How To Make a LOT More Money as a Consultant
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James will show you how to double your income by going from a salaried permanent employee to an independent consultant. James will discuss: Differences between perm, consulting, contracting; Understanding how placement/consulting companies work; Salary vs W2 vs 1099; Certifications; Developing the needed technical and communication skills; Interviewing and resume tips; How to negotiate; Networking yourself; and the additional risks and higher expectations that go with being a consultant.
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How To Make a LOT More Money as a Consultant
- 2. • • • • • •
- 3. Agenda Reasons to become a consultant Reasons not to be a consultant Why companies pay more for consultants Differences between perm, contracting, consulting What it is like to be a consultant Understanding how staffing companies work Salary vs W2 vs 1099 Social media, job boards, networking Technical and communication skills Resume, interviewing, negotiating In-demand skills, certifications
- 4. Reasons to become a consultant • • • • • • • • • • • • •
- 5. • • • More Complex – Taxes/Insurance/Billing/Incorporation etc. • • • • • • • • •
- 7. Differences between perm, contracting, consulting • − − • − − − − • − − − − −
- 8. What it is like to be a consultant • • • • • • • •
- 9. Understanding how staffing companies work • • • • • • • • • •
- 10. Salary vs W2 vs 1099 • − − − − − − − • − − − − − −
- 11. Salary vs W2 vs 1099 (cont) • − − − − − − − − − − −
- 12. Social media, job boards, networking • • • • • • • •
- 13. Technical and communication skills • • • • • • • •
- 17. • http://bit.ly/xt7vYw • http://bit.ly/AhJv1k • http://bit.ly/ztOfpz • http://bit.ly/wQhCOA • http://bit.ly/zJ9Ztq • http://bit.ly/zDsnkj • http://bit.ly/wJ7u5u • http://bit.ly/yp9r3l • http://bit.ly/y2N34D • http://bit.ly/xBsB68 • http://bit.ly/zNcQ7s • http://bit.ly/nUd5nH • http://www.jamesserra.com/denali/ • http://bit.ly/4tP3mF • http://bit.ly/1Z1aNK • http://bit.ly/yp9r3l • LinkedIn Resume Builder: http://resume.linkedinlabs.com/ • http://bit.ly/xCjdGy
Editor's Notes
- Not seen any session like this, controversial, consulting companies will not likeDoubled my salary when I want from a perm to W2 contractor
- Microsoft products onlyMention ran fantasy football leaguesBeen at 15 companies, longest 4 years
- Giving new life to a profession that people typically shy away from as they want more stabilityPredictability – As a consultant, you always have an “end date” when you will have to start looking for another project..no downsizing, layoffsBetter experience – new job every few months. New tools, meet new people, builds resume, learn new business, know more companies, different types of job, more friends, development over maintenanceMisconceptions: they are not always experts – some stink; some large consulting companies do a bait and switchMore remote work: once they know you can do the job…save expenses, office space
- Riskier only if your skills are not solid and not have high-demand skills. Need to have confidence in your skillset my working hard to learn all you canInsurance – I pay $473/month for high-deductable family ($7500/$22k/100%). Do you have spouse with insurance? Pre-existing conditions, maternity coverage, health background checkAdd: can’t handle pressure, not flexible with assignments/tasks
- It’s a different bucket of money – many times a company has a budget to spend on consulting fees, but no budget for hiring a salaried person. And usually there are no rules for how the budget is spent: It could all be spent on one high-priced consultantCompanies don’t have to pay the overhead that goes with a salaried employee, such as heath insurance, taxes, vacation, training, sick-leave, retirement plans, worker comp, payroll taxes, social security taxes, unemployment taxes, etc, which can add 30%-50% of the salaryLooks better on the company statement (revenue per employee). The lower the employee headcount, the better the company looks to investorsCost of contractors is an expense for a company and therefore a tax deduction, whereas a company can’t deduct salariesYou don’t have to fit into a salary “slot”. When hiring a perm, they have to fit into a salary range so they are not making more than their boss. No such slot exists with contractors and they usually make more than all but the top executives at a companyDon’t have to train consultants like you do a perm. Consultants can hit the ground runningEasier to get rid of a contractor if they are not working out compared to a new perm hireQuick and better solutions: Consultants can be 2-3 times faster than others, with better solution, have existing frameworksAdd: Don’t have expertise on staff, they can spot unusual/non-standard things, well-connected to point you in the direction of help, have extra budget and need to spend it to have same budget next year, need consultant to promote your idea/solution, can provide you with ideas/solutions you did not think of (should this be another slide called “Why companies hire consultants”)?
