Operating a business is no small task. There are a lot of things that require your attention any day — from cash flow and marketing to personnel and tech issues.
More times than not business leaders have more questions than answers to various operational challenges. And that’s exactly why the consulting industry thrives.
Smart consultants offer seasoned insights, proven solutions, and sometimes even extra horsepower for navigating business management. If your business is struggling to keep up with the market trends or you lack the perspective to develop it further, it may be time to hire a consultant.
This guide provides a walkthrough for hiring, onboarding, and paying freelance consultants.
The global consulting market size stands at over $130 billion. Meaning you have an array of external providers to select from. At the same time, hiring in-house advisors is also attractive, especially when you go through major corporate changes or prepare for a new growth stage.
To decide on the optimal talent sourcing model, we’ve lined up some arguments for each.
Establishing an internal think tank looks appealing to rapidly growing companies. When you have people with strong analytical skills, a passion for growth-hacking, and out-of-the-box thinking, you’re better positioned to navigate market calamities. Plus, you can always “externalize” this function to amplify your brand and market reach.
Slack, for example, launched a company HR think tank back in 2017, which was tasked to conduct workplace research for internal purposes. However, in 2020, they externalized this function as a Future Forum research consortium.
Below are several more reasons for building an in-house advisory team:
Top-grade talent is an asset to every company, but it’s hard to come by. Over 75% of organizations report talent shortages, mostly for senior, tech, and management roles. And even when you know just the right person, hiring them full-time may be cost-inhibitive.
Also, you should factor in the next downsides:
In the UK, 8 out of 10 companies that hired freelance consultants were satisfied with their services. Almost a third (27%) said that consultants met most of their expectations and a whopping 53% said they exceeded them.
Qualified pros know how to strategically solve the client's problems and can provide a high tactical output at consistent levels. Whether you miss a specific skill set, want an outside eye on your problem, or need extra horsepower to streamline operational work, independent consultants will come through.
Independent consultants can be an incredible asset to any company. Yet, the engagement can backfire too. Since consultants remain on the margin of your business (i.e., they’re the external workforce), they would have a topical view of your business and may lack the same zeal and motivation as an in-house team. Likewise, not all consulting advice would pay off (for one reason or another), which would leave both parties frustrated.
And here are several more potential downsides to hiring freelance consultants:
Consulting firms range from global networks, serving Fortune 500 companies to smaller boutique firms, specializing in one type of consulting (e.g., financial). The range of choice is stupendous and only limited by your budget.
Consulting firms can undeniably solve more elaborate problems and do so faster than in-house teams and independents would. But that comes at a cost. Consulting firms like McKinsey are known to charge clients up to $16,000 per day for working with their most senior partners. While others impose minimal client engagement rates of six figures or more.
Apart from somewhat inhibitive costs, there are also several more points to consider:
Consulting covers every existing business function — from accounting to technology. The goal of a great consultant is to effectively capture your problems and propose a set of solutions.
Some also dab into the execution part and facilitate solution implementation. Though most remain on the strategy level aka conceptualize the future to-be state, pitch ideas, validate findings, and guide the execution.
If that’s the type of support you need, here are seven types of freelance consultants you can hire:
Freelance consultants operate as satellites to other businesses. The best way to find them is to start asking: “Who’s the best person for X in your industry?”
Get online and start looking for people who’re talking about the subjects you care about. Most consultants also double as bloggers, speakers, podcasters, YouTube hosts, and columnists in the business media. Others are acting execs or university professors, who offer consulting services on the side.
When you’re ready to hire, Xolo makes finding freelance consultants a breeze, by ensuring your projects always receive the precise talent they need. Contacting the Xolo crew, and informing them of your project details and mission, means you’re just a few business days (or less) from hiring amazing freelance talent.
We’ll go over some alternatives to finding freelance consultants today, and give you a chance to decide which fits your needs best.
Before you make a decision, consider reviewing:
Consulting compensation varies a lot, as does the nature of their services.
Consultancy UK did a curious analysis of the consulting fees across different market players — from independent contractors to Big Four consulting firms. Using open-source data, the team estimated the average revenue per employee in each case.
