Apr

14

Contractor vs. Consultant

April 14, 2009 | 2 Comments

Consultant, Contractor… is there a difference?  Sometimes there isn’t, sometimes the same person can be both, even on the same engagement.  However, I  define the difference this way:

  • Consultant: An expert in a topic.  Some sought after for his/her knowledge.  A trusted adviser.  Someone you can trust to get things done on time and under budget.  Ideally associated with high hourly rate (only needed for his/her knowledge) or a lower risk retainer.
  • Contractor: A technical resource.  Someone you hire to perform a certain task, but you define most of what the outcome will be.  Normally paid by the hour (or day/week/month), and thought to be easily replaceable and interchangeable with a similar one from a different provider.  Some companies replace some of the tasks they could have done with permanent employees with a temporary one that could easily be fired, even if more expensive in the short term (IRS Discourages that practice).

No problem or shame on being either one.

Contractor Consultant
Pro:

  • Lower level of responsibility.  Flexibility to finish an engagement as soon as they stop paying more hours.
  • The job market markets your services.  They set your rates and the level of need (demand) for your services.  You just need to put a sign of “Joe The Plumber” or “Joe The Programmer” and people will call you.
 Pro:

  • People request you by your name.  Once you reach that level, competition is less relevant.
  • You may help define the state of the art of your industry.
  • Normally you can handle more than one engagement at a time.  (More networking if done right)
  • You may be able to charge higher fees.
Cons:

  • You will be paid at market rates, and people will comparison shop.
  • Normally you handle only one engagements at a time.
  • You may be seen as a replaceable/interchangeable resource.
 Cons:

  • You retain some of the project “ownership” (read: responsibility for it to be successful).
  • It is difficult to understand why pay for your services. (Justify rates with the Rate of Return).
  • You need to market your services.

Some other people discussing the differences:


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Comments

2 Comments so far

  1. The Weakonomist on April 14, 2009 07:21

    Nice comparison of the two. The funny thing with consultants at my bank is that we use the word as an employee position too. It’s very confusing sometimes.

  2. Geoff on May 5, 2009 18:34

    Both columns in your table say “Contractor”.

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