What is Consulting?
The Lifestyle, Earnings, and Satisfaction
Most consultants find their career gives them a highly rewarding lifestyle, earnings, satisfaction, and contribution to the world. A consultant’s expertise, experience, and decisions are highly valued. It can be a very rewarding career.
This section of the Ultimate Guide will show you survey results that can help you decide if you want to become a consultant. There are many advantages to becoming a consultant. But if you do not build your business correctly, the disadvantages can be exhausting.
What do Consultants Do?
Consultants work in a wide array of fields ranging from helping small retail businesses to researching artificial intelligence and from social media strategist to Global 1000 corporate strategy.
Just a small collection of areas consultants work in could include,
Small Business Startup
New Product Development
Medical Practice Management
Medical and Pharmaceutical Research
A 2017 State of the Industry survey by the Institute of Management Consultants found their US members self-selected themselves into the categories,
Institute of Management Consulting, State of Industry, 2017
How Much Do Consultants Make?
Getting a clear picture of what consultants earn is difficult because there is no precise tax or census definition of consultant that ties to their earnings. Consultant earnings depend greatly upon the clients they serve, their offering, and their marketing ability.
One method of calculating independent consulting income is to multiply the income of full-time consulting employee by a multiplier. A multiplier is used to account for an independent’s additional overhead, marketing time, taxes and non-full time status.
A second way to look at the range of consulting incomes is to look at US census data for solo professionals who categorize themselves in the categories that fit consulting. As you’ll see, there is a surprising distribution of income for solo-professionals and consultants.
Comparing Corporate and Independent Consultant Incomes
You can find corporate consultant incomes for very specific niches by looking at online job boards. The online job boards give you a chance to see salary equivalents for very niche expertise and locations. (This can be handy later for project pricing.) However, don’t just assume an independent consultant earns the same as a corporate salary. Corporate salaries need to be adjusted upward for a full-time solo consultant.
The salary posted in job listings does not include benefits such as insurance, educational leave, and family leave. In 2019, US corporate benefits were approximately 30% of base salary.
A good Rule of Thumb is that a “full time, well-marketed” independent consultant charges 2 to 3 times as much as their salaried counterparts. However, that rate includes the consultant’s time with admin, overhead, and marketing.
Independent consultants with good business and marketing systems
earn 2 to 3 times the revenue of their corporate counterparts.
The table below shows average consulting salary from the last week of January 2019 for average and senior job postings for all jobs including “consultant” in their title on the websites Glassdoor, PayScale, and Indeed. This table is for salary and does not include bonuses, profit sharing, or salaries for senior consultants or partners.
Remember, a good rule of thumb is that independent consultants charge 2 to 3 times the salary of their full-time employee equivalent.
Independent Solo Professional and Consultant Incomes
A second way of estimating income and distribution for consultants is to look at US Census data for solo professionals in those segments where consultants work.
This chart shows the income distribution for solo professionals from an analysis by Elaine Pofeldt of the most recent US Census data from 2015. This analysis is from Elaine’s book, The Million-Dollar, One-Person Business, published by Lorena Jones Books.
Like the high-end for salaried consultants, a lot of solo professionals make very high incomes. And outliers have amazingly high incomes.
Totaling the long tail on the right of the curve shows that more than 2.7 million solopreneurs make more than $100,000 per year. There are more than that now since this data is from 2015.
There are almost one-million solopreneurs making more than $250,000 and 35,584 making between $1,000,000 and $2,500,000.
Even falling short of the top outliers still puts you in the high-six figures.
Following the business systems used by these high earners significantly improves your income and independence.
Following Even a Few of the Business Systems Used by These
High-Earners Significantly Improves Income and Independence.
While Elaine could not identify from the census categories the people who were consultants, she was able to see their industry categories. Four of the six categories fit the type of work and deliverables produced by consultants,
Why Do Some Independent Professionals and Consultants Earn Such High Incomes?
Why do some solo-consultants and solopreneurs make so much money? What do they do differently?
Elaine Pofeldt’s book, “The Million-Dollar, One-Person Business“, my consulting experience and two years of research shows that high-earners use proven strategies and repeatable business and marketing systems.
For her book, Elaine interviewed thirty $1,000,000 solopreneurs to learn what they did differently. She found six things they did that average earners had not done. What they did differently wasn’t the stuff you read in magazines like waking up at 5:00 am or drinking “napachinos” to boost their energy and creativity.
Like Elaine’s findings, my research found eight “stages” that incorporated specific business-building practices and systems that made the difference between success or a hard slog. Elaine’s six things and my eight stages incorporate the business thinking and systems that experienced investors demand new startups use in Silicon Valley.
It isn’t magic. It isn’t productivity tips. Success comes from building your solo-consulting or solo professional business using well-proven business systems that anyone can follow.
Most consultants are experts in their field, so it takes more than domain expertise to ask for and earn rates. So, what do consultants with high earnings and highly successful businesses do differently?
