Are you a contractor or are you a consultant? Consulting vs contracting – what does it matter?
Well, it does have a significant impact in how you are perceived, what projects you have access to, and how much pricing power you have.
Part of our virtual training courses for attorneys (though this principle also applies to other fields) is a shift in framing your own services: Think of yourself not as a lawyer but as a consultant who just happens to have intimate knowledge of the legal system. This effectively combats the detrimental perception of you as a contractor.
Let’s get our definitions straight. I personally would describe the two as follows:
Contractor: They act as an employee of the company who hires them, taking briefings of defined tasks and then working on completing a larger project as per the specifications and in the timeframe set by the employer.
Consultant: They a brought in to solve an urgent need that the client can’t solve on their own. Either they don’t have the time, the resources, or the in-house knowledge to do so. The consultant is tasked with analyzing the problem and suggest possible solutions that stem from methods or knowledge the client does not have access to.
Which of those two options sounds more like your practice? Are you someone who markets their time and skills as a gun-for-hire work towards completion of client’s projects? Or do you market solutions to the urgent problems that your potential clients have?
Why should I care?
First and foremost, the fees a consultant can ask for are generally a multiple of those a contractor would be paid. This is of course not always the case, but often enough that it’s worth to consider.
Contractors translate their time into money by billing hourly for work on specific tasks. Their invoices scale only with a negotiated hourly rate and how much time they spent on the project.
Also contractors usually work under direct supervision. They are perceived as interchangeable and can easily find themselves in a situation where they have to out-bid other competitors with ever lower hourly rates.
Presenting Yourself as a Consultant
A consultant however bills the solution of a specific problem, usually by project phases. They define problems in a way that is useful to the client. Then they define solution options to those problems and present the client with different cost-structures and benefits for each option.
This generally also involves recommending a specific option that he consultant evaluated as the best trade-off given the client’s unique circumstances, market considerations, internal politics, and so on.
Once a decision has been made, a consultant will write out a more detailed project plan along with a budget, and then design and implement the chosen solution while collaborating with the client’s in-house personnel.
And the upside? Consultants get to set their pricing not based on a strict hourly basis but instead they can base it on the emotional and economic value of the client’s problem and it’s solution. Thus their effective hourly rate is increased by working smarter, not harder.
This is also a benefit for clients who can better predict the cost of a project and have the peace of mind, that a long delivery time is both against their and the consultant’s best interest.
So, if you currently find yourself more aligned with the contractor work mode and want to start leveraging the economy of scale to maximize profits, you’ll have to embrace a different kind of mindset.