Guide to hiring freelance consultants

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. 

Full-time advisors vs independent consultants vs consulting firms: Which option to select?

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. 

Pros of hiring full-time advisors

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:

• Tailored research. Your internal team can be tasked with any sort of strategy, research, and operational tasks. Process optimization, research into brand positioning, compliance landscape monitoring — there’s a lot of high-value work your teams can produce in-house. 
• Embedded organizational knowledge. Full-time employees create, store, and distribute new knowledge within your organization. They’re well familiar with your business context, shifting goals, and internal constraints and can build new strategies around those. 
• Continuity of work. In-house advisors are involved at every stage of the initiative. They conceptualize the project, then facilitate the execution, and analyze the results. Based on this institutional knowledge, they can then devise even better strategies. 

Cons of hiring full-time advisors

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:

• Limited flexibility. The best advisors have bounded competencies. They may excel in SAP implementation, for example, but have little knowledge of equivalent Microsoft tools. Therefore, you have to carefully weigh in on whom you can (and should) bring on-board full-time. 
• Risk of internal bias. The flip side of significant institutional knowledge are the preconceptions that full-time employees tend to develop over time, which could lead to “safer” recommendations and less objective” advice. 
• Complacency.  Since full-time advisors are already integrated into the organization, they may not feel as motivated to drive change or innovate over time. Especially, when their earlier suggestions face route resistance and unwarranted stakeholder scrutiny. 

Pros of hiring independent consultants

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. 

• Outcome-driven collaboration. Freelance consultants commit to delivering on specific objectives. Some also peg their compensation levels to specific KPIs (e.g., a sale increase by 10% would mean another $10K to their paycheck). They’re accustomed to taking charge and cruising through the execution at warp speed. 
• Diverse range of services. Most freelance consultants excel in a specific niche (be it fundraising for DTC startups or risk management for biotech companies). This means you can work with a top expert in your field or industry every time, rather than settle for “generalist” advisory. 
• Access to a professional network. Since independent consultants are mostly experienced professionals, they have a lot of other interesting contacts in their books, which they often leverage in client engagement. A great consultant is your “gateway” to more smart people in your industry and beyond it. 

Cons of hiring independent consultants

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:

• Limited resources. Although independents have substantial professional networks, they lack the same level of human and tech resources consulting firms or in-house hires would have. Therefore, they can only cover a more limited scope of work. 
• Risk of misalignment. In some cases, consulting engagements may get off the track and not pay off in the way you’ve envisioned. The reasons are aplenty — from human error to lack of executive commitment on your part. To gain the most benefits, you’ll have to ensure a high degree of internal support from various stakeholders. 
• Constrained availability. Freelance consultants are a one (wo)man business, as such they have to carefully balance various client engagements. Hence, “selling” a one-off, smaller project to a busy consultant, whose schedule is jam-packed with retainers may be tough. 

Pros of hiring consulting firms

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. 

• Breadth of expertise. Bigger consulting firms tout multiple advisory capabilities — from M&A support to large-scale digitization projects. If you have an ambitious target, requiring cross-functional expertise, top-tier agencies will be able to support you. 
• Top-caliber talent. It’s no secret that Big Four companies employ some of the brightest business minds. Their talent bench includes a mix of former executives, academics, entrepreneurs, and otherwise smart people, who’re hardly fazed by any business challenge. 
• Access to best tools. Consulting firms meticulously invest in the latest technology for business analysis, risk management, financial ops, and more. As a client, you often get a “slice” of their tech estate, plus benefit from streamlined, data-driven service delivery. 

Cons of hiring consulting firms

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: 

• Potential for conflicts of interest. Bigger firms often work with multiple clients in the same industry and sector, which could result in perceived biases and conflicts of interest. If you’d rather not “rub shoulders” with your close competitors, you’d have to carefully vet each firm's client list. 
• Strong vendor dependence. Consulting firms can take over entire functions and/or large-scale projects. However, such over-reliance on an external partner can be not sustainable (i.e., what would you do if they suddenly go out of business?) or too cost-inhibitive. 
• Over-reliance on frameworks and data. Agencies are hired for their frameworks and analytics-driven “best practices”. But over-reliance on numbers alone can leave them blind-sighted to software, qualitative aspects of the client's challenges and opportunities.

