The Pros and Cons to Being a Professional Consultant
You are probably an employed person frustrated with trying to get ahead financially and you are thinking there must be a better way to earn more and keep more of the money you do earn so in the back of your mind, you think a career as a professional consultant may be more rewarding - I was thinking this too once many years ago. Truth is; it can be extremely rewarding although I didn't know that when I started out but I had just stumbled onto one elemental truth that changed my world.
Reading a "Rich Man Poor Man" book one day, I realized that on salary, you make "X" dollars and then pay tax on it and that as a self-employed person, you make "X" dollars then you deduct any related business expenses, then you pay a similar tax percentage on the net of your income less these related expenses. Once I realized that this included the costs of my vehicle to get to the project, depreciation on said vehicle, and a portion of my at home costs (rent, mortgage, utilities, phone, etc.) to operate my business out of my home; I was sold. Not only could I earn a higher rate of pay for my time (Consultants generally make more per hour than employees), but I could net out all these costs of doing business and then just pay my taxes on the remainder - ultimately, a significantly lesser amount of actual tax paid than an employee had to pay.
So this was my primary motivation for ultimately becoming a consultant: You make more gross revenues and you pay less total tax on it. In fact, just by starting a home or consulting business, you have already made money!(view YouTube video link) If you can keep busy, this can be a very rewarding way to live your life - and it theoretically can set you up for a comfortable retirement. This is a simple formula for making good money - but there is one catch: You have to market yourself to get busy again once you complete a project and there is no guarantee that you will find your next project when you want to!
This stops a lot of people from doing this. The security of the pay cheque and possibility of the pension at the end of it keeps them handcuffed to their jobs even if they don't like their jobs. Of course there is another reality, many people just don't have the drive and strength to regularly market themselves, the experience or the knowhow to complete projects for others successfully, or even enough understanding as to how to get started in business (free class link) - and the fear of not knowing enough can be debilitating to many. Taking a risky jump into a world you don't understand when you have bills to pay each month and when you may have others to take care of that depend on you, is a frightening thing to do.
Consulting is not the answer to everyone but the key point I am trying to make here is don't just back away from doing it because these fears are holding you back. You will never make more than just a highly taxed salary if you don't do something like this in life so you will work your years away possibly at jobs you don't enjoy for the sake of the pay cheque and supporting your family and you will run the risk of reaching your retirement years with very little set aside to retire with unless there is a good company pension waiting for you. It is my belief that for many, you owe it to yourself to at least research what it takes to be a successful consultant and then to honestly assess yourself as to whether or not you think you have enough to offer to potential clients to succeed. Don't decide not to risk due to ignorance or fear only. If you decide not to risk it, let it be because you have honestly analyzed the pros and cons and the risks and rewards of it first. If you try it and fail, well, you can always go out and find another job.
I for one have found my life as a consultant to be an extremely rich experience and a financially rewarding one. I am nearing retirement age now in significantly much better financial shape than I believe I would have reached it as an employee and as a bonus, I have had a lifetime of travel and of completing extremely exciting projects all over the world. I would not have traded my consulting and resulting life experiences for anything else - for me, it has been a wonderful ride. It might be for you as well - so research it and consider it.
By Dan Grijzenhout - December 20, 2016
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