- After explaining, do a show of hands to see what the audience is made up ofThere are hybrids: being a perm salaried for a consulting company: Note that if you are working as a consultant for a consulting company, but are being paid a salary (NOT as a W-2 or 1099), then I am considering you a “Perm” when talking about money/benefits (not about job duties). Also note that a W-2 contractor is many times brought in to supplement a staff and therefore shares some non-pay related characteristics of a perm employee (i.e. travel, laptop, work hours, type of work, work hours flexibility).Create blog: Difference between consultant and contractor and perm (see consulting in delicious) #1Add: consultant: self promotion as a business/website, cultivating customers, set deadlines and are responsible for meeting them, develop strategic partnerships, written agreements/defined deliverables
- Hire you for your skills, fire you for your personality
- MCS/Hitachi vsTEKsystems/KforceStory atPenzoil and via placement company switched from perm to w2. They all say how they are like family, but once they place you never hear from them until gig is almost up. Don’t stay with one consulting company as your options are limitedWatch out for Indian recruiters..many layers and look for H1…subcontract out from large consulting firmSalaried for a true consulting company:Good if you are just starting out and need mentor and training. Allows you to try and determine what you like because of varied projects. Why would I go salaried and take a big cut in pay? They lose a lot of talent, unless they have career path to be a partner. They have you work unpaid OT, you are at the whim of what project they put you on. They should use independent consultants. All about billable hours: If you are not hitting 70% billable hours, you will be in danger of being firedLot’s of travel: consulting company does POC’s, trainingJumping ship – story of recruiters who want me to leave contract early for less payDon’t bother referring as referral fees suck unless they are good referral or you want them to work with themConsulting companies: May have taken years to build relationship with client. Average markup is 33%. Should markup be the same regardless of hourly rate?Markup depends also on client…volume basis…master services agreementLot of times recruiter have to educate client to say rates are too lowMarkup based on classification…goes down higher level jobPay rate vs bill rate….benefits, time off, visa, overhead/admin costs, float..able to pay consultants if not gotten paid by client…client can be a pain if expenses not in certain format (restrictions)…get in legal trouble, by law, if don’t pay timelyOr clients may say we can’t pay until a few months but want to keep consultantAdd slide: understanding how consulting companies work (when you join a MCS type of company on salary): see http://www.sqlchick.com/entries/2011/4/17/technology-consulting-as-an-employment-option.html. Types on firms: large, medium, boutique – highly specialized/nicheAsked Sean:Why do most consulting companies choose to hire only salaried people? It seems the “top” talent stick with contracts-only because they pay is good and switching to salary would mean a big cut in pay. Wouldn’t a mix of salaried people along with 1099 consultants (sub-contractors) make more sense? How about offering the 1099 consultants a career path to join the consulting company as a partner/VP without having to first take a pay cut to join the company? Do you lose some of your top people when they realize how much more income than can make by taking W2/1099 contracts? And being salaried and not getting paid OT, do you get a lot of complaints from your employees about that? Do you tell your employees your client bill rate, and does the difference upset them? What are the rates you charge clients? Do you have different rates for clients for the same type of work? How would you convince a highly paid independent consultant to join Pariveda? Do you expect to see client companies hire more or less consultants in the future? Anything you would like me to add to my presentation to promote consulting companies like yours? Consulting companies have a higher markup because they using the extra money to promote/build their consulting practice (marketing). Billable hoursCut of rate: Your rate plus overhead plus franchise fee plus recuiters fee (so called break even), then add profit margin
