Article Summary: Building your consultancy practice to where you want it to be can take a little time. For many coming from traditional employed roles, income may dip briefly when you first start, before it climbs. You don’t need a large lump sum in the bank to manage this. A flexible, gradually-built buffer and a realistic sense of your own cash flow matter more than a specific number. There’s no single right way to price your work, either. Some consultants charge based on the value they bring, others win clients by charging less for a more personal service. The right approach depends on you and your clients.
Please note, this article is not financial advice, which Setfords cannot provide. We always recommend anyone considering consultancy speaks to an accountant and/or financial advisor.
Money is usually the first thing lawyers want to understand before making the move to consultancy, and understandably so. But it’s also the area where it’s easiest to talk yourself out of something that, in practice, tends to work out better than expected. This article is a general, reassuring look at how finances typically evolve in your first year as a consultant, without assuming you need a particular amount of savings or a specific business background to make it work.
Considering consultancy? Read the rest of the articles in this series:
- Your First Year as a Consultant Solicitor
- Building Your Client Base as a Consultant Solicitor
- Marketing Yourself as a Consultant Solicitor
- Building Your Support Network
- Junior Lawyers: Preparing for Consultancy
What to expect from your income
Generally, income for most new consultants follows a similar shape: a brief dip (compared to a traditional employed salary) in the early stages while your pipeline and invoicing find their rhythm, followed by a steady climb as things settle in. This pattern (sometimes called a “J-curve”) isn’t a sign anything has gone wrong or a signal to panic. It’s simply what happens when income shifts from a fixed salary to something more directly tied to the work you generate and bill.
Very few consultants describe their first year as a flat line or a decline, and growth can happen sooner than you expect depending on how much you bill and when.
Building a flexible buffer
A lot of advice about self-employment leans on the idea that you need a large sum of savings set aside before you make the leap. That’s not a realistic goal for everyone, and it shouldn’t be treated as an absolute prerequisite for consultancy.
What matters more than a specific figure is having some flexibility built in, and building it up gradually rather than trying to have everything in place before you start. That might look like:
- Setting aside what you reasonably can in the run-up to your move to make sure your basics are covered while you focus on starting
- Timing your transition around a natural break in your existing income, if that’s an option for you
- Understanding your own monthly outgoings clearly, so you know what “enough” looks like for you specifically, rather than working from a generic number
- Treating the first few months as a period to manage carefully, rather than a wall you need to have already cleared
There’s no single right answer here, and what works for one consultant may look completely different for another depending on their circumstances, their client base, and how quickly work starts to come in. The point isn’t to arrive with a perfect financial cushion. It’s to go in with a realistic, flexible plan, and to know that the early dip is temporary rather than a sign to turn back.
We recommend speaking to an accountant and/or financial advisor while you’re planning your move to get a better picture of where you stand.
Understanding how you’re paid
One of the biggest mental shifts when moving to consultancy is understanding fee-share. Rather than a fixed salary, your income is directly tied to what you bill. For many consultants, this ends up being the single biggest driver of increased earnings compared to previous roles, simply because there’s no ceiling imposed by a salary band.
It does mean getting comfortable with a different rhythm, though. Instead of a predictable monthly wage, income can vary from month to month. This is especially true early on, which is why understanding the J-curve and building in some flexibility matter so much. Once your pipeline settles, most consultants find this variability smooths out considerably, and the upside of fee-share becomes the more noticeable part of the picture.
Get a better idea of how much you could earn as a consultant with our earnings calculator.
Pricing your work
There’s more than one way to think about pricing your work as a consultant, and there’s no one right way. Whatever you decide, it’s worth thinking it through to make sure it works for you, rather than simply defaulting to what your previous firm did. Some things to think about include:
Value-based pricing means setting your fees in line with the outcomes and expertise you deliver, rather than a standard hourly rate. For many consultants, especially those with a particular niche or deep expertise, this is a confidence-building shift after years of working under a fee structure set by someone else.
Your overheads as a consultant give you flexibility, but not always a reason to charge less. Without the costs associated with a large traditional firm, some consultants find they can position their pricing more competitively than at their previous firms, if that suits their market, helping them win work while still charging a rate that reflects the value of their time and expertise.
A more personal service can be priced accordingly. A huge advantage of consultancy is offering clients a more attentive service with more direct access, greater continuity and more personal attention. Many clients recognise the value this brings and are happy to pay for it. As such, many consultants find they can charge more for this kind of service, not less.
Of course, there’s no one correct way to approach pricing. The right balance depends on your specialism, clients, and level of experience. Plus, you can always adjust to suit different clients or as your confidence and expertise grow. However, the approach you take should reflect the value and service you’re providing so you can build a thriving practice.
Getting the practical structure right
Alongside the bigger-picture points above, there are a few structural decisions to think about as you’re considering consultancy and early in your first year:
- How you operate. Most consultants choose between working as a sole trader or setting up a limited company, and the right choice depends on your personal circumstances, your income, and your long-term plans. This is worth discussing with an accountant before you decide, and at Setfords can be changed as you build your practice.
- Pensions and long-term planning. As a consultant, contributions and planning become something you manage yourself rather than something that happens automatically through payroll. It’s important to put a plan in place early rather than letting it drift. Your future self will thank you!
- Getting the right advice. A good accountant or financial adviser, ideally one who understands the fee-share model and self-employed income patterns, is one of the most valuable relationships you can build in your first year. This article is a general overview rather than financial advice, and the details will differ for everyone.
The bottom line
The financial side of consultancy tends to look more daunting from the outside than it really is once you’re in it. With a flexible approach, a clear sense of how fee-share works, and a considered choice about how you price your services, the first year’s finances are far more manageable than they might first appear.
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