Are you a consultant, or a contractor? Does it matter? Only if you care about things like pricing power, access, credibility, differentiation, and value.
To keep lawyers focused on the business problems that drive demand for legal service (which is where the most desirable clients want you focused), I encourage them to think of themselves not as lawyers, but as management consultants with technical knowledge of the law. This is in contrast to being perceived as contractors, which is to their detriment. While there are as many opinions as people, I'll define each this way:
- A contractor acts as a temporary employee, performing defined tasks to help complete part of a larger project. He or she is told what tasks to perform and when they must be completed.
- A consultant is brought in when the client has an urgent need and isn't able to take care of it or doesn't know how to--and doesn't have time to figure it out, or the inclination to do so. The consultant analyzes the problem and defines solution options, often using methods or tools that the client hasn't thought of, hasn't the knowledge to use, or isn't aware of. The consultant is self-directed and does whatever it takes to deliver a solution that best meets the client's needs.
Which description characterizes your practice? Do you simply offer your time and skill to complete piece-work, or do you market solutions to problems that count? This is important because, generally, a consultant earns higher fees than a contractor. Of course, this depends on factors such as demand, skill and the client's need, but it's true more often than not.
A contractor bills for time spent performing tasks. Invoices are a simple accounting of the number of hours worked, multiplied by the hourly rate. They're usually paid solely for their direct contributions as practitioners, which excludes getting paid for managing the work of multiple contractors. Contractors usually work under direct supervision, and usually don't obtain their own work.
Contractors are perceived as fungible, and often find themselves in competitive bid situations with a price-sensitive buyer.
A consultant most often bills by the project, charging for discrete phases. In collaboration with the client she:
- defines the problem more usefully and completely
- specifies the desired outcomes and deliverables
- defines solution options and the implications and cost of each
- recommends the optimal solution given the client's business environment, market considerations, financial constraints, resources, and internal politics--and the consultant's broad experience with a broad array of similar or analogous companies and circumstances
- facilitates a decision
- puts together a project plan and budget
- designs and implements the solution chosen by the client
- integrates and collaborates with client personnel performing associated work
Consultants are responsible for drumming up their own work, through a combination of networking, marketing, and sales. A wise consultant sets pricing based on the operational, economic and emotional value of the solution and the demand for it, not simply the time it takes to deliver it. Consultants increase their effective hourly rate by working smarter, faster and more efficiently. Many clients like this approach because they can predict project cost, and they know there's no incentive for the consultant to drag out the work.
Some lawyers reading this may bristle a bit because the contractor definition strikes too close to home. It's not that if you bill by the hour and perform pre-defined tasks that you're a contractor. It's if you do that with too high a percentage of your work.
There's nothing wrong with being a contractor, per se. To maximize profit, though, you've got to organize your operations to standardize, normalize and otherwise enable economies of scale. Few lawyers know how to do that or are inclined to submit to the required discipline.
Learn how to value your services according to the strategic, operational, economic and emotional impact of the problem you solve. Step Two of RainmakerVT's Decision Process is the Cost of Doing Nothing simulation, where you'll manage an avatar through a virtual value discussion. You'll elicit the buyer's perception of these four forms of impact, deciding what to say or do next, and getting immediate video coaching and feedback for each response choice. Learn by doing.