Supplement Your Consulting Pipeline by Subcontracting

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Most independent consultants have some FUD (fear, uncertainty, or doubt) when it comes to finding work. Even if you’ve been self-employed for years, dry spells between projects can still happen, and if you’re just starting out it’s especially difficult to find your own work. It can take several months to set up your business, establish your reputation, and build your network in order to find and bill your own clients directly. Subcontracting to a well-established consulting firm or through an agency or online platform can be an attractive option. This article and the corresponding quick reference guide summarize the pros and cons and offer practical tips for expanding your reach.

Pros and Cons of Subcontracting

Here are the trade-offs of using a third party to find your consulting work and handle the contract administration. 

Pros: 

  • If you’re just starting out as an independent consultant, this is the fastest way to get work while building your own business.

  • Contract administration is fast and easy. They do the contracting paperwork, carry the insurance, do the invoicing and collections, and even handle your income tax payments so you can focus on doing the work. Of course, they charge for this. (See cons.)

  • It’s an easy way to see if you even like consulting. (See prior point.)

  • You’ll likely be introduced to clients you may otherwise never meet.

  • Some companies provide access to group health insurance so it may be worth subcontracting just to get access to a better/cheaper health plan. Plus, when the work ends you’ll likely be able to convert to COBRA which is nearly always less expensive than buying your own health insurance.

  • It usually takes very little time and effort on your part.

Cons: 

  • You’ll make less money than if you find work on your own. How much less varies by the type of company or platform. Typical agency fees are 35%, meaning you get paid 65% of what the client is paying for your services. This may not sound like much, but let’s say the client is paying $200/hour for your services. For a three-month full-time project, you’ll give up about $33,600 to the agency (480 hours x $200 x 35%). Some agency fees are as high as 50%. Usually, online platforms are a better deal with only a 20% fee. (More info on agencies and platforms below.)

  • The type of work may be more tactical and less strategic, challenging, or engaging than you prefer. Use the suggested questions in the reference guide to help figure this out ahead of time.

  • You may need to do some admin (busy work) like file status reports or do verbal check-ins with the client relationship/engagement manager.

  • You may be subject to a non-compete agreement. This means you can’t work directly for their client for a certain period of time.

  • Some companies offer access to 401(k) plans, but this is actually a con (literally) since self-employed retirement plans like SEP-IRAs or solo 401(k)s are a better option if you are self-employed. (More info here.)

  • You’ll likely be paid on a W-2 tax basis, not a 1099 business-to-business tax basis. This means you may pay more tax since you won’t be able to take standard business owner tax deductions and your retirement contributions will be limited. (See prior point.)

How to Find Subcontracting Work

This is the easy part but first it helps to understand the options at a high level. Basically, there are four ways to find subcontracting work.

  1. Subcontract to a major consulting firm. Most global consulting firms use their own talent databases when they need to augment their own staff. For example, PwC Talent Exchange or Deloitte Open Talent. (For more links, download the reference guide.) You don’t have to be an alumnus of the firm to sign up as a potential subcontractor but your success rate will depend on your area of expertise. If your skills are aligned to plug into large projects that involve dozens of people, you are more likely to be hired than if your expertise is usually a solo activity. For example, an experienced Scrum master is more likely to be hired than an executive coach.

  2. Find work through a national agency. Like a talent agency, these companies match independent consultants with client projects. An agency is different than a consulting firm because agencies usually place one person at a time, and they assume consultants are bringing their own methodology and tools. Agencies don’t dictate the approach or oversee the work like a consulting firm does, although sometimes they require status reports or check-ins.

  3. Sign up with an online platform. Consulting agencies and online platforms both exist to bring consultants and clients together, but they go about it in different ways and charge different fees. Agencies involve people in the matching process, to oversee projects, and to “manage the client relationship.” (This last bit is in quotes because any good consultant can do this.) While agencies usually charge about 35%, online platforms charge about 20%. Platforms are a better deal for consultants because they rely on algorithms and AI to match talent to projects; there’s no human acting as a middleman or overseer. On the other hand, there are tens of thousands of résumés in a platform database so your “hit rate” may be lower. 

  4. Subcontract through a local consulting firm or agency. Local companies tend to have strong relationships with local clients of all shapes and sizes, from huge multinational companies like Google to pre-IPO start-ups. Plus, they often prefer to hire subcontractors instead of full-time employees. To find them, do an internet search with your area of expertise and geography. For example, “leadership development consulting Los Angeles county”. After reviewing the websites and/or business pages on LinkedIn, send them a note that asks if they hire subcontractors. Be sure to summarize the types of problems you solve and/or how you make a difference on projects.

Although building your own brand and nurturing your own network is usually the most profitable way to find work, there’s nothing wrong with subcontracting to fill in the gaps. To make it even easier, download PICA’s quick reference guide for short descriptions and links to dozens of firms, agencies, and platforms. ☺️ (Just because it’s called independent consulting, you don’t have to do it alone. PICA’s got your back!)

~ ~ ~ Additional Resources from PICA ~ ~ ~