There is a lot of uncertainty around how much freelance consultants actually cost compared to perm employees: we’re here to help you understand all of this.
How businesses are benefiting from the gig economy
This will hopefully prove an interesting read for businesses who aren’t currently harnessing the full potential of freelance consultants.
Things have changed quite a bit since I first encountered the world of freelance consulting. Rich and I had just left McKinsey, and were in the throes of starting up movemeon when we did some freelancing to “pay the bills”.
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It was quite a shock coming directly from a large consulting firm. The freelance market was very nascent, and people weren’t sure about how to work with freelancers. I’ll never forget being forced to defend my day rate to the CEO in the first week of work; or just how long it would always take for procurement to find a way to pay me!
I’m pleased to say, these stories are becoming fewer and farther between. As businesses have woken up to the potential of freelance consultants, we’ve seen huge growth and development in the freelance consulting market. We think this growth is just the beginning.. (Scroll down to the bottom to find out why)
We’ve been lucky to partner with thousands of businesses here at movemeon, and discussions around freelance roles have grown exponentially over the past three years. Whilst there’s been a lot written about the benefits of freelancing for the actual freelancers, in this article, I wanted to give a quick overview of what we’re seeing on the other side – the businesses using freelancers.
What we’re seeing in the freelance market
Over the past year, we’ve seen a huge growth in the breadth of businesses that are awakening to the possibilities of freelance.
Freelance consulting is currently the fastest growing part of our business. Historically, freelance projects had either come from young consultancies looking to build an associate pool or consultancies that had suddenly come across a shortage of people to deliver a project.
However, over the past year, we’ve seen a huge growth in the breadth of businesses that are awakening to the possibilities of freelance, from early start-ups through to large international corporates.
What’s driven this change?
In a word – quality. As the gig economy has grown, freelancing has started to attract the very best ex-consultants. This has largely been driven by change in attitude towards careers: the pressure to “be on the right path” has reduced; instead, people are focused on the present. They assess jobs on what they offer in the current moment (both financially and in terms of personal development).
At our quarterly freelance drinks, I asked quite a few in the room on what drew them to the world of freelance. The three most common answers were:
- Autonomy over which projects they do, as well the actual scope of these projects. This autonomy allows you to really develop functional or industry expertise.
- Money; “cashing in” on consulting experience. When you’re a freelancer, you can be charging out at a lower rate than you were with your consulting firm, yet take home a lot more.
- Freedom to decide what next step to take in their careers – freelancing offers this just as consulting itself does.
Why freelancers are disrupting the larger consultancies?
Freelancers bring a delivery mentality to their work. Not only have they directly sold the work but their reputation is critical to winning more work.
It has become clear from the freelance projects on our site, or in broader discussions with our clients, that businesses are increasingly viewing freelancers as an alternative to more traditional consultancy firms.
The traditional consultancy model will always be the best option to deliver critical strategy consulting and large implementation projects (partner expertise; another brand to hold to account). However, there has been a growth in the past decade of consulting projects requiring just a smart problem solver on the ground. For this type of consulting, freelancers offer some clear advantages.
The ROI on a freelancer can be 3-4x that of a consultant
Typically, freelance day rates are one-third of their charge rates at consultancies (the other two thirds goe into overheads and the Partner profit pool!). Freelancers will, therefore, offer 3-4x the ROI of a consultant if someone wants a smart problem-solver on the ground.
Models that you can turn on and off
Freelancers offer even more flexibility than consultancies. Larger consultancies live and die by their utilisation. One key element to managing this effectively is keeping quite fixed staffing models – if your consultants are not full-time on a project it gets a lot harder to keep utilisation high. For a lot of projects, this doesn’t make sense: you’d prefer to have a freelancer for 2 or 3 days per week. This flexibility in the delivery model can further add to the ROI of using a freelancer.
Both expertise and mentality
Freelancers often have to be more specialised to win projects. In a large business, consultants are forced to stay general for as long as possible – another way to be more flexible to manage utilization. As such, it’s not until Manager or Senior Manager levels where they can boast genuine domain expertise/knowledge.
Freelancers also bring a delivery mentality to their work. Not only have they directly sold the work but their reputation is critical to winning more work. As such, they are under far more pressure to show the impact of their presence. These two factors can result in a freelancer who has a far larger impact than a more traditional model.
Businesses are looking for freelancers
for long-term flexible talent
In addition to disrupting the more traditional consultancies, the freelance market has also created new opportunities for businesses to engage talent flexibly on a longer-term basis. The two most common opportunities we have encountered are:
- Pools of resource
This is most common with consultancies (from large to small) – who develop a pool of flexible talent. The consultancies can then tap into this for relevant projects, or purely just to manage capacity.
- Talent acquisition – from freelancer to permanent
We see this most often with PE-backed businesses, although it is a growing trend in corporates, too. A freelancer is initially brought in for a high-profile interim role (e.g., Transformation Director), with the long-term aim of bringing them into the business on a full-time basis. This is particularly effective when a brand is unknown, and struggling to get great people through permanent recruitment.
We think this growth is just the beginning...
Given the number of questions we get asked about freelance consulting, we can be sure of two things:
- There is a lot more latent demand in the market and more people could be benefiting from using freelancers
- As the freelancer market continues to evolve, more businesses will look to long-term ways of working with freelancers
We expect to see the rapid growth in freelance to continue, and for this to be both into areas where larger consultancies have worked over the past few years, and into new markets (i.e. longer-term talent acquisition).
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