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Freelance Consulting Advice

Advice for starting & growing your freelance consulting career

Dino

How to Avoid These 12 Common Freelancing Pitfalls

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TLDR:
Becoming an independent consultant has never been easier – but that doesn’t mean you should just jump in blindly.

Whilst setting yourself up as a freelancer isn’t difficult, there are some things you should avoid to save yourself some pain.  I’ve seen these mistakes made over and over, and made a few of them myself in my first couple of years in business.

Read on to learn how you can benefit from the experience of other freelancers before you…

12 things to avoid doing as an independent consultant

1. Not having a plan (a.k.a. ”winging it”)

This was my very first mistake, and it cost me.

I just quit my job one day – with no plan, no clients, and no idea what I was doing.  I made it work, eventually, but it cost me time and money, and caused so much unnecessary stress.

It doesn’t take a lot of time or effort to come up with a plan.  Just do it.

2. Not having a buffer/enough savings when you start

Closely related to number 1, this was also me.  And it compounded mistake number 1.

Without a buffer, I *had* to make money right away (I had recently gone through a divorce, and had two small children to support as well).  Not a good situation to be in.

Combined with mistake number 1, it meant I had to borrow money – and it took me many years to finally pay that debt back.

3. Not understanding which business structure to use

This is not a deal-breaker, but it can save you some drama down the track.

It really just comes down to what your long-term plan is.  Are you going to start and stay as a sole trader, or set up a partnership, or even a company that you plan to grow?

You can change it later, but why not get set up properly in the first place?

4. Not specialising/defining your speciality well enough

This can also be seen as not knowing who your ideal client is.  Either way, it will be harder for you to attract quality leads, because you’ll be casting too wide a net, and/or prospects won’t be sure about exactly what you do.

You also open yourself up to more competition.  Which do you think is easier to sell: “I’m a project manager” (competing with every other PM in the market), or “I’m a project manager specialising in infrastructure builds for mining companies”?

5. Not using a contract/formal agreement

This is one of the most important items.

It’s also another mistake I made early in my freelancing career.

Long story short, when something goes wrong or a client doesn’t get what they expected (it will happen), not having a formal agreement will reduce the situation to a “he said, she said” mess.  Also see number 6.

6. Unclear scope/expectations/outcomes

This is closely related to number 5, and can have the same effect as not having a contract/agreement in place at all.

You can think of every client engagement as a project, and every project ultimately comes down to expectation management.  Be clear about what you’re delivering, up front, and in writing – agreed upon by all parties.

7. Having unclear (or no!) payment terms

Also related to numbers 5 and 6, this can cause huge problems for you because of the potential impact on your cash-flow.  Let alone the stress it can cause, and the time it can waste.

Unless it’s an ongoing engagement with weekly or monthly payments, get a deposit up front, and get sign-off and final payment before handing over the keys.

This is probably obvious, yet I still hear horror stories…

8. Under-pricing yourself (and overworking yourself to make up for it)

This would have to be one of the most common pitfalls – and it’s not hard to see why it happens.  Especially when you’re just starting out.

Yet another one that caught me out, partially due to my previous mistakes.  I was desperate to earn something, so I took lower-paying work.  It’s not great when you’re struggling and making less than you know you’re worth.  Worse is you end up working more to make up for it.

Closely related to this is taking on work that you wouldn’t normally do.  Not always a bad thing, but generally not advisable.

9. Competing on price alone

Similar to number 8, this never ends well, for the reasons stated above.

A better option is to offer something extra (make that clear), whilst charging your full rate.

10. Doing “free” work

As an independent consultant, especially before you have built up a name for yourself, you will undoubtedly be approached to do some free work in exchange for promotion/referrals/etc… which usually have zero value.

If you decide to do this, make sure you do so in exchange for a review/testimonial/case study and/or referrals – but be clear and upfront about this, and include it in your agreement.

11. Not budgeting/no cash-flow management

This one will bite you, and has been the reason many businesses (not only freelancers) have failed.

The phrase “cash is king” should actually read “cash-flow is king”.  Why?  Because no matter how much you’re earning, if you don’t manage your spending and expenses, you’re going to fail.  Making $200k per year?  Great!  Spending $210k?  Fail.

