Difference Between Contractors, Freelancers and Consultants

Many contractors who are starting out, or have decided to change the way they work, are often unsure what to call themselves. The three most common independent business structures are contractors, freelancers and consultants. At first, these may sound similar, but upon closer inspection, the differences become clear.

These three terms are often used interchangeably, but the differences are particularly noticeable when you start talking about the financial aspect of contracting, freelancing or consulting. Clients have different expectations when hiring a consultant as opposed to a contractor or freelancer, and will expect to pay differently for each as well.

A brief summary of the differences highlights that a consultant’s role is typically to evaluate a client’s needs and provide expert advice on what needs to be done; a contractor and freelancer will usually carry out the work. Contractor and freelancer roles are also usually differentiated by the engagement model used.

Consultant

A consultant is generally referred to as an ‘experienced professional’ and will provide expert knowledge in return for a fee.

They tend to work in an advisory capacity only and are usually not accountable for the outcome of a consulting exercise. Some consultants have introduced dramatic shifts in management thinking and improvements in the performance of organisations.

Consultants can command a very high fee due to their experience and are some of the most knowledgeable people in their chosen field.

Contractor

A contractor is also an experienced professional, but one who provides a specialist service in return for a fee.

Unlike a consultant, in most cases, a contractor will carry out the work. In some instances, they may also advise on what the work should be.

Contractors are used by organisations that wish to acquire a given skill set for a period of time but do not wish to employ somebody on a permanent basis. As such, a contract is for a set period only, which can be amended if both parties agree.

Freelancer

The terms ‘freelancer’ and ‘contractor’ are often interchanged, but these are two different things.

Whilst a contractor will work full-time for one client, a freelancer usually has their own premises and has multiple clients.

Freelancers generally command similar rates of pay to contractors but will only earn the same as a contractor if they bring in enough business across all of their clients, to enable them to work a similar number of hours as a full-time contractor does.

Which business structure would you choose?

For many roles it makes no difference what you call yourself. You’ll be hired based on your skills and experience, and the contract role is predetermined by what the client requires.

Something worth considering is that it may be slightly harder to win business as a consultant than it is to win business as a contractor or freelancer, as the requirement for your skills is often far less clearly defined. It’s also much more difficult to justify the cost.

Operating as a freelancer or contractor

Whichever route you opt for, the only skill set you need is the ability to do the job you are contracted to do, exactly as would be the case if you were going for a job in permanent employment.

The only difference is that you do it as a contractor, working for one client full time, or as a freelancer, working a smaller number of hours per week for a number of clients.

Operating as a consultant

Read the latest books and follow your industry’s thought leaders online. Start to think about the theories and conceptual approaches, not just execution.

Don’t get embroiled in the finer details of your freelancing or contracting area. Instead, strive to understand the theoretical and conceptual underpinnings of why certain things work while others don’t. For example, as a web developer, you may have to read up on additional topics such as human psychology to understand why people approach and react to websites in different ways.

Remember, anyone can make their CV or website look the part, but be sure you have the ability to provide true consultancy services before selling yourself as a consultant.

Merging the two

There is definitely an option to ‘cross between worlds’ in order to make yourself suitable for more types of work.

As a contractor, it’s also a good way to move gradually into the consultancy environment.

When you are brought into a full-time contract in a specific role, or when you are asked to carry out a specific piece of work as a freelancer, you may find that the people who have employed your services do not have a clear idea of exactly what they need you to do.

As such, you could find yourself providing the type of advice upfront which would traditionally fall into the realm of consultancy.

And whilst you might not get paid for the consultancy side of things, this provides great experience and could help you to secure a consultancy role in the future.

Thinking of becoming a consultant, contractor or a freelancer? Unsure where to start?

Find out how to become successful, whichever way you operate and maximise your take-home pay. Download your copy of our free guide today. This guide includes:

  • Finding the right contract – Agencies or job boards? We’ve got you covered.
  • Seven secrets to optimising your income – From experience to presentation skills.
  • CV’s, e-CV’s and CV databases – How to make sure your CV is picked up.
  • Five tips when writing your CV – why it is important to keep it up-to-date.

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