Freelance consulting roles your business needs

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: 

• Fractional or interim executive is a senior leader you bring in to establish a new function or facilitate change management for an existing one. Also, over 71% of companies hire external executives when they lack internal resources to resolve critical situations. Interim c-suite members can help set up better operational processes, implement new operational plans, and accelerate the progress toward the set KPIs. 
• Growth advisors help you figure out how to best reach those lofty revenues, sales, or userbase targets. That’s the person to call upon whenever you prepare a go-to-market strategy for a new product, plan to expand into new territories or struggle to navigate the increased competitive pressure in your industry.  
• Business coaches assist leaders in achieving specific goals: Scale business operations, improve financial processes, or level up people management skills. Most do 1:1 engagements, although group business masterminds are popular too. 
• IT consultants get called upon whenever a new major tech project is on the agenda. These talents advise on specific software acquisitions, help with reference architecture design, provide user training, and otherwise help you get the maximum value from the acquired technologies. 
• Strategic advisors lend their substantial business acumen and market knowledge to anyone looking for qualified second opinions. That’s the type of consultant to speak to whenever you’re considering new revenue channels, business model transformations, and other big-ticket, but high-risk action items for your business. 
• Management consultants are trained to identify areas of improvement within different corporate processes, systems, and functions. They’re hired to provide a working solution to a precise set of problems — be it high employee attrition or low customer satisfaction scores. 
• Financial advisors handle all the money matters. From cash flow analysis to profit and loss modeling, these experienced financiers help you make better sense (and cents) of your money flows. 

Where to find the best freelance consultants?

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:

• Referrals. Chances are someone in your network already worked with an amazing consultant or at least can give you a couple of names. Then do some personal due diligence to further evaluate the candidate. 
• LinkedIn. Look for senior people in your industry with “consultant”, “advisor”, and “mentor” titles. Analyze their past career history and published projects to determine if they’re a match. 
• Professional associations like the Society of Professional Consultants, the Institute of Management Consultants, and the Management Consultancies Association (MCA) among others have public members directories, where you can get connected with certified freelance consultants. 
• Niche marketplaces. Talent Response, Catalant, TalMix, and Umbrex offer on-demand access to consultants across roles (IT, finance, HR, Marketing, etc). The downside is that each platform takes a substantial cut (20% to 40% on average) on each brokered transaction. 
• Consulting firms networks. Talent Exchange by PwC and Deloitte Open Talent are the top two places where you can connect with tenured consultants, operating as independent contractors. 

How much do you pay freelance consultants? Rates by location & expertise 

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. 

Hourly rates for freelance consultants

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. 

Project rates for freelance consultants 

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:

• External review of the library: $13,00 (plus travel costs if delivered on-site) 
• Consulting on organizational development and effectiveness: $7,000-$19,500
• Library regeneration projects: $25,000 for a 4-part service 

Overall, the average consultant engagement rate among experienced consultants is $20K+ per project. 

Day rates for freelance consultants 

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. 

How to pay freelance consultants

Freelance consultants have several billing models:

• Hourly (aka based on weekly/monthly timesheets)
• Fixed-price (using milestones or in one lump sum payment) 
• Retainer (a subscription-style, fixed-price payment due over X months) 

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. 

Must-know tips for working with freelance consultants

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: 

• Clarify the consultant's role from the get-go. The worst scenario for any consultant is fierce internal resistance or downright dismissal of their suggestions. Therefore, you have to get your team(s) on board with your decision to bring a “stranger into your house”. Explain why you’ve hired this person, what job they will need to accomplish, and what inputs will be required from other folks. Office politics shouldn’t stand in the way of a prospective engagement. 
• Provide requested resources. If your consultant asks for access to this or that, they probably have a good reason for that. You shouldn’t restrict access to information or internal systems (unless that’s indeed warranted). Also, if your consultant requests access to extra technology or human resources (and provides justification for that), try to make that happen. 
• Practice “scope control”. Savvy consultants know how to continuously generate value for their clients and fix multiple problems, rather than just the one they’ve been initially hired to tackle. That said, throwing just about any issue at your consultant will result in a higher monthly bill and jumbled priorities. That’s why you should continuously manage the scope of the engagement to direct the consultant’s effort toward the most crucial action items. 

Need more guidance? Learn how to manage freelance teams to achieve great synergy and top performance! 

Key steps to hiring freelance consultants: Conclusion

1. Asses your business’s needs and challenges
2. Determine if you need full-time or part-time consultants
3. Select the consultant type: growth advisor, business coach, etc.
4. Find freelance consultants to hire. Let Xolo help →
5. Budget for your consulting needs and rates carefully
6. Generate thorough invoices with deliverables. Let Xolo help →
7. Establish clear communications with your consultant(s).
8. Regularly evaluate their progress, and adjust accordingly.
9. Automate invoice payments to your freelancers. Let Xolo help →
10. Foster an on-going and collaborative relationship with your new consultant.

Hire Europe’s best freelance consultants with Xolo 

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.

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About Elena

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.