Not only that, even if you’re managing your spending and expenses, the timing of money coming in and going out can also hurt you.  If your clients fail to pay you for 2 months, but you have bills due this month, you’re in trouble.  Which is another reason item number 7 is so important.

12. Not networking and/or not promoting yourself

Whether you like it or not, you have to put yourself out there.  How else can you expect prospective clients to know that you even exist, or that you do great work?

Your network and connections have a huge impact on your ability to find and win work.  And finding and winning work is the biggest fear many freelance consultants have.

And promoting yourself doesn’t mean you have to be a sleazy salesperson, but you do have to let people know what you do and how it can help them.

Go Forth and Prosper

So there you have it.  Armed with the knowledge above, you know what not to do, meaning you’ll save yourself some heartache, and increase your odds of becoming a successful independent consultant.

And if you want to speed the process up, understand how to avoid all of the pitfalls listed above, and get a heap of time-savings tools and tips, as well as advice and accountability, check out my group and 1-on-1 coaching options.

How much can you earn as an independent consultant?

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TLDR:
How much do independent consultants really make?  The answer: it depends!  If you have even a little experience, you can generally make more than an equivalent employee.  And if you have a lot of experience and a good track record, the sky’s the limit – up to multiple 6 figures and beyond.

This is one of the most common questions I get asked.  Understandably, because even if you’re just toying with the idea of becoming an independent consultant, you want to know that your income won’t take a step backwards…

The good news is that, if you have some experience and a good track record, you can almost definitely make more (and often much more) than you could as an equivalent full-time employee.  Or to look at it another way, and this is the goal for many people too, you can earn the same amount for less work.  Depending on the rate you can command, you could even work for 6 months every year whilst making the same as a full-time employee doing the same work.

Factors Affecting Your Rate

There are several factors that affect the rate that you are able to charge as an independent consultant.

A big one is your level of experience.  Generally, the more experience you have, the more you can charge.  This is closely related to another factor, your track record.  The more you can show a history of successful assignments, the more you will be able to charge.

Another two related factors are your specific area/type of service, and the average salary/rate for that service.  For example, a strategy consultant will generally be able to charge more than a HR consultant.

Your location also affects how much you can charge.  Different countries, and even different states within each country, have different average rates.

And finally, the type of clients you are targeting or generally work with can affect your rate.  A small business or local government department may not pay the same as a multinational company, for example.

And having said all of that, remember that this is just a guide – at the end of the day, the market will determine how much you are able to charge.

Things to Consider

There are a few things that you have to consider when comparing your income as an independent to that of an employed consultant.

1. You will usually collect GST (or your country’s equivalent), and you have to pay that to the government (unless you’re working via an agency, and they handle that for you)

2. You will also be paid a tax-inclusive amount, meaning you have to set aside and regularly pay income tax (unless you’re working via an agency, and they handle that for you)

3. You need to manage/pay your own superannuation out of your income

4. You need to cover your own annual leave and sick leave

5. It’s also prudent to allow for the occasional gap between contracts

You need to allow for all of the above when setting your rate, and determining how much you need to work (i.e. how many weeks per year) – in order to cover yourself in areas that an employer would normally manage.

Calculating Your Rate

There are many ways to charge for your services, with the most common being:

Per hour, per day, (monthly) retainer, per project/assignment, or value/profit/ROI based.

Most consultants start with an hourly or daily rate, although many aspire to charging per month or per project.  I’ll cover the different methods in detail in another post, but regardless of how you charge for your services, you have to make sure you cover your needs in terms of the items mentioned above.

A rule of thumb I advise my clients to use is to assume you’ll work an average of 30 hours per week, for 46 weeks of the year.  That allows for some annual leave, sick leave, and non-billable time – and gives you the absolute minimum you should be charging.  I generally then round that figure up to the nearest $50 (if we’re talking hourly rates).

If you are a beginner consultant with not much experience, drop the expected hours per week to 25 or even 20, as you will spend more time winning work/projects.

Some Examples

Let’s say you’re a project manager with less than 5 years of experience, currently earning $100,000 per year (inclusive of tax and super).

