As attractive as retirement may seem at times, it can be a daunting prospect for many people. Retirement represents a marked lifestyle shift and not everyone is eager to take that very significant step.
Fortunately, the workplace – and the way we work – have shifted considerably in recent years. In many professions, including tech and engineering, the nine-to-five (and beyond) grind at the office or job site is no longer the only way to get the job done. With the tools for flexible work arrangements widely available, and an increasing movement towards a gig economy, it’s easier than ever for professionals to downshift their careers to a pace that they are comfortable with – by becoming consultants.
Transitioning out of full-time employment to consultancies before committing to full retirement has widespread benefits in the workplace. For workers nearing retirement age, consultancies are a way to remain intellectually stimulated and to continue making valuable contributions while focussing on projects that interest them the most, in a flexible and autonomous environment. For employers, these highly skilled and knowledgeable consultants can fill the talent gap created by the shrinking labor pool and tangential skills shortage. As well, consultants of this caliber can help fill the experience gap that has been created by decades of downsizing and outsourcing – and exacerbated by the large wave of baby boomers poised to leave the labor market.
As promising as consultancy may seem, it is still a significant shift and there are several things to consider, including how to set up an LLC, how to find and land projects, and how to navigate this new way of working.
Leaning Into The Transition
On the surface, becoming a consultant may seem like a dream opportunity. You’ll still be using your skills and expertise, you’ll still be doing work that interests you, and you’ll still be earning income. Additionally, you get to set your own hours, choose your clients, turn down projects that don’t interest you, and substantially improve your work/life balance.
On the flip side, however, as a consultant, you are essentially a self-employed entrepreneur. Unless you partner with a recruitment agency that specializes in placing consultants in your field, you will be responsible for managing all aspects of your business. You’ll be required to handle all administrative tasks yourself; continuously network and seek out new contracts; frequently navigate new workplaces with different cultures, work processes and managers; manage your budget and ensure that you have funds put aside for sick days, vacation, and taxes; manage your time and calendar appropriately; and deal with fluctuating income.
As you consider shifting to a consulting role, it’s important to weigh the pros and cons to make sure that consulting would be a good fit for you. Once you’ve decided to embrace the change, one of the first steps to take is establishing your business structure.
Setting Up Your LLC
There are several different kinds of business structures, including a sole proprietorship, a partnership, a corporation, and a limited liability company (LLC). As a consultant, it’s advisable to set up an LLC.
While you could operate more informally as a sole proprietorship, an LLC provides several tax and liability advantages. Most importantly, an LLC allows for the separation of personal and business finances. Without the formalization of an LLC, your personal assets would not be protected in the case of legal issues or bankruptcy related to your consultancy. Also, an LLC allows some flexibility in how your business will be taxed (i.e., it is usually more advantageous for small businesses to be taxed as flow-through entities than as corporations) and you can write off your business expenses.
Setting up an LLC is fairly easy to do. While you may wish to consult with or hire legal and/or financial professionals to ensure that your LLC is created in a way that is most advantageous to you, the basic steps for setting up an LLC are:
- Deciding on your business name. Many consultants simply use their names.
- Designating a registered agent to receive official or legal documents. You can designate yourself as the registered agent for your LLC.
- Obtaining a copy of your state’s articles of organization form (some states may use a different name for this form).
- Completing and filing the articles of organization form. Filing requires a fee.
- Creating an operating agreement that details the financial, legal, and management rights of all members of the LLC. An operating agreement is not required in all states but it’s highly recommended to create one. There are free online templates if needed.
- Keeping your LLC active by following your state’s requirements, which may include filing an annual report and/or paying an annual fee.
Formalizing your business structure as an LLC is not difficult or expensive. And, in addition to the many legal and financial benefits of establishing an LLC, doing so adds to your credibility and professionalism.
Other Tasks Related To Setting Up Your Business
In addition to working through the steps to establish your LLC, there are a few other things that you may need to do. It’s best to check with your state or consult with the professional who is setting up your LLC (if you chose to work with one) to find out which additional tasks you need to complete.
Obtaining Business Licenses And Permits
Most states require that you obtain a business license and/or other permits to operate a business within the state. This process involves filing paperwork and paying fees. Once approved, you’ll likely need to renew your license and/or permits annually – and it’s important to stay on top of the deadlines to do so, otherwise your LLC could lose its status as a legally recognized business.
Getting An Employer Identification Number (EIN)
After your LLC is formally established, one of your first steps should be obtaining an EIN. There are several reasons to do so, including:
- An EIN is a way to separate your business and personal assets;
- An EIN is often required by banks to open a business account;
- An EIN solidifies your position as a legitimate business, which may be especially helpful when dealing with the IRS.
Obtaining an EIN is quick and easy to do on the IRS website.