Source: Consultancy UK
Global consulting firms (e.g., McKinsey, Bain & Company, A.T. Kearney) typically generate between $400,000 and $500,000 from each employee per year (in the form of billable client hours and add-on fees). Although not all of that revenue is paid directly as salaries.
Independent contractors, in turn, have a wider discrepancy in income with some earning $50K per year at the lower end and over $400K at the higher.
In reality, freelance consultants' rates aren’t kept. Talented independents can (and would) charge a number they feel they are worth, often proportional to the value they’re delivering for their clients. So prepare to review different proposals and price quotes.
That said, we don’t want to leave you completely hanging. So here are some ballparks you can use to budget for consulting fees.
A 2022 study by Freelancer Map found that European consultants charge $113/hour on average (before VAT). That makes sense as most freelance consultants are tenured professionals with post-grad degrees and decades of industry experience.
Hourly consulting rates tend to be lower ($50-$100/hour) for operational support e.g., ongoing assistance with new framework implementation or process optimization. But most consultants will command higher rates ($200+/hour) for executive consultancy and interim roles. Tech consulting hourly rates also run higher. For example, Senior Specialist Engineers in Canada charge $360/hour on average.
Likewise, consulting rates increase proportionally to experience levels. In the US, consultants with five or fewer years of experience, bill $140/hour on average, while people with 25+ years bill a median of $200/hour, according to an IEEE survey.
Although hourly rates are popular with consultants, some also practice value-based pricing i.e., pegging the engagement value to the delivered ROI.
Source: Consulting Success
Project rates vary a lot depending on the scope and nature of work. For example, the American Association of College and Research Libraries (ACRL) has the following reference project rates listed for different types of engagements:
Overall, the average consultant engagement rate among experienced consultants is $20K+ per project.
Some consultants choose to go with a day rate instead of billing hourly. A day rate usually covers 6 to 8 hours of remote or on-site work on the client’s project. It also already factors in all the taxes and admin overheads independent contractors have to pay out-of-pocket.
Once again, day rates vary a lot depending on the industry and experience levels. For example, the average day rate of HR Consultants in the UK is £593.20. Although the more qualified folks, offering strategy support can charge upward to £833.83 per day. In comparison, freelance consultants working with the museums tend to charge £201- £400 per day on average.
Freelance consultants have several billing models:
In each case, you’ll receive an invoice, specifying all the deliverables, per-item costs, and a total with applicable taxes.
Another benefit of using Xolo is that we handle all VAT payouts. In fact, you won’t be even liable for VAT in most cases since you’d be contracting with us — an Estonia-registered limited liability company (LLC) with a valid VAT number. If we’re based in different jurisdictions, a zero VAT rate applies, thanks to the Reverse Charge VAT mechanism in the EU.
We provide all hired contractors with a simple invoicing app they can use to bill you. Once a freelancer invoice arrives, you can choose between settling it immediately or adding it to a processing queue (depending on the payment terms).
With Xolo Teams, you can schedule freelancer pay runs at any time (every day or once per month for a rolled-up master invoice). This gives you extra flexibility in terms of cash flow as you can always adjust the payment cadence to cover the accounts payables with new cash from accounts receivables.
Moreover, you don’t have to worry about any cross-border payment complexities (or hefty bank fees) as we’ll cushion those. We charge a single flat-rate fee of 3-5% on every payout, which you can also equitably split with the hired contractor.
The key to a successful consulting engagement is fast integration of the hired pro into your organization. They need to get a “crash course” in your company's history, operations, and processes to get productive.
To make the above happen, apply the following tips:
Need more guidance? Learn how to manage freelance teams to achieve great synergy and top performance!
Xolo is changing the way you think about hiring freelancers — less hassle, less time and better results. Send your next project to Xolo, and let a dedicated industry expert curate three freelancers perfect for your exact mission to you in under three business days, leaving you with an easy decision.
And if you’re looking to build a team, Xolo has you covered from discovery to payday.
Elena Prokopets writes content for tech-led companies & software development businesses, marketing to them. Her empathy for the customer, expertise in SEO, and knack for storytelling help create content that ranks well and drives industry conversations.
Elena uses Xolo so she can focus on her solo B2B content writing business without stressing over the compliance and admin overhead.
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