Things to consider before becoming a self employed Consultant

Every year, at around this time, a common theme in my conversations with HR professionals is their desire to follow through on a New Year's resolution to move onto a new role. 2012 has started out a little differently, though, with a number of these practitioners, mostly senior and highly experienced, considering a shift to working for themselves.

In the HR profession, especially in the learning and training arena, this is certainly an option, and many of us do make the move to be our own boss and become a consultant. What people have been asking me is what they need to consider before taking that step. 

After answering this question a number of times, I have been encouraged to write this article and share my views more broadly.

So, here are my 6 key criteria for becoming a self-employed HR consultant

1. Know that your expertise is ‘saleable’ - This is critical! Will clients buy your services? Identify ‘what you want to be famous for’, what services you will offer, and the scope of those services. Find and articulate your niche. For true success, you need to know and believe you are in the top 10 - 20 per cent of your peers in your chose field. It can’t be, “I do anything and everything”, as that is the ‘jack-of-all-trades’ consultant and can often lead to a decreased/low personal brand. I don’t often see clients wanting or paying well for generic consultants.

2. Connect regularly with your network - most new consultants struggle with this.  They know people, but not enough to build a significant business - and they don’t stay in contact often enough with past colleagues and contacts. When I started my first business I was fortunate to have over 200 contacts that where ‘hot’ or ‘warm’. The calls I made were never 'cold'. My two biggest sources of clients continue to be those direct ‘hot’ and ‘warm’ contacts and secondly, their referrals. It’s also important to remember that networking is a two-way street – you have to give and be available for people – add support and value.

3. Be a marketer and sales person – knowing enough people isn’t enough, and neither is just having a coffee with people. Sure, it’s a ‘softly, softly’ approach in many cases, but you need to be able to articulate what you offer, how you work and ‘ask’ for an opportunity to work. Being a natural ‘connector’ really helps here, as you will already have kudos with potential clients who will be open to meeting and hopefully working with you. 

4. Have the capability and desire to run a business - there is a need for some detail orientation - for setting up a company, creating documents and IP, doing the financials e.g. invoicing, BAS, MYOB, GST, PAYG, Workers Comp, PI & PL insurance, and paying yourself.  Yes, you can outsource some things and this makes good business sense, but consider the cost versus value.  An accountant is often necessary, especially when setting up a business, and sometimes legal advice is also required, both of which can be expensive.  A bookkeeper can assist with monthly financial processing, but make sure you understand how it all works to ensure the commercial viability of your business.

5. Can you go solo?  Are you comfortable with working on your own for most of the time? If you’re an extravert, or thrive on the stimulation of a busy office where you have frequent contact, working alone can be hard. Having others around to bounce ideas off and check in with can be a huge benefit. There are other ways to be connected and engage with people, but you have to go looking for these opportunities. Being a solo consultant isn't for everyone. I admit that this was the toughest transition for me. 

6. Making money cannot be the primary driver - For senior managers in large corporations (over $250K), in most cases - they would need to work as hard and as many hours to earn the same salary. There are endless books, blogs and articles on the key reasons why someone should start their own business. The most common reasons are:- increased flexibility (what, when and how you work), less hours in an office, avoid office politics, no more ‘working for the man’ and ‘towing the line’, greater creativity and engagement, and more diversity of work and interactions (variety of clients and assignments). 


And the all -important question … ‘What $$$ can I make as a self-employed consultant’?

Following on from point 6, here’s a quick calculation:- 

If you’re a senior employee on $200K package per annum, your daily pay rate is $770 gross (that’s 260 days per year that you are paid for - 52 weeks x 5 days per week)

So...if you become a consultant, and want to make the same $200K salary, you need to:-

a)      Remember you won’t do billable work every day. I would recommend calculating work on a 10 month (40 week) per year basis - rather than 12 months.  Firstly, December and January are generally quieter months, and you will also have gaps and down time over the year, such as Easter, holidays, school holidays, days off.

b)      To make $200K per year – you need to earn $20K per month (over 10 months) – and a working month is 23 days (in most months)

c)       To make $20K per month, calculate , what you need to work in terms of billable days (or hours). You need to research and determine your daily rate – which needs to be market- based for your service offering and delivery.  A generalist HR consultant may charge $1,000 per day, so would need to work 20 days per monthAt $1,500 per day, it’s 14 billable working days, and so on. As a facilitator/trainer at $3K per day - that’s 2 days per week - and you will bring in $24K per month. But remember, you will need to spend the other 3 days per week creating your workshop content, preparing, plus the ongoing marketing, admin, financials, etc. Depending on your calculation, the idea of leaving employed work may not seem as appealing.


My take is if you want to continue to earn $200K per annum or more, you may still be working the same long, or even longer, hours as in your corporate roleharder in the ‘delivery’ (you are not paid for meetings, planning and thinking time as a consultant), and have the added pressure of running a business and earning an income.

Peter Switzer, one of Australia's leading business and financial commentators, has some great advice for small business and sole traders. After 3 years of running my own business, two of Peter's points still resonate loudly with me:-

 1.Don't start your own business with the primary goal of making money

 2. The 3 biggest challenges for small businesses are cash flow, cash flow and cash flow!

 This is purely my viewpoint. It’s based on what I have personally seen and experienced over the last 3 years in business, and from what I have heard and learnt from other consultants and sole traders. It is also supported by a great number of articles and blogs that are currently in the market. 

I started my own business with the key objective of finding a more flexible way to work. My daughter had just starting school, and I missed everything in her first 2 terms of Kindergarten because I was a full time, corporate parent. I wanted to be there for the occasional ‘drop off’ and 3pm pick up, go to athletics and swimming carnivals, and occasionally help out at the school during the day.  My initial decision was to give consulting a go by working for others. 12 months later I was brave enough to start my own business - which I have now done twice!  I have now achieved the flexibility I want for my family, and I have no regrets. It’s been a huge learning curve and an amazing journey, and I couldn’t be happier.

If you decide to embark on the journey to become a self-employed consultant, I wish you every success. It’s a privilege and a joy to be of service to others. Of course, feel free to contact me if I can be of any help to you as you commence your new venture!. 

Amanda Webb


One Degree HR

Views: 3074

Comment by Susan Rochester on February 21, 2012 at 13:35

Excellent insights, Amanda!  Thanks for being so sharing your experiences so others can learn from them.

Comment by Karen Schmidt on February 24, 2012 at 7:55

Great article but of course all those figures are gross. Depending on your fixed and variable expenses you will need to add between 30 and 60%.

Comment by Lynette Jensen on February 24, 2012 at 7:58

It is very good advice Amanda! Thank you, and well done.

Comment by Yvonne Smolenski on February 24, 2012 at 14:46

Excellent article and advice that I concur with totally from my own personal experience. Thankyou for taking the time to share with everyone.

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