What Did The Contractor Say to the Consultant?

There are three terms used for a technical service professional, often interchangeably: contractor, freelancer, and consultant. Let’s put a more specific point on it.

Contracting…

is the closest to employment. As a contractor, you are effectively an employee that doesn’t get benefits or pay payroll taxes. Engagements are often months in length, and 40 hours/week. A typical flavor is subcontracting, where you act as a resource for another agency. Your work is 100% production work. Billing is usually hourly, but sometimes it’s daily or weekly.

Freelancing…

involves you taking on more product & project management, in addition to providing a majority of the production work. Length and size of projects can vary greatly, from one-day one-offs to ongoing engagements. Freelancing opens you up to other options for completing projects, such as bringing in a subcontractor of your own or shopping for solutions off the shelf. Freelancing bills for time or fixed-fee basis, and can also be on a monthly retainer.

Consulting…
means you don’t do any production work, only strategic, such as training, workshops, coaching, management of internal resources, or research. Consulting is typically fixed-fee and not based on time. It can also be retainer-based, with a fixed recurring fee.

Which One Should You Do?

There’s a hierarchy here. At each level, you start doing less production & more strategic work and open up the potential for higher earnings. At the bottom of the ladder, you have subcontracting where you grind out to-do items in Basecamp for a low hourly rate, where at the top you have consultants who are respected enough to be paid $X0,000 per month just to be available for advice.

In my experience, you’ll probably end up doing all three. My career has primarily been the first two. While the bottom level work is less fulfilling, it is easier to find and often steady. I know many a contract software developer who can grind out five figures per month, and six figures per year with contracting. It’s not “entrepreneurship” in the purest sense, but as the pelican can-open from The Flintsontes says, “It’s a living.

The Key To Leveling Up

I’ve talked to people who can open pure consultancies and build client relationships quickly, while others struggle. From what I can tell, the primary factor is trust. The most proof you have that you can deliver results, combined with the personal trust you build with people one-on-one, leads to higher opportunities. Examples of trust signals:

  • Testimonials
  • Your portfolio/case studies (even if you don’t have client work yet)
  • Your history / CV
  • work samples (i.e., your Github profile)
  • work artifacts (i.e., books, courses, articles, interviews)

Defining The Different Work

While reading Alan Weiss’s Million Dollar Consulting, there was a passage that I think helps clarify this even further, which you can use to point your efforts towards more efficient, and higher paying means.

Alan Weiss divides work into three categories: strategy, methodology, & delivery. Delivery is the act of producing whatever needs to get done to create the deliverables for a project. A methodology is the practices and procedures used to manage delivery. The strategy is identifying new opportunities for growth. It determines if a project should happen at all and if so, how much we should invest in it.

The strategy drives the methodology. The methodology drives the delivery.

He uses the formula to decide the value of project work: 50% strategy, 30% methodology, and 20% delivery.

Dividing Up The Value

This model maps to our earlier definitions:

  • Contractors are responsible for delivery only.
  • Freelancers are responsible for methodology & delivery, maybe a bit of strategy.
  • Consultants are responsible for strategy, possibly some methodology.

Applying This To Your Work

In theory, if you can shift the kind of work you do up the ladder, you increase your value. How can you change the focus of your work such that you take more ownership of the strategy and methodology? I don’t think this applies just to professional services, but employment as well. I don’t think any boss would be upset with an employee that shared ideas on ways the company could cut costs or increase revenue.

Have ideas on how to shift your focus, or ideas you want to discuss further?  let me know in the comments or reach out via email.  I’ve been thinking a lot about this for my own business lately and would love to share notes with others.

Action Items

 

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