$100,000 divided by 46 weeks and 30 hours per week equals $72.46 per hour.  Rounded up to the nearest $50 gives you $100 per hour.  If you were to work 46 weeks at 30 hours per week, you would earn $138,000 (inclusive of tax and super).

Now let’s look at a senior IT leader with 12 years of experience, currently earning $180,000 per year (inclusive of tax and super).

$180,000 divided by 46 weeks and 30 hours per week equals $130.43 per hour.  Rounded up to the nearest $50 gives you $150 per hour.  If you were to work 46 weeks at 30 hours per week, you would earn $207,000 (inclusive of tax and super).

These examples are generalised, and don’t take into account any specific services or target clients – use them as a guide only.  If the average consulting rate for your area of expertise is higher than your calculated rate, don’t be afraid to increase your rate.  Just don’t decrease it.

And remember to regularly (at least annually) review your rate, and increase it if you feel it’s justified.

So How Much Can You Earn?

As I said at the start of this post, and as I have hopefully made clear above, it depends!

To get a better idea, try my free Potential Earnings Calculator.  Or feel free to contact me, and I’d be happy to give you some advice.

In almost every case, however, you can earn more than you can as an employee, and the potential to increase your earnings (as you get more experience and more runs on the board) is virtually unlimited.  Coupled with a more flexible lifestyle, it’s hard to argue against.

One thing is for sure – there has certainly never been a better time to be an independent consultant.

Is now really the right time to quit my job?

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Are you asking yourself the question: “Is now really the right time to quit my job and become an independent consultant?”

If so, here’s some things you should know…

Businesses always have problems to solve.  And now, more than ever, they are hiring external experts to come in and solve their problems.  If your expertise can help, and add value to their business, then you can build an independent consulting business.

If you’re concerned that now isn’t a good time, remember…  it’s never the “perfect” time.

But the fact is, there has never been a better time to become an independent consultant.

How can I be so sure?  Don’t take my word for it, read on.

According to multiple respected reports, such as:

freelancing is growing – in all industries and regions – and freelancing market share is only expected to increase further in the future.

Businesses Want Independent Consultants

The pandemic has shown us that the work itself matters more than where the work is done.  Most companies had no choice but to change their business model to facilitate working from home, and have now learned that – in most cases – location doesn’t really matter.

So, it’s possible for a consultant anywhere in the country/world to land a major consulting project for a company based anywhere else in the country/world.  This was already happening, but has accelerated significantly due to the pandemic.

This provides independent consultants with an incredible opportunity – the target audience is no longer restricted to their city or country anymore.

Online Consulting Platforms Have Made It Easier Than Ever

Thanks in part to online consulting platforms, businesses can now hire consultants from anywhere in the world, and consultants can choose who they work with – a win-win for both sides.

From MBO Partners: “Online platforms and marketplaces have acted as powerful facilitators, making it easier, cheaper and more convenient for independent workers to start businesses and find customers.”

It used to be the case that the consulting industry was dominated by large consulting firms. And just because expert advice existed, not everyone could access it – it was usually only the big companies that had the privilege of (i.e. could afford) hiring consultants.

Today, online consulting platforms have turned the tables and made top consultants more accessible to all businesses – large and small.  Businesses can now easily hire people who have worked for big companies and consulting firms.  These independent consultants can bring vast knowledge and skill sets to a company, without making them spend half of their HR budget.

In fact, according to Business2community, 71% of freelancers reported an increase in the amount of work they were able to attract online over the last several years – with online platforms providing a great medium for connecting freelancers and companies.

Independent Consulting is Good For You

MBO Partners’ 11th annual “State of Independence” report states that 2 out of 3 full-time independent workers believe they are more secure than traditional workers.  Not only that, 87% say they are happier working independently, and 78% say they are healthier working independently.  Workers are finding more money, opportunities, and flexibility by going independent.

So, if timing is a reason holding you back from moving to independent consulting, know that there has never been a better time.

If it’s fear or a lack of information holding you back, get in touch – it’s easy and not as scary as you think.

