This blog series addresses some common misconceptions about consulting and executive coaching. Visit the CommsLede blog or my LinkedIn page for more…
Misconception 2: My private practice will be equally (or more) profitable than my current corporate role.
Many folks are often under the impression that a consultant or executive coach’s hourly rate x the hours they work = their take-home pay. For most independent practitioners, however, this isn’t the case. Here’s a more realistic breakdown:
- Each week, independent consultants and coaches have “non-billable” working hours. This time (which can be up to half my week) is spent on work that supports their business and clients, but can’t be billed to clients. I spend this time chasing down invoices, balancing my books, reviewing master service agreements and drafting scopes of work, reading industry news, research articles and books by thought leaders, researching best practices and conferring with my peers in the space, networking, and drafting CommsLede content/ managing the CommsLede site and social feeds.
- In addition to federal and state operating taxes and fixed startup costs, independent practitioners usually have ongoing monthly operating fees (insurance, IT support, digital and print subscriptions, time tracking, accounting or scheduling software, website maintenance, virtual assistants, etc.) and general business expenses (printer ink, paper, pens, Post-It notes, postage, binders, etc.) These costs can quickly add up month over month — whether you have client work or not.
- Independent consultants also often rely on outsourced business services or partners, including legal (contract reviews), accounting (tax filing), web programmers, designers and copy editors.
- All insurance, social security costs, and retirement plan/401k contributions are out-of-pocket. Benefits (medical, vision, dental, PTO, longer-term disability, general liability and workman’s comp insurance, discounts, etc.) are significant advantages of most in-house roles that folks tend to take for granted until they’re gone.
- Consultants and coaches are usually only paid for the hours they work. If you eat lunch, have a medical/dental appointment, take any vacation time or holidays at all, have a sick day (or get COVID!), it’s all unpaid time. If you need to pick up a sick child from school, take a pet to the vet, or take a personal call, the clock stops. Also, if clients cancel or move meetings at the last minute, your laptop crashes, or you have thirty minutes between sessions that can’t be used to get work done since you’re waiting on client input, it’s instantly unpaid time. These “ghost minutes” can add up to hours of unpaid time each week, even when you’re at your desk.
While an “hourly rate” may initially seem impressive, it’s very rare, in my experience, to consistently have 40-hour billable weeks. (Since, that’s likely 55-70 hour work weeks when you factor in all your non-billable time.)
All this is not to say one can’t run a profitable independent practice or business that’s equally (or more) profitable than your current corporate role. With enough hustle, grit, and expertise, almost any business can be profitable. But many folks have shared with me their expectations to earn their current salary (or more) as a consultant or executive coach immediately out of the gate or within the first year or two.
I think it’s important to have the full picture before setting salary expectations and goals, and it’s also important to have savings set aside to compensate for any salary gaps if you need to maintain your current income.
With more than two decades of communications experience spanning agencies, Fortune-100 organizations, non-profits and academia, Kristi Hinck Mills brings her passion for communications to CommsLede Consulting, where she delivers strategic solutions and executive coaching for her clients. Visit the CommsLede blog for more tips.