- Salary benefits: Dental/Medial/LTD/STD/life, Vacation, sick, holidaysExpenses usually paid for all 3Give my experience: Perm for consulting company, 70% markup, benefits equaled $4/hr, switch to W2 got me $12/hrSalary of 90k equal to $60/hr 1099. I have heard the general rule of thumb is that a contractor’s wages should be about twice an employee’s salary for it to be worthwhilePerm: Your salary is $90k, with a 10% yearly bonus. You pay $300/m for health insurance. Your company matches up to 3% of your salary for 401k (for which you need to contribute 6% of your salary to the 401k), and you get a little company stock each year worth about $1k. So your “true” salary is around $100k.Contractor (1099): Your rate is $60/hr. Since you only get paid when you work, subtract out 80-hours for 2 weeks of vacation, 80 hours for 10 holidays, and 40 hours for sick/miscellaneous. Assume $600/m for health insurance and another $100/m for dental. Don’t forget 7.65% in self-employment tax. We will say no bench time or overtime work, and you are not paying for any training. Finally, we will say the tax deductions you get being 1099 save you $5k per year. Doing the calculations, your true salary is around $100k.Add corp-to-corp:
- Corp-to-corp since some companies don’t accept 1099..liability issues, legally can be considered an employee..Shell won’t let contracts go longer than 2 years (must leave for a month). Microsoft got sued by contractors who said they were really employees and demanded benefits
- blogging, twitter, LinkedInReasons to blog: learn, document for future use, better job security, more people find you, raise your brand, sql server mvp, fun, prove to employees/clients I know my stuff (credibility), improve my writing skills, "street cred", using twitter to get hits (twitterfeed), follow and follow back and retweet, if you want learn something, teach it (great way when I don't know enough about a topic); helps as a consultant when I can use my blog as a solution to a customers problem, love to share75% of jobs are obtained thru personal contactsLinkedIn – connect with everyone in your field to find out what they are doing and when they are hiring. Plus they follow youBlogging: WordPress, feedburner, syndication, all in one SEO pack add-in, use twitter to indicate new posts. When from zero to 2000 visits a day.I get 15-20 unsolicited calls/emails a week from recruiters
- ABL: LinkedIn groups, Videos, read blogs, write a blog, books, daily emails, conferences, other peopleHard Skills: Technical ability, troubleshooting, resourceful, specializationSoft skills: Communication (writing, email, speaking, telephone), time management, honest but tactful/diplomatic, trustworthinessAdd slide: tips for success: be available to your customers, have a clear well-defined scope, be professional, never fudge an invoice, be descriptive on your invoice, admit mistakes, organization – time/finances, promote your brand – become a known commodity, objectivity in recommendations
- Interview even if not looking for job: meet new people, find out what technology is in demand, make contacts, improve your interview skillsMost recruiters have no idea about technology. They don’t make money unless you agreeBest negotiation stance is after you interview with the client and they want to hire you. Staffing company does not want to disappoint the client. Also, the staffing company can reduce their markup instead of going back to the client to ask for more.
- BI is “Gathering of data from multiple sources to present it in a way that allows executives to make better business decisions”Big data (Hadoop), BI, self-service BI, mobile BI, cloud BI, MS PDW, high ROI, data miningTremendous return on investment (ROI). One of my projects dealt with spend analytics, and the resulting scorecard, which gave executives at the company a way to analyze data that they never had before, saved the company 1% the first year. Big deal, 1% you say? Well, the company spends $200 million per year. So they saved $2 million, with estimates they might be able to save up to 10% ($20 million a year). Makes it easy to justify paying a high hourly rate to a consultantPeople skills – tell story of recruiter who said after 2 minutes, “thanks God, you have a personality!”Try to determine what the next hot skill will be
- In closing: start your own consulting company, but need a salesmanShould I mention salaries?at this point in MS BI I think that the more independents out there demanding more $ ... raises all BI boatsthe market would get the message... that and maybe they would learn that u don't want people in India making your BI choices!I think that IT is changing big companies need to realize it to keep good talent and there will be more telecommutingRates for senior BI: perm Salary 90k – 110K (min: 70, max 120, more if management), hourly $70 - $90 (low: 60, high:100), consulting companies charge $120 - $200+. See TDWI survey. Pragmatic Works: $150/hr, Paul Randal: $325/hr, Microsoft $250-300, Brent Ozar xx, me: 95, garrett: 85Houston/TX rates a bit lower. Rates a bit lower for DBA, and then a bit lower than that for developerMany companies are cutting full-timers and hiring consultants insteadJob market is great. 1% unemployment for MS BI stack. Many companies have not hired in last 3 years, now need projects done now and done fast…hire consultantsIf you are new to field, find a mentor. Start small and build.