When considering starting your own consulting business, it is important to have a clear understanding of:
- The precise nature of your work
- Your contractual and commercial relationship with your clients
- How you will be perceived in the marketplace depending on how you choose to position yourself
In my experience there is a significant amount of ambiguity and assumption surrounding the terms, names and labels given to people who are not mainstream employees.
Therefore, to assist you as you contemplate starting your own consulting business and to aid interpretation and navigation of this site, I thought it would be worthwhile to provide some basic definitions. These definitions and interpretations are based on my experience.
A person engaged on a temporary basis to fill a position and perform a role typically requiring skills that are mainstream and core to that particular division, business or industry. An example role might be a Customer Service or Human Resources team member.
Temporary staff tend to earn lower salaries on average compared with permanent employees. In addition, temporary staff do not receive benefits such as healthcare and employer's pension contributions.
A temporary worker might be retained by the business for a protracted period, sometimes years. During this time she may be deployed in different parts of the business to meet business needs, perhaps to cover for unexpected absences or unusually high demand for a service.
A contractor is typically engaged to work on a predefined project until that project is completed. An example would be an application developer writing code for a software application.
The work content of the role is likely to be clearly set out by the client at the start of the contract and the client may be quite prescriptive in setting out how the work is to be undertaken.
The client (sponsor) may have expectations that he will quite closely oversee the work of the contractor to ensure progress in line with planned timescales and the quality of work produced.
A contractor could be engaged for a significant period of time which could extend to twelve months or more depending on the nature of the project and the role allocated to the contractor.
A contractor will tend to earn more than a permanent employee and significantly more than a temporary employee.
A consultant is an individual who brings scarce and specialized expertise and is engaged to work with the client to resolve complex and challenging problems.
A consultant will typically have some or all of the following characteristics that distinguish her from a Contractor:
- Be older and have more years of experience in her field, discipline or profession
- Highly respected within her profession, actively involved at the forefront for example speaking at conferences and writing papers and articles as a subject matter expert
- Worked in a variety of environments possibly including public sector, private sector, not for profit, academic
- Likely to have worked both as an external adviser to client organizations, typically as an employee of an established consulting practice, and in senior line roles within businesses
In addition, a consultant is likely to bring a body of proprietary Intellectual Property, perhaps software models, business models or proven consulting methodologies for which the client is willing to pay a premium fee.
The consultant is likely to command higher fees than the contractor on an equivalent daily rate basis, however, the number of days charged to the client are likely to be fewer for a consultant compared to a contractor.
By way of illustration, it would be more usual for a consultant to be working with a client a few days per week or perhaps 5-7 days month, wheresas a contractor type engagement would typically involve working on site 5 days per week, perhaps for a 3 or 6 month continuous contract.
The Oxford Dictionary defines Independent as follows: 'Not dependent on or controlled by another person or thing.'
A freelancer is a little more difficult to define, but this is my best attempt:
An individual who sells her skills and services concurrently to a number of disparate clients or customers; typically paid by the hour, day or assignment rather than working for a regular salary.
A note on Navigation
This tier 2 page is 1 of 4 interrelated pages that together are intended to provide a basic body of information to assist you with starting your own consulting business. The four pages seek to answer following questions:
The rationale for starting your own consulting business including consideration of the advantages and disadvantages.
2. What (This page)
What is a Consultant? - Basic definitions and distinctions between different ways of working.
The factors that are likely to influence the timing of your move to establish your own consulting practice.
A summary of the key activities and steps that are inherent to starting your own consulting business and making a smooth transition to a commercially successful independent consulting business.
Jump back from Starting Your own Consulting Business to I-C-B.com Home Page