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What is Independent Consulting?

by MBO Partners

You have heard the clarion call to freedom and are ready to step out to become your own boss. Or perhaps you are ready to challenge yourself in a new way and explore your options. You have heard the term independent consulting – but what does that really mean? What exactly is independent consulting?

You may hear the terms consultant, contractor, freelancer and even solopreneur used to describe a non-employee that performs work for a company for an agreed upon price. The labels are often used interchangeably and often depend on the industry and norms. However it is worthwhile to take a deeper look at the terms and what it may actually mean to your business.

Freelancers work on a contractual basis for a variety of companies as opposed to working as an employee for a single company. The term freelancer is common in journalism and publishing, used to describe freelance reporters or freelance writers. Freelancers are essentially independent contractors. In some industries, the term freelancer can have negative connotations, so it is important to research the preferred term in your industry.

Contractors are self-employed and provide certain services to a company or a third party on behalf of the company. Architects, engineers and consultants are commonly referred to as contractors. The legal designation of an independent contractor requires that an individual (1) be free from the control of the client, (2) be able to exercise his or her judgment as to the manner and methods to accomplish the end-result, and (3) be responsible for the end-result only under the terms of the contract.

1099 is sometimes used to refer to an independent contractor. The term derives from the IRS form 1099-MISC used to report miscellaneous income, including income earned by an independent contractor (but not an employee). The IRS describes “1099s,” or independent contractors, as those “who are in an independent trade, business, or profession in which they offer their services to the general public.”

Solopreneur is a relatively new term and describes an entrepreneur who is running a business of one, or microbusiness. Solopreneurs do not have employees but may contract with other solo workers to get work done.

 

Independent Help Comes in Many Forms: Consultant, Contractor, Expert, or Small Firm?

Independent workers can be task-oriented “do-ers” or strategic thinkers brought in for their expertise. There are some nuances to the field: for example, the different meaning assigned to the term consultant vs. contractor.

The dictionary defines a consultant as "an expert in a particular field who works as an advisor either to a company or to another individual." Consultants bring the value of strategic thinking, outside knowledge, and a depth of experience that can help the client solve a problem or move ahead in their industry, rather than simply completing a task in their area of expertise.

Contractors know their job and how to do it. They are brought on to perform a specific task (or complete a project) that perhaps the client does not have the knowledge or resources to complete themselves. At the end of the day, many consultants are termed contractors by their clients – as that’s how procurement organizations view these on-call talent resources. The naming is far less important than the ultimate goal of defining where they fit in the value and pricing chain.

Let's say a company is hiring a Java programmer of a given experience level. When they go out in search of a contractor to fill that position, they know there is a specific skill set that all applicants should possess. Because of this type of commoditization, selection of a particular contractor may come down to cost. You can fight this kind of rate pressure while still remaining an independent contractor by differentiating your skill set into niche areas and growing in seniority and experience.

Now compare this to a consultant. If a company is hiring to solve a problem, let's say the streamlining of purchase order processing at a widget factory, the consultant they hire will bring a unique perspective to the table. Perhaps the consultant has experience working exclusively with widget companies. Perhaps he or she has never worked with a widget company but specializes in purchase order process optimization. This person cannot be commoditized and can leverage their knowledge, contacts, and skills to win the contract and get the best bill rate. The key is that the consultant is doing more than performing a specific time-based task.

 

Putting it to Work

Many people view independent consulting as an option to earn extra money between traditional jobs. While this is one way to do consulting work, it’s not what we’ve found most people are doing. In a recent study, MBO Partners found that only 19 percent of independent consultants surveyed wanted to return to traditional employment – with 75 percent of respondents committed to remaining independent consultants for the foreseeable future.

Independents exist across industries and areas of expertise, and are equally likely to be men and women. What they all hold in common is that successful consultants have a clearly articulated area of expertise that can be packaged and sold to clients.

Independent consulting is a viable career path in many different industries ranging from aviation to technology.  It is possible to specialize in specific types of businesses such as manufacturing, financial services, or telecommunications. Clients who have specific needs in a given area are likely to contract the services of an independent consultant to restructure a component of the business in a manner that will help the company move closer to attaining its goals.

The consultant will seek to enhance aspects that are already working well while redefining, eliminating, or changing aspects that appear to hinder the overall operation. This may include making recommendations for merging departments, adding or eliminating positions within the operational structure, or completely reworking a process associated with one or more areas. Companies that hire an independent consultant are seeking a strategic problem solver – an expert with the ability to diagnose an issue and develop and implement a plan to cure. Some independents enjoy the intricacies of this level of strategic detail, while others prefer to simply work in their area of specialty. The idea is to make a conscious choice about how your services are positioned to your clients.

Taking some time to determine what category you fall into will help you define your business model and better articulate your value to the client. Once you've settled on your position, you can more accurately understand what you should be charging and how to market your services.

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