Dividing Your Business And Personal Assets
To protect yourself, it’s best to formally separate your business and personal assets by obtaining an EIN and setting up a business bank account for all business transactions.
Your salary would, of course, need to be withdrawn from the business account. There are a few different ways that you can pay yourself. There are pros and cons to each different way of doing so; all are discussed in an excellent piece at Forbes. However, in brief, you could choose to:
- Pay yourself as a W-2 employee;
- Earn profit distributions;
- Pay yourself as a 1099 independent contractor; or
- Keep the money in the business.
It’s a bit of a process to formally set up a consultancy business but taking the time to dot your i’s and cross your t’s will protect your personal assets, set you up as advantageously as possible in terms of taxation, and establish credibility for yourself as an independent business owner.
Developing Your Online Presence, Your Personal Brand, And Marketing Strategies
As an engineering or tech professional with decades of experience in your field, you likely have an extensive network of contacts who will be extremely valuable as you pursue contract opportunities. Nonetheless, establishing your online presence as a business, solidifying your brand, and developing marketing strategies for that business will not only help you land clients but further establish your credibility.
Your Online Presence
While an optimized LinkedIn profile is a critical marketing tool for consultants, you may also wish to create a business website. A website adds to your credibility, fleshes out the information provided on LinkedIn, expands your online presence, gives you a broader space in which to develop your brand, positions you as an expert in your field – and, overall, gives you a comprehensive vehicle for reaching potential clients.
Your online presence, of course, also includes your activities on social media. Leverage your socials to optimize your brand and your marketing strategies. Ensure that your personal posts align with your brand. Join and actively participate in relevant online professional groups by reacting, commenting, and sharing content that aligns with your brand.
Your Personal Brand
While we often talk about branding in regards to internet influencers, celebrities, and politicians, we all have personal brands and our online activities already project those brands, whether we actively shape them or not. Our brands are a combination of our internal beliefs and values, our experiences, and our personalities – and all of that shapes how others perceive us. To actively shape your brand and ensure that it is reflective of what you truly want to project to the world, think of your brand as your mission statement and lean into it as you develop your marketing strategies.
Your Marketing Strategies
Your online presence, your brand, and your marketing strategies are all interconnected. As a consultant, it’s unlikely that you will advertise your services in conventional ads. Instead, use your online presence to establish your brand, position yourself as an expert in your field, and foster your network, which is all part of marketing yourself to potential clients.
Landing Projects And Clients
In many ways, landing clients as a consultant is similar to finding a new employer. There are several different ways to find out about possible consultancies including:
- Postings on job boards;
- Actively networking in person and online;
- Asking for referrals from satisfied clients and/or past employers;
- Cold calling companies who could benefit from your expert niche knowledge;
- Optimizing your LinkedIn profile and ensuring that it indicates that you are open to work;
- Refining your online presence to align with your brand, passively marketing your unique value proposition; and
- Partnering with a recruitment agency that specializes in your area of expertise.
Consultancies are less common than other types of roles and they aren’t always easy to come by. It will usually take some legwork on your part to find out about them. It’s important to build time into your weekly schedule to actively seek out your next consultancy, to prevent too long of a break between contracts.
Adapting To New, Flexible Work Arrangements
One of the biggest benefits of transitioning to a consultancy is the freedom and flexibility that this type of work provides. However, the transition from a structured nine-to-five in-office job to the flexible work environment of a consultancy can be daunting for some people.
One of the primary difficulties is the lack of a set routine. In the office, your workday is usually structured around set office hours, meetings, and deadlines. As a consultant, you’ll need to manage your own time, set priorities for yourself, and stay motivated without the support of your colleagues and managers. This shift requires self-discipline and excellent organization and time-management skills.
Additionally, because consultancy work is on a contract basis, the instability of short-term contract work can be unsettling, especially after decades of permanent roles. The main issue, of course, is the resulting fluctuation in your income, which will now depend on how many projects you are working on and their duration. The resulting financial uncertainty can be stressful.
Further, consultants often have to balance multiple projects at the same time, often for different companies and managers, with each project having its unique requirements and deadlines. Juggling competing priorities while maintaining a high standard of work can be overwhelming at times.
Despite these challenges, many professionals find the transition to consultancy to be incredibly rewarding. While you shouldn’t let the potential drawbacks deter you from transitioning to consultancy, being aware of potential challenges in advance can help you plan proactively in case issues do arise.
Embracing the Transition
Transitioning to a consulting role as a way to downshift between full-time employment and full retirement may be an excellent choice for many engineering and tech professionals. It allows a way to continue to utilize your skills and expertise while enjoying more freedom and autonomy in your day-to-day life and a better work/life balance. Remaining in the workforce also benefits employers who are struggling to fill talent and knowledge gaps, as well as younger employees who still have much to learn from those who are poised to exit the workforce. That is not to say that the transition will be effortless and without challenges, but it will most certainly be worth it.
