- Business Development
- Supplementing Your Pipeline with Consulting Agencies
Supplementing Your Pipeline with Consulting Agencies
Perhaps the hardest thing as 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 Business Development = Relationship Development), 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 working with an agency, gives you questions for starting your research, and introduces you to some of the better-known consulting agencies.
First, let's clarify what we mean by "consulting agency."
For our purposes, an agency is 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. At PICA, we believe that consulting agencies and consulting firms are both different than staffing agencies that provide staff augmentation services for tactical work, not consultants that 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.
If you're just starting out on the independent path, this is a good way to get work while building your own network.
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 definite plus in the U.S. After the project, you'll likely be able to convert to a Cobra health plan for several months. Some agencies have a 90-day waiting period before you can sign up for the insurance, others don't. It may be worth doing one project just to get access to better rates for health insurance, this may not offset the first disadvantage listed below.
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.)
The agency fee or mark-up on your services usually puts serious downward pressure on your pay rate. In other words, you'll make significantly less money than if you find work on your own. How much less varies by the agency. Some agency fees are as high as 40%, meaning you get paid 60% 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 nearly $29,000 (480 hours x $150 x 40%).
You may need to do some admin (busywork) like filing 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. (More info here.)
The type of work may be more tactical and less strategic, challenging, or engaging than you prefer. Use our suggested questions below to help figure this out ahead of time.
Questions for Evaluating an Agency
Here are things to consider and ask before signing up, or at least before you agree to do a project.
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 25-40%. (Note: This means the client is willing to pay a lot more for your services than what you're actually getting paid. This is why finding work on your own is so much more lucrative.)
Will they pay me on a 1099 tax basis or W-2 basis? If you have your own clients that pay you on a 1099 tax basis, it may not be worth taking a W-2 project because it may jeopardize your business-owner tax deductions and retirement contributions.
How often will I be paid, and how quickly are expenses reimbursed? Every two weeks or when the agency gets 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? If there is a non-compete clause you may be able to negotiate the duration.
Overall, does this agency provide staff augmentation (more tactical work) or actual consulting (solving problems)? The pay will align with your perception. Read their website carefully and look for terms like "staffing services".
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." Alternatively, "We are all about making things happen," or "We're all about Practical Consulting." (This is likely to mean hands-on tactical work and lower pay.)
What's the history of the agency If they started out as a staffing agency, they're probably not going to pay as well. 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 (BTG): "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. Rumor has it that BTG tends to prioritize using local talent more so travel may be less than with other agencies. Through BTG, it's also 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.
Patina Solutions: They tell clients, "It's your success, plans and vision… accelerated by our experience." Patina is a network of former executives who are now consulting, so if you have 25+ years of operational experience this agency may be a good choice. They pay on a W-2 basis though.
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 skew lower 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." Their website doesn't explain how to work with them but they have a good reputation.
Note, there are many more regional agencies than the global and national ones listed above. Try doing an internet search like "consulting agencies in NYC" or "boutique consulting firms 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, Deloitte Open Talent, or Accenture Contractor Exchange. If you're a technology consultant, Avanade does a lot of subcontracting to Accenture.
Try signing up with an online platform where the matching process is driven more by technology, and the agency fee is less egregious. For more information, see our related article here.