Perhaps the hardest thing for an independent consultant is not knowing where your next project is coming from, or when. While nurturing your own network is usually the best way to find work (see tips in my article), many consultants also supplement their business development efforts by affiliating with agencies and, increasingly, online platforms or marketplaces. This article summarizes the pros and cons of these options, gives you questions for starting your research, and introduces you to some of the better-known consulting agencies.
First, let’s clarify what I mean by “consulting agency.”
By “agency” I mean a company that matches independent consultants with client projects, like a talent agency. 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. To me, consulting agencies and consulting firms are both different than staffing agencies that provide tactical staff augmentation services, not consultants who diagnose and solve problems. This article is about affiliating with consulting agencies, not consulting firms or staffing agencies.
Pros and Cons of Working Through an Agency
Each agency is different, but in general here are the tradeoffs for you as an independent consultant.
- Connection to projects and or clients you might otherwise never have access to. Even if you don’t get a particular project, it never hurts for potential clients to see your résumé.
- Some agencies provide access to group health insurance plans, a plus in the U.S. After the project ends, you’ll likely be able to convert to a Cobra health plan for another 18 months. Some agencies have a 90-day waiting period before you can sign up, others don’t. It may be worth doing one project just to get access to better health insurance rates, but I’m not sure how good the rates are or if they offset the first disadvantage listed below.
- If you’re just starting out on the independent path, this is a good way to get work while building your own network.
- Faster, easier, cheaper business administration. Usually the agency handles the contract, carries the insurance, and does the billing and collections so you can focus on doing the work. Of course, they charge for this. (See cons.)
- Their agency fee or mark-up on your services usually puts serious downward pressure on your pay rate. In other words, you’ll make less money than if you find work on your own. How much less varies by the agency. Some are as high as 35%, meaning you get paid 65% of your billable rate. This may not sound bad, but let’s say your rate is $150 per hour. For a three-month full-time project, the agency fee can cost you over $25,000 (480 hours x $150 x 35%).
- You may need to do some admin (read: busywork) like file weekly timesheets or status reports, or do verbal check-ins with the client relationship/engagement manager.
- They may require you to sign a non-compete agreement. This means you can’t work for their client outside of their agency for a certain period of time.
- Some offer access to 401(k) plans, but this is actually a con since self-employed retirement plans like SEP-IRAs or solo 401(k)s are a better option if you are self-employed. (Read my article here.)
- The type of work may be more tactical and less strategic, challenging, or engaging than you prefer. Use my suggested questions below to help figure this out ahead of time.
Questions for Evaluating an Agency
Here are things to consider before signing up.
- Does it cost anything to sign up? Usually no.
- What does it cost me once I accept a project? In other words, how does the agency make money? Most make their money by handling the billing and marking up your pay rate 20-35%, or paying you 65-80% less than what you bill them.
- Will they pay me on a 1099 tax basis or W-2 basis? Friends don’t let friends W-2®. If you don’t know why, read my article or watch my 70-second video.
- What are the typical pay rates for my type of work? Here’s an example: my company placed a senior consultant on a project with a Fortune 500 company and he was paid $200 per hour. He recently told me that through a hybrid agency/firm he was paid $120 an hour. He thinks most change management consultants there are paid about $100 hourly.
- How often will I be paid, and how quickly are expenses reimbursed? Every two weeks or when they get paid by the client? This affects your ability to pay bills in the near term.
- Once I’m working on a project, what sort of oversight or administration is required? Is this billable time? It may seem trivial but sometimes this type of thing is downright annoying.
- Is there a non-compete clause and if so, what is the duration? Sometimes this can be negotiated. One consultant I know managed to negotiate the duration from two years down to one.
- Overall, does this agency provide staff augmentation (more tactical work) or actual consulting (solving problems)? The pay will align with your perception.
- How do they go to market? How do they describe themselves? Be wary of descriptions like this: “For over 30 years, XYZ has offered consulting and staffing solutions that convert strategy to action, and move people towards success.” Alternatively, “We are all about making things happen,” or “We’re all about Practical Consulting.” (Read: hands-on tactical work, lower pay.)
- What’s the history of the agency? If they started out as a staffing agency, they’re not going to pay as well. I’ve seen it time and time again. Even though they say they are a consulting agency, their clients still perceive them as staff augmentation. The work is scoped and priced accordingly.
Agencies to Consider
Setting aside the low pay scale, these agencies may be worth investigating, in no particular order. I’ve included comments from some consultants who have worked with them.
Business Talent Group: “Business Talent Group is a global consulting marketplace that lets firms quickly harness exceptional independent talent to get critical work done.” They say 30% of the Fortune 500 use their expertise. My consulting friends tell me that BTG tends to prioritize using local talent which is obviously good for the consultant. It’s possible to be paid on a 1099 tax basis, but there may be some admin busywork like status reports. Types of projects include business planning, market evaluation, competitor analysis, product strategy, mergers and acquisition, and international expansion.
RGP, formerly Resources Global Professionals: “Intellectual Capital On Demand. RGP is a global business consulting firm that helps organizations drive transformation, accelerate change, and deliver bottom-line results. We don’t stop at telling clients what needs doing. We help get it done.” RGP is really a hybrid consulting firm/agency because they frequently supplement their full-time consulting staff with subcontractors. They probably have the biggest footprint with the Fortune 500, but their rates are low and they pay on a W-2 basis.
Ex-Consultants Agency: “Where Consulting Meets Executive Search. We work with clients to place top-tier consultants in permanent & project roles.” A consultant mentioned them to me, but their website doesn’t explain how to work with them. Please email me if you have any info and I’ll update this article.
Note: There are more regional agencies than national ones. Try doing an internet search like “consulting agencies in NYC” or “consulting agencies near me.”
You may also want to look into registering to be a potential subcontractor with some of the major firms. For example, PwC Talent Exchange or Deloitte Open Talent. If you’re a technology consultant, Avanade does a lot of subcontracting to Accenture. Read this article by consulting guru Alan Weiss for more info on subcontracting to consulting firms.
My next blog post will dig into the plethora of online platforms where the matching process is driven more by technology, and the agency fee is less egregious. In the meantime, let me know what you’ve discovered about working with a consulting agency. What else should your fellow consultants know before diving in?