Finding Work as a Freelance Consultant

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Finding work as an independent consultant (or rather the fear of not finding it) is probably the number one concern for most – especially new – freelance consultants.  In fact, that fear is what stops a lot of people from becoming freelancers in the first place.  And it can be tough sometimes, especially if the economy in your area/country is slow and there’s not a lot of work to be found.

But it doesn’t have to be that scary, as long as you follow some basic steps.

Recruiters & Job Boards

One of the first things I did when I quit my 9-to-5 job (back in 2007), was to sign up with and get to know a few recruiters.  I also set up searches on job boards (I mainly used Seek.com).  These are both great methods for finding contract work as quickly as possible, which allows you to show what you can do, build up some credibility, and make new contacts/build your network.

Outsource Yourself

Depending on the type of work you do, you could outsource yourself using services like Elance, oDesk, and Freelancer.  This is another great way to find work quickly, and get some runs on the board.

Today, there are even consulting marketplaces, like Expert360, and specialist services, like Essemy, that make it even easier to find consulting work.

Find Opportunities While You Work

As a consultant working in someone else’s business/company, you’ll find that you see opportunities for improvement everywhere.  If you see a genuine opportunity in an area that you could help with, let someone know that you could assist.  If they’re happy with your work, and they can see the value in your proposal, you could generate your next contract.

But don’t create an opportunity where there is none.  Being dishonest about that, or about your abilities, just to secure some work is a sure-fire way to ruin your reputation.  And as an independent consultant, your reputation is everything.

Use your network

I’ve written before about the importance of networking, especially when you don’t need to – when you’re busy working is the best time to be working on your network.  That will ensure that, when you do need some help, you have a network to call on.

Don’t be afraid to ask for work by letting people know you’re available, or that you will be soon.  Social media (particularly LinkedIn in my experience) is a great way to do this.

If you’ve put the work into building and maintaining your network, you’ll find that it pays you back ten-fold when you need it.

Building your network is the key to your long term success as an independent consultant.

Work Will Find You

When you’re starting out as a freelance consultant, it can be tough.  Ideally you’ll have some money set aside to get you through at least six months, just in case.  But even if you don’t (I didn’t, in fact I was in debt) you can still get by – you just have to try a little harder.

After some time, once you have built a reputation for good work, and built a solid network, you could be in a position where the work finds you.  And I can tell you that’s a great place to be.

Have any other methods for finding work?  Please share them by leaving a comment, thanks!

 

Cheers
Dino

 

Why the Hell Would I Want to Freelance??

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The case for becoming an independent consultant

Could you imagine anything worse?  Always worrying about getting your next contract.  Constantly stressed about not having a steady income.  Having to deal with all the ‘business stuff’, like marketing, invoicing, taxes, and so on.  No thanks!

Anyone against (or even afraid of?) freelancing can easily rattle off a long list of cons, like:

  • You don’t get paid sick leave, annual leave, or other employee benefits
  • You work on your own most of the time
  • You have to work long hours, and be on call
  • You constantly have to find new clients and work
  • You have no job security
  • And so on…

The reality is, it’s not all doom and gloom.  IMHO, most of the reasons given are either just plain wrong, or they’re actually positives looked at the wrong way.  For example:

  • You don’t get paid sick leave, annual leave, or other employee benefits
    I couldn’t live the way I wanted to if I was limited to 4 weeks of holiday per year! Especially not as a single parent with kids – they get 12 weeks off school every year.  Being a freelancer means I can take whatever time off I want.  And even if I’m working, my hours are flexible enough that I can work around my needs.  I’ve been to almost every performance or event for my kids since kindergarten.  This has easily been the biggest benefit for me personally.
    .
  • You work on your own most of the time
    This is not necessarily true, depending on your clients and specific work.  Even so, whether or not this is a problem depends on your personality. As an independent consultant, I spend most of my time working directly with clients, usually in their offices.  But even when I am working on my own, I use coworking spaces to be around people, and also organise regular coffee and lunch meetings with my network to break up my days.  And one other thing, as a contractor working on 3 to 12 month contracts, I can almost entirely avoid office politics – that’s a huge plus for me.
    .
  • You have to work long hours, and be on call
    This is simply not true.  I decided when I became a freelancer to not work full time, and that’s what I continue to do.  Even when I get asked to work full time for a new contract, I say that I will work a maximum of 4 days per week, and it’s never been a problem.  As for being on call, as an independent consultant, my clients are all professional businesses and they keep standard business hours.  Sure I’ve had the occasional 6am or 7pm phone call, but they’re rare.
    .
  • You constantly have to find new clients and work
    True – and that’s fantastic! I love the variety being a freelancer gives me.  I’ve expanded my field of expertise and domain knowledge by taking on varied roles over the years.  And with the right plan and system in place, ensuring you always have work is achievable.  Not to mention that my network is always growing because I keep working with new businesses.
    .
  • You have no job security
    This is also true, but you know what? Neither does anybody else!  Think having a permanent job means you’re secure?  Think again.  The only difference is your notice period.  And given that freelancers are used to finding their own work, it gets easier and easier.  Someone with a permanent role who is made redundant (I hate that term) suddenly finds themselves having to figure out how to go about finding work.

