When to Transition to Independent Consulting From a Full-Time Job

Thinking about leaving your full-time job to become an independent consultant? It’s an exciting move that can give you more flexibility and control over your career, but it’s not without its challenges.

To figure out if—and when—this transition is the right fit for you, it’s important to weigh a few key factors. Let’s take a look at what you need to consider before making the leap.

1. You are financially ready

There’s no magic number needed to quit one’s job and make the leap to self-employment, but typically one should save between three to six months of general expenses. The exact number depends on the person and their experience as a consultant—if you have a career where you’ve done consulting in the past and are diving back in, three months might be enough. If you’re looking to make the leap right from full-time employment to consulting, 6 months is a safer cushion.

Many independents also use side-gigging or part-time independent work as a “runway” to self-employment. In some cases, particularly among older workers who want to ease into retirement, independents may even be able to transition from an employee to a consultant of their current company. With the stability of a regular paycheck, they can focus on expanding their network, securing clients, and adapting to the rhythm of consulting income, which often arrives based on project milestones or completion rather than a typical biweekly schedule.

While those traditionally employed and independent alike should maintain a savings cushion, independents must be extra diligent due to the occasional income variations that come with being independent. How one saves is a personal choice, but people may choose to utilize higher-yield savings accounts, maximized 401(k) contributions, or simple lifestyle and budget streamlining techniques to save enough money to make the transition to independence.

Independents should also be aware that their paycheck may not reflect taxes, and should plan to budget 25% to 30% of their net pay in taxes, or utilize a service such as MBO Partners where they can pay themselves a wage on a W-2 basis, and account for taxes with each paycheck. MBO also allows independents to opt in to portable benefits such as group health insurance and tax-advantaged retirement savings vehicles.

In addition to savings, independents should plan for items such as paid time off, as well as a bill rate that accounts for taxes. MBO Partners offers a bill rate calculator that can help would-be independents and experienced consultants alike determine how much to charge for their services.

2. You have an entrepreneurial mindset

Making the leap to independence is more than just about having enough in the bank; it’s about the independent mindset. MBO’s 2024 State of Independence in America study shows there are 72.7 million Americans working independently—and the independent workforce itself is expanding three times faster than general employment.

Working for one’s self comes with advantages and disadvantages. Some feel empowered by the flexibility to work when and how they choose. Others may find independence isolating, as there are no peers to consult for guidance, no boss to set priorities, and no colleagues to brainstorm with. Professional development is also a challenge since independents must seek their own path to career advancement.

When it comes to making decisions such as these, know that most successful independents are already experts in their field when they make the leap—the average independent has more than 8 years of professional experience, according to the State of Independence.

Successful independents come from all walks of life and pursue any number of different types of work, but all are entrepreneurial, have marketable skills, and, perhaps most important of all, know the ins and outs of the independent lifestyle, including the freedom, flexibility, and occasional uncertainty it brings.

3. You are prepared

Companies such as MBO Partners can provide the business operating system needed to set up and manage an independent business virtually overnight, but they can’t provide the skills and mentality needed to succeed in the long term. However, our State of Independence report shows that more independents are more than ever before. In fact, 84% say they are happier working independently, and 79% say they are healthier.

Remember, becoming independent is not just making the decision to leave a full-time employer, but also includes making the decision to run your own business. This involves many “back office” tasks often taken care of by an employer, such as billing and invoicing, accounting for vacation and paid time off, office space and more. Using a business operating system such as MBO Partners to manage your back office can alleviate some of these issues, but others require time, planning, and occasionally, money.

For some, his includes establishing a work location, especially if you’re not working onsite with a client. If you lack a dedicated space in your home, you may wish to secure paid office space at a co-working location, which is often tax-deductible but not generally billable back to the client.

Successful independents value the flexibility of working when and how they choose, but also need to be able to have the cash flow to cover a paycheck that comes in on project milestones or a break in income between projects. Of course, it’s still important to remember to put money aside for things like retirement, or, if you’re already retired and working part-time as a consultant, to plan for health-related expenses as you age.

If you’re considering becoming a full-time independent consultant, learn how to prepare yourself by reading: How to Transition from a Full Time Job to Self-Employment.

This article from MBO Partners does not constitute legal or financial guidance.