I’ve talked to many people who would like to shift from doing full-time salaried work at companies to becoming their own boss. Having been on the journey myself, I say go for it — you’ll find consulting very rewarding. I also say it’s the Future of Work.
A common question we get from new consultants is, “How do I set my rate?” You could start by taking your last salary and calculating an hourly rate, but I’ll tell you why that translation falls short.
A Different Lens
When you work as an employee, your position fills a well-defined need that may have existed historically. For example, a product manager defines the why, when, and what of a product that an engineering team builds. Your role is distinct to that company and the requirements are understood. Moreover, your salary is based on a certain point in time, not necessarily what it could be in the future.
When you jump out into the market, you can’t expect that other companies will look at you with that same lens. Your experience may be valued more or less, depending on the needs of the business. A startup may have a different budget than a large corporation. In essence, there’s no uniformity in the way potential clients evaluate rates.
A Holistic Approach
If your move is to see if you can make more money than you did as an employee, the consulting route can be a tough way to go. You may have to build a bigger brand, a great reputation, write a book, or hire minions in a different country to do the dirty work. This takes time, and it starts to look more like a small company than an individual.
What’s the approach you should take? Focus on what consulting can give you holistically. Many people in our consulting community have gotten so much joy from intangible benefits — flexibility of time, freedom of what projects to work on, a variety of roles, continued learning, and more control of whom you work with.
I’ve talked to a lot of people who are unhappy in their full-time jobs. Some may have even called it “soul-sucking.” They are overworked, burned out, and tired of running in the proverbial hamster wheel. They see a future where they could actually maintain work-life balance and undertake other things they enjoy. (What salary would you take to have a life like that? Maybe you would even cut your salary in half!)
If you are still working as a full-time employee, let me give you a taste of what some of our consultants are able to do with their new-found flexibility. One consultant works in an office three days a week. Her commute was shortened to less than 20 minutes. She takes a foreign language class once a week. She goes to the gym every single day. Another consultant recently left his full-time job and now has time to write a book. Others have started side businesses such as photography or real estate. Some have kept their Bay Area clients but have moved away to live in their ideal conditions.
When I first started consulting, I coached middle school basketball and taught algebra in summer school. Talk about having great balance. Consulting allowed me to “replenish my soul.” I found the right mix of doing things I love, including marketing, but in a different way. These are benefits you can’t put a price on.
There’s karmic value in breaking the contract you have in your head from past work experiences. If you’re going to try something new like consulting, then really try something new. Don’t compare your former work world with this drastically different world.
Now, to get more specific tips on how to calculate your consulting rate, read this blog.