2020 update: The last two points are probably the greatest fears people face when considering freelance consulting, but the reality is, finding work is not that difficult.  And more than that, it makes you more adaptable and resilient – it prepares you for the worst.  When times are tough – like during a recession, or a COVID-19 pandemic(!) – people get laid off.  If you’ve only ever had steady employment, that can be really scary – I’ve seen the terror in the faces of my recently-made-redundant coworkers who haven’t had to look for work in 20 years.  But as a freelancer, you’re used to finding your own work, and not relying on anyone else.  It’s not so scary.

 

How Much Do I Really Need?

I also want to point out something that many people don’t seem to get.  Generally speaking, your hourly rate is much higher as a freelancer than as an employee.  So to earn your current full-time employee salary, you only need to work 3 or 4 days per week as a contractor.

Let’s say you’re on a $150K salary.  Assuming you can make $800/day as a contractor, that equates to 188 days per year.  That’s about 38 weeks (roughly a 3 month plus a 6 month contract), meaning you have 14 weeks of flexibility.  That’s 3 months to find your next contract, or to take as leave, or to work more if that’s what you want to do.

The point is, you don’t have to be working every day of the year for 48 weeks – that’s just what we’re used to because that works for employers.

 

So Is It For Me?

At the end of the day, freelancing is not for everyone.  For me, the best thing about freelancing is the freedom and flexibility.  If those are important to you, it might be worth a try.

Not sure if you’re cut out to be a freelancer?  This worksheet can help you decide.

 

Cheers
Dino

 

Why You Should Consider Coworking

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As a freelance consultant, you chose to work for yourself, but that doesn’t mean you have to work by yourself.

We all know it can be lonely as a freelance consultant, especially if you work from home a lot.  That’s why you’ll often find us at cafes – so we can work and be around other people.  Or we’ll organise meetups, where groups of freelancers can discuss common issues and problems, share ideas, or just socialise.

Or maybe you need a professional meeting place to take clients, but the idea (and cost) of a serviced office doesn’t thrill you.

Welcome to coworking!

What is Coworking?

At it’s core, coworking provides a place to work – that usually means desks, an Internet connection, and coffee, plus meeting rooms and a common/lounge area.  A coworking space is where freelancers, start-ups and other independent workers can come together in a shared office.  But it’s much more than that.

Coworking has exploded over the last few years and is still growing in popularity with new spaces regularly popping up all over the world.  CoworkingResources and Coworker estimate the coworking market to double between now (2020) and 2024.

What are the Benefits of Coworking?

Many people who leave their jobs to become independent consultants often miss the camaraderie and social interaction of the office.  Coworking can definitely help there.

I believe coworking is an excellent example of the saying “the whole is greater than the sum of its parts”.  It’s the collaboration and sense of community that differentiates it from other office environments.  What you get is a knowledge pool made up of people from various fields all, willing to share and collaborate, and that allows for the cross-pollination of ideas.

Not to mention it’s very handy to be able to bounce an idea off someone for a quick sanity check.  Add to that regular social and educational events, and often even access to experienced mentors, and the value to members is huge.

In short, the networking and connections that coworking enable are invaluable. 

Oh, and membership usually costs a fraction of what you would pay to rent an office or use a serviced office, and you can come and go as you please.

