Although there are many ways to categorize consulting, one major difference is whether someone works as an independent consultant, or as a consultant working for a consulting firm.
Firm consultants vs independent consultants
Independent consultants generally have a large network of clients and potential clients. They either do their own marketing to sell projects to people in that network, or they partner with a firm that helps them identify work.
An independent consultant often does short gigs for clients, usually working alone to perform a study or tightly defined task.
Conversely, a consultant working for a firm often works with a team of people. The team can be a combination of fellow employees of their firm, employees of the client, and other consultants.
These rules are not set in stone. Consultants from a firm can work alone and independent consultants can be part of a large team on a long-term project.
A consultant with a firm will be charged the going hourly rate to the client based on that individual’s skills and experience. That consultant is paid a salary that is often a fraction of the rate billed. That consultant generally receives a full benefits such as health insurance, a 401(k), and paid vacation time. Although firm consultants are responsible for developing new business, they have less responsibility for finding their next job. The firm generally has a sales team that finds the work for them.
Independent consultants are responsible for finding their work. They get to keep most of their billings after taxes, but are responsible for their own health insurance and retirement savings. If they want to take vacation time off, they don’t get paid.
Consultants that are risk averse often stay affiliated with a firm that will do the heavy lifting of sales for them. They can do the work of a consultant and not worry so much where their next job is coming from.
Some consultants work for a firm until they can develop a good Rolodex of clients before they set out on their own. Sometimes, just because they have consulting experience, they may get an opportunity to do some independent work for a client gig.
Conflict of interest
There is nothing wrong with a firm consultant doing a one-off gig or even transitioning to becoming an independent on a full-time basis. The critical consideration is to avoid any conflict of interest.
Consider if you work for a client for your firm, and that client offers to pay you separately to do additional, independent work for them on your own time. If your firm provides the same service the client is asking you to do – even if it is not your role, you could be competing with your own firm.
Whether there is any question of competing or not, it would be advisable to meet with your manager at your firm and get their opinion. If they have any reservation, it may be a conflict of interest. On the rare occasion that they don’t have a problem, make sure that the time you work on the independent work never interferes with the work you are doing with the firm.
If a completely separate client asks you to do independent work on your own time, this may be a more palatable set up for your firm. You still need to ensure that the time you spend on your independent client doesn’t interfere with the time you spend for your firm.
Your firm may require you to bill a minimum number of hours to the client to justify your salary. Working fewer hours in order to serve your independent client creates a conflict of interest. Obviously, billing both clients for the same hours is also a serious breach in ethics.
Finally, always ensure that you don’t use any of your firm’s resources to serve your independent client. This includes office supplies, email accounts, and intellectual property.
Many consultants use employment with a consulting firm as a stepping stone to becoming an independent consultant. During that transition, it is important to maintain ethical practices to ensure that there are no conflicts of interest with your independent practice and your firm.
How have you made the transition from a firm to independent consultant?
As always, I welcome your comments and criticisms.
If you would like to learn more about working in consulting, get Lew’s book Consulting 101: 101 Tips for Success in Consulting at Amazon.com
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