US Census data shows that in 2015, the average self-employed person in the US earned $47,200. In that same year,
The difference between average and high earners is huge.
Can you imagine what that difference would make to your life, your family’s life and your children’s future?
Where Do You Want to Be on the Earnings Curve for Consultants?
This income distribution has the long tail to the right often seen in these types of studies. The long tail is because a few solo professionals build systems that make a big difference. This difference isn’t just in earning. It carries over into life-satisfaction, independence, and well-being.
What is the Difference Between High Earning Consultants and Average Consultants?
Two things separate high earners from average earners, the business structure, and their marketing.
In Elaine Pofeldt’s ground-breaking research on high-earning self-employed people she discovered the factors critical to success are,
Pofeldt, E. (2018). “The Million-Dollar, One-Person Business,” Lorena Jones Books.
My interviews and research into successful startups came to a very similar conclusion to Elaine’s. Most successful startups, whether a solo professional or technology business, follow principles used by Lean startups in Silicon Valley.
And in the case of consultants and solo professionals, find ways they can move away from working hourly or project-based,
High Earning Consultants Create Business and Marketing Systems
A survey of solo-consultants conducted by Michael Zipursky shows a couple of significant differences between solo-consultants earning less than $150,000 per year and those earning more than $150,000 per year.
If we overlay these differences on the same earnings chart from before it looks like this,
Those earning less than $150,000 per year had only 1 to 3 clients per year, apparently marketing and looking for new clients only when a client was lost. Their marketing primarily depended on referrals and networking.
Consultants earning more than $150,000 per year had six or more clients per year and marketed DAILY. They also used a portfolio of marketing methods that filled their prospect pipeline; referrals, speaking, networking, LinkedIn outreach, seminars, webinars, and email automation.
What About the Consulting Lifestyle?
The percentage of people working as consultants, business coaches, and full-time freelancers is growing rapidly. The reasons for this growth are more than just high incomes. It’s because a large majority of consultants or freelancers love what they do and are highly satisfied with their work.
Multiple surveys over the last few years have shown that independent workers are more satisfied, happier, and healthier than their 9-to-5 counterparts. The results from MBO Partners, the Institute of Management Consultants, and the London School of Business all show the same result, greater job satisfaction, career growth, and independence.
With that many solo professionals loving their lifestyle, you can expect the independent workforce to continue growing. Wage stagnation is another good reason to go independent, but more than income people want to work independently for greater personal freedom and greater work satisfaction.
One great advantage of independent consulting is being able to combine work and travel with your family. This picture is from a Viking cruise with my family going through a lock on the Rhine from Basel, Switzerland to Amsterdam.
Independent Professionals Have Higher Job Satisfaction
The 2019 MBO Partner’s report shows that full-time independents, not just consultants, have a 69% satisfaction rate with their income. That’s close to the 66% satisfaction rate of full-time employees. So, full-time independents and full-time employees have almost the same job satisfaction rate.
There is a big difference though in the interest in their work. 57% of full-time independents are interested in their work, while only 37% of employees are.
Full-time independents are significantly more interested in their work. This may be because they can,
This is not a short-term effect. The number of full-time independents planning to continue as independents continues to rise. In 2019, 70% of full-time independents said they plan to continue, up from 64% in 2018 and 58% in 2015.
Independent Consultants Have Greater Lifestyle Satisfaction
Research by the London School of Business and the consulting firm Eden McCallum in 2018 showed even greater satisfaction among independent consultants. The vast majority, 90%, of independent consultants are satisfied with their jobs. This is the conclusion from a sample of 307 independent consultants of whom 75% are the main or sole household earner.
A survey by the London Business School found very similar reasons to the results found by MBO Partners,
This isn’t to say there were no downsides. The downsides independent consultants reported where,
The Biggest Complaints of Independent Consultants
These are some of the marketing systems outlined in this Ultimate Guide and that you learn step-by-step in the Starting and Building a Thriving Consulting Business course. In the course, you learn the three types of marketing that work best for you and your niche.
There are two downsides to independent consulting that are a usual topic in any late-night conversation between consultants, the Feast-or-Famine cycle and a lack of recurring revenue.
Without a doubt, the Feast-or-Famine cycle that drives capricious income is the biggest complaint among independents. I’ve been hearing it continuously in my 30+ years of working with consultants.
The Feast-or-Famine cycle happens because most consultants don’t build marketing systems that automatically fill their pipeline.
A lack of recurring revenue is part of the same theme. Consultants often work long hours improving client businesses, but they do not work on their business. You’ve probably heard it before – you need to work on your business not just in your business. This problems usually comes from not having multiple streams of recurring income.
You need to work on your business,
not just in your business.
Consultants are hard workers, but there are only so many hours you can work. As a solo consultant, you can only earn so much, and promote your consulting so wide in the few hours you have.
Smart consultants identify key offerings they can leverage to their niche. They package or productize their consulting offering so they have multiple streams of income that don't depend upon them putting in hours at a client.
This guide and the course are here to show you how to avoid these two risks and build your own thriving consulting business.