More Information

For more information on coworking, start here.  To find your nearest space have a look here.

I’d love to hear about your experiences with coworking.

 

Cheers
Dino

 

Coronavirus – What to do if you’ve lost your job or contract

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[Updated April 18th]

If you’ve lost your job or your contract, there are steps you need to take immediately, and things you can do to prepare for the recovery.

If you or your business have been impacted by this crisis, and a new or improved website would help, please visit our friends at Strategic Web Solutions.

First, it’s important to remember that we will get through this.  It will be tougher for some than other, and maybe tougher than it’s ever been for some, but we will get through it.

Here’s what you need to do now.

First, steady the ship:

  1. Acknowledge that changes will be needed until the situation turns around
  2. Apply for benefits/assistance
    1. Unemployment benefits, wage support, etc.
      1. In Australia, government support for businesses can be found here and support for individuals/households can be found here
      2. [April 13th] An excellent summary of support available to small businesses and the self-employed can be found here (Australia)
      3. [April 13th] Details of the Paycheck Protection Program (USA) can be found here
      4. [April 18th] Latest details about JobKeeper Payments for sole traders and self employed, from the ATO here
      5. [April 27th] JobKeeper – updated after some confusion regarding sole traders
        Sole traders go here
        Other businesses go here
    2. Apply for relief from your lenders/creditors – business expenses relief, rent/lease pause or reduction, etc.
  3. Build a (new) budget
    1. Cut all non-essential expenses
    2. Reduce or pause bills (utilities, credit cards, etc.)
    3. Work out how much you really need to survive

Next, establish a new routine and do what you can:

  1. Get immediate help
    1. Apart from everything above, are there other things you need help with – whether personally or professionally?
    2. If so, who can you turn to?  A family member, friend, or colleague if you need a loan?  A support line if you are struggling with mental health issues?

And finally, consider your next steps, and prepare:

  1. How can you find some (any) work, or attract clients, during the current crisis?
    1. Depending on your area of expertise, there could be opportunities for you (e.g. see this article)
  2. What can you do to set yourself up for when things start to go back to normal?
    1. If you’ve lost your job, is now the time to start your independent consulting career?
    2. If you’re already an independent consultant, can you refresh your website and profile, learn new skills, etc?

 

Coronavirus update (COVID-19) – Help for Consultants

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I know what it’s like to have no work, but still have bills to pay and mouths to feed.  The current situation is putting many people in that position, and I want to help.

I know that if you’ve just lost your job or your contract, you need help now.  Over the next few weeks I will be posting practical advice and steps you can take to survive right now, and to either find work quickly, or get yourself ready for when work becomes available again.  Bookmark this page as I will keep it updated with links to all related posts and resources.

For as long as this crisis continues, I am offering discounted websites for consultants, and free 1-on-1 sessions.  Contact me here.

If you or your business have been impacted by this crisis, and a new or improved website would help, please visit our friends at Strategic Web Solutions.

What you need to do now (more details, regularly updated, here):

  • First, steady the ship
  • Establish a new routine and do what you can
  • Consider your next steps, and prepare

 

In Australia:

 

Am I Ready To Be A Freelance Consultant?

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Am I Ready?

So you want to be a freelance consultant? That’s not surprising, given that freelancing as a career choice (or as a way to earn an income while building a startup) is growing fast – in the US, UK, Asia, and Europe.

Freelance consulting sounds perfect, and no doubt you’re attracted by the flexibility. You can work when and where you want, choose your clients and projects, and are responsible for your own success. You can take breaks whenever you want, spend more time with your family, and do away with commutes/peak hour traffic!

Maybe you’re dreaming of making a lot more money, or working only 6 months every year, or of building up your own agency. And it’s all possible – but it takes work. With the right approach, and some effort, you could be living the life you’ve dreamed about.

Freelance consulting is not for everyone. Some people are better suited to, or even thrive, working in a traditional 9-to-5 office job. The following worksheet will help you figure out if you’re ready to take the leap to freelance consulting – and if you’re not, what you need to do to get yourself ready.

Click here to download my free “Am I Ready To Be A Freelance Consultant?” worksheet.

 

Cheers
Dino