I recently read a line in Terry Pratchett’s Hogfather (the Discworld novels are excellent reading for consultants of all types by the way) that made me laugh out loud because it precisely nails the important intrinsic difference between consultants and contractors. The situation is that a high-profile member of the Guild of Assassins is talking to a bunch of contract muscle types for a job, and one of the contractors uses the word “employed” to refer to the team’s relationship to the client.
He bridled at this. Assassins were never employed. They were engaged or retained or commissioned, but never employed. Only servants were employed.
This nuance becomes evident in a lot of little and big ways but the clearest sign is that as an indie consultant, you almost never haggle over your price. It doesn’t matter what title you give yourself, what expertise you offer, or how much you charge. If you end up haggling, you’re a contractor, not a consultant.
This is a social distinction, not a financial one, and it matters because it sets the tone of your working life. Many contractors make way more money than consultants, and might bill at much higher rates. But an $800/hour gig worker who gets bargained down to $600 in an explicit negotiation, with talk of guaranteed hours and such, is a contractor. A $150/hour gig worker who always gets either a yes or no, but no haggling counter-offers, is likely a true consultant (non-haggling is necessary but not sufficient).
What difference does this distinction make? A big one. Consultants have quasi-social relationships with clients, with non-financial aspects you may or may not value. In fact there are three zones here:
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Transactional: you haggle, but you don’t expect more than civil social interactions around the gig. Chatting outside the scope of the transactional relationship will feel like voyeuristic curiosity about a different social milieu to both sides.
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Quasi-social: you don’t haggle, and you become at least mild friends, who enjoy chatting outside the scope of the engagement around shared interests that are “socially native” for both of you in your respective milieus. You probably participate in the occasional unbilled social interaction like a dinner party where you don’t talk shop. But you probably don’t get angry or fight.
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Intimate: the relationship is close enough for yelling and screaming, and talking about money the way families do internally. Money matters are on the table and up for discussion, but not in the same way as it is when haggling with a vendor in a marketplace. Disagreement is unlikely to end in walking away from each other (truly intimate relationships are rare in gig work, though mildly intimate ones are common).
If you’ve successfully positioned yourself as a consultant, you’re in the quasi-social zone, and people will either say yes or no to the price you quote. If nobody ever says no, you’ve priced your services too low.
Or they’ll judge your sense of your own worth accurately themselves, and make you an offer that works for you, and you can simply say yes. If anyone ever makes an offer that simply feels insulting to you, you’ve either overestimated your worth or badly miscommunicated your capabilities. People rarely knowingly lowball you unless they are assholes and know you are under some kind of pressure that might lead you to give them a bargain deal. If on the other hand, their offer is shockingly higher than you expect, something weird is going on that you should figure out. Check to see that you’re not accidentally working for the mob, as happened to Tom Cruise in The Firm.
You still have to occasionally recalibrate and reset your price as you gain experience and build a track record, and the occasional larger-scope anchor gig will need more custom pricing design, but in general, as a consultant, you don’t haggle in individual transactions.
Why this dynamic? Because consulting is an intellectual partnership that is too bespoke to easily compare to substitutes, and only works if both parties see each other as fully human, and the relationship a bit above pricing discussions. If a client sees you as a functional and sharply scope-limited cog producing a “deliverable” component of a larger activity, that’s a contracting relationship.
In consulting, all parties are contributing to the outcome in highly entangled ways that make it hard to break out and accurately value a given individual’s contribution. In contracting, the contractor typically has clear measures for their own success or failure, independent from the overall success or failure of a project, and a way to value their piece of the puzzle.
When a client truly sees you as a consultant, the choice they are making is not between you and someone else similar to you. Their choice is between doing it one way with you in the picture, and doing it a different way without you. It’s like a marriage: the client is choosing between different lives, not different people plugged into the same slot in a life template that doesn’t change.
This is why that old joke about a man hiring a prostitute works.
Man: will you sleep with me for $1 million?
Woman: Okay
Man: will you sleep with me for $5?
Woman: WHAT! What kind of woman do you take me for?
Man: we’ve already established what kind of woman you are. Now we’re just haggling over the price.
If you’re interested in a more general understanding of the socioeconomic dynamics at work here, read my old ribbonfarm posts The Economics of Pricelessness and Bargaining With Your Right Brain.
Approach pricing your services as a consultant the way you might approach making a restaurant suggestion you might make if someone offers to buy you dinner.
You will make a suggestion that is acceptable to both of you socially, because the main point is to spend time together, not maximize the dollar or calorific value of the food you can get out of it. If you can’t think of a restaurant where you can both feel comfortable and able to focus on each other’s company over the food, you’re not going to be socializing at all.
Think of how awkward a restaurant outing would be if you suggested a super-pricey place you would never pay to go to yourself, and ordered the most expensive things possible, like it’s your one chance to be in that environment. Or if you suggested an all-you-can-eat buffet and gorged yourself like you hadn’t eaten in a week.
Neither is conducive to actually having a fruitful relationship with the person paying. In one case your host would be giving you a tour of a social class out of your reach while graciously ignoring your gaucherie, and in the other case they’d be feeding you because you’re starving and only pretending to keep you company socially.
Do not assume though, that simply because there is no haggling, the price agreed upon is irrational or somehow divorced from demand-and-supply dynamics.
Generally what’s going on, when a gig lands in the consulting zone, is that the value in play is so high that whatever the consultant is being paid is almost a rounding error relative to the value of a potentially successful outcome.
In most gigs I’ve taken on, I’d estimate that my billings represent less than 0.5% of the economic value in play. Usually much less, in the case of large companies navigating really big decisions and problems. That doesn’t mean I’m personally on the hook for delivering 0.5% of the value. Things are generally too entangled to make such determinations. All it means is that my cost fraction is low enough that it’s not worth optimizing. For cost management, there are other, bigger levers around to work with than nickel-and-diming me.
Or for personal gigs with a life-coaching or therapeutic tone, the value in play is their health, happiness, or sanity, all of which are generally priceless to anyone no matter how rich. Which means if they can pay at all, they’re not going to argue about the price. They’re not in that headspace (which means it is even more crucial for you to be careful not to exploit that trust).
Make sure you actually want such ambiguous quasi-social relationships around high-stakes personal or organizational activities, by the way, and are not just defaulting into this mode in trying to avoid the awkwardness of bargaining where bargaining is in fact both possible and called for.
If so, it may be better to position yourself as a contractor, and develop a structured bargaining approach if it fits your goals better. It’s one thing to recognize and adapt to the social narrative surrounding a gig, quite another to become attached to it at the cost of your financial health.
If you are avoiding negotiating simply because you find it demeaning or stressful, you’re doing it wrong.
But if you do like the quasi-social nature of consulting, and you successfully position yourself as a consultant, then price yourself right for it to be a sustainable lifestyle, and try to get to yes/no via 1-step negotiations, with pricing resets every year or two.