An Apprehensive Entrepreneur

Q:I've been working for a while in my field and I see some of my colleagues moving into the consulting field. They have the freedom to choose the projects they'd like to work on and I'm envious of that. However, I've always worked at large organizations with benefits like health care coverage. I'm worried about going into consulting, how to navigate the process of getting my own insurance, paying higher taxes, how to market myself, etc. What are your thoughts?

A:Dear Apprehensive Entrepreneur, 

Bravo on reaching the point in your career where you feel confident in possibly striking out on your own. There are definitely pros and cons when it comes to consulting. The autonomy of choosing your own projects and working your own hours can be wonderful. But that autonomy does come with a lot of extra responsibilities and considerations.
Choosing to be a consultant as a primary form of employment is choosing to be self-employed. 
I think the biggest boogeyman when it comes to being self employed is the taxes, and for good reason. Many of us are super inexperienced when it comes to the IRS and the tax code, outside of using tax software to file (death to Turbo Tax! Free Tax USA forever!). However the fear of the unknown when it comes to taxes should not be a reason to stop yourself from dipping your toe in the consulting pool. 
When it comes to dealing with taxes my suggestion is to turn to an expert. Find a CPA (a proper one) and entrust your taxes to them. It may not be fun to pay someone to handle your taxes, but the piece of mind and the certainty that you won't be hit with a massive tax penalty can be priceless. 
  • Also be aware that when you are self-employed, you will need to make quarterly payments on your taxes, you cannot wait until tax day to figure out what you owe the government. There are penalties for that. This means that you need to find a CPA to sort you out as soon as you venture out on your own. 
Along with the tax question, the health insurance question has become a lot easier to manage ever since the Affordable Care Act was signed into law during the Obama administration. Everything you need to find your own health coverage is available on It is fairly user friendly and leaving your job to go into consulting is considered that kind of life event that allows you to buy insurance outside of the standard open enrollment period. 
That leaves the final piece, how to go about transitioning from "working for the man" to being your own employee as a consultant. This is by far the most difficult pat of the equation, so let's look at some strategies. 
  • One strategy is to start small, you need to build a reputation when it comes to consulting, a lot of the work comes through referrals and relationships that have been built during previous work. So don't be too quick to leap into consulting if you don't have a foundation of contacts to offer you that coveted first gig. Keep your main job going while you ease in with side gigs that are not conflicts of interest and don't get in the way of your normal working hours. To truly break in you may need to do some pro bono or free consulting, build up the experience you need with whatever work you can find, reach out to friends and people in your network to see if anyone has some work they wouldn't mind letting you cut your teeth on.  
  • Maybe you already have the framework in place to leave your job and start consulting, fantastic! However don't be surprised if your new work reality is less freeing than expected. Even with the right contacts it takes time to build the kind of network and reputation that truly gives you free reign to take certain projects while rejecting others. The goal early on is to make enough money to get by on while doing enough work to flesh out your biodata/resume/cv. Also many new consultants are not able to charge the rates they would prefer, it's another thing that you must work up to. 
  • ***Also even more disheartening, is that some places base consulting rates on past work so it can be a real grind to get your rates for service to where you want them. There is a real conversation about using past salary to determine future salary that we should address because it is problematic, but this answer is already long enough so onward...
  • Finally in very unique circumstances you can become a consultant for the organization you are currently working for. This strategy is wholly dependent on what type of company you are working for. If they use consultants the chances of managing this kind of relationship goes up exponentially. If your company has no history of using consultants for work, it's unlikely that this strategy is for you. 
  • For the purposes of outlining the process, let's assume you have an organization in line with the former and not the latter. You can reach out to your supervisor/HR department/operations or whomever normally handles consultants that are brought on and explain your desire to transition from a full time employee to consultant typically for a specific project. There is no guarantee that this will work, but if you have a good relationship with your employer and your work is valued, you would be surprised to discover how flexible a company can be.
  • The flaw with this final strategy is that you cannot have your cake and eat it too. You would be giving up all of the benefits and any perks of working for your organization to do what would likely be similar or the same work as a consultant. It wouldn't be very freeing... but it would allow you to build up a resume of consulting jobs in an organization that you already know well. From there you can take your accumulated consulting experience and branch out to other organizations and look for work that you are more excited to spend time on. With the experience already in the bag you are in the best position to find more work and turn your consulting into a true career.

Choosing to go it alone is a very bold choice and cannot be done without a taking a small leap of faith that things will work out on the other side. Unfortunately in life there are no guarantees. But if you really are willing to put in the work early on, and create a plan to follow. You can join your friends and colleagues who have already made the leap into being their own employer. 

I have an interesting additional resource to round out my answer to this week's question. Instead of a listicle from an employment website or university, peep this Independent-Consulting.Art_.JHolley.pdf ( A fairly long and in depth personal account by someone who made the transition from worker to consultant and beyond. It's a hefty read but it is full of insights and tips.