Advice on Becoming an Independent Contractor?

miyako asks: "I'm 20 years old and going to be graduating soon with a degree in Computer Information Systems. I was thinking recently about the job market available and I began to realize that I don't want to spend the rest of my life using my skills to make someone else money. I've been making money these last few years doing odd computer related jobs, programming, networking, graphic design, but never steadily or on a big scale. What I've come to realize is that when I graduate I'd prefer to work for myself doing contracting jobs. I thought that I would put the question out to Slashdot since a number of you seem to be doing this for a living or to supplement your income. What's the best way to get started, especially for someone without a lot of professional experience under their belt?" Update: 10/08 11:20 EDT by C : After press time, another worthwhile related question popped up. Rather than post another story, it's probably better to handle both issues together. So in addition to the current question, what legal aspects should Independent Contractors consider, especially when it comes to writing contracts? "Is it better to be a generalist, or to specialize in a few areas? What can I do to get myself recognized in the sea of other people doing the same thing? Is the market really there and is it strong enough that someone could make a living only doing this? What do I need to be aware of on the business end of things?

I realize that I might make significantly less, at least at first, than I could working for a company, but I would rather make less money and be more fulfilled working for myself. In short, what advice would Slashdot readers give a new graduate who is looking to start a business doing contracting jobs?"

While considering the issues an independent contractor needs to worry about when starting out, it might also help to consider the aspects a starting contractor will need to tackle when confronted with an important aspect of his job: writing contracts. With that in mind, we have this addition from Clanner: "I've been working as an IT Contractor recently, and I have a few opportunities to do some independent contract work (IE: not through a contracting agency) for a handful of clients. While I plan on consulting an attorney at some point, I'd like to get a few pointers from the Slashdot community as far as things to watch out for in contracts with customers. I'm looking for both items to avoid having in a contract as well as things that I should make sure are included. I plan on using a balanced contract, where neither party is at any severe advantage or disadvantage. I'm sure there are plenty of experienced hands at this in the Slashdot community, and I'd like to hear any suggestions you may have and about your experiences in this type of work (good or bad). Thanks!"

Comments

Easy

[Anonymous Coward]

Go to Iraq and help out. They are so desperate for people that they won't care about your lack of experience. You can make signficantly more than you would here. Plus you can take pride in knowing that you are making a difference.

Re:Easy

[WhatAmIDoingHere]

The money is good, but remember, it's called hazard pay for a reason.

Learn to get good at dodging random gunfire.

Get professional experience

[everyplace]

Seriously, nothing screams "legitimate contractor" more than professional experience.

This doesn't necessarily mean get a real job though. I've found that if you want to build a really good portfolio or resume, be it devleoping, design or whatnot, go to work for a non-profit that is aligned with something you care about. Usually they have some projects that are just yelling for technology help, which of course is usually some of the most costly help.

What this does for you is a) gives you some real names to put onto your resume. Especially if you go after the well-known non-profits in your city. b) gives you some real work experience, dealing with clients, deadlines and whatnot. These are both invaluable to you to see how the real world interacts with contractors, and to potential future employers, who will see that you can actually function in the real world, and are a contractor by choice and not circumstance.

Your mileage may vary, but this is what I've found to work.
-everyplace

Price and Paper

[rueger]

One - set a reasonable price for your work right from the beginning. If you start out pricing yourself at the bottom of the market you'll get bottom feeder clients and lock yourself into low prices. Once you've established that you're the cheapest in town it's almost impossible to boost your rates to where they should be.

Two - contracts are your friend. Even if you don't insist on a full written contract, send the client an e-mail that outlines duties, timeframes, deliverables, and pay rates. Do that before starting work. As one lawyer put it, even the weakest paper beats someone else's memory of a conversation.

Three - if the job changes direction or scale, stop and renegotiate. Don't wait until you've put in two weeks of work not covered by your original contract, only to find that the client has some odd idea about how it was "included".

Four - if the client jerks you around do not ever work for them again, no matter how much they cry and plead for forgiveness. If they do it once, they'll do it again.

Finally, if you have a good client, tell them, and cut them a deal from time to time.

Don't move...

[bergeron76]

When I was in school (FSU) I began to build a significant client base doing most of the same things that you're doing now (except it was back in the 90's in my case). I moved to Atlanta to take a "real" job, and 99% of the client-base that I had built up over time disappeared overnight.

I don't regret moving to a big city (Tallahassee is a FUN FUN town though!); however, keep in mind that where you start your practice is going to be your home for a looong time if you want to be successful and build a significant income from it.

Please keep in mind, that things like rent-a-coder.com, etc didn't exist back when I was consulting. I could only work locally (I had clients all the way up in Thomasville, GA though).

Also, treat every client/contract as if it's the most important one. You _never_ know who they know and word-of-mouth was the way I found most of my clients.

Good luck!

Nobody will hire you.

[Dr. Bent]

You: "Hello. I'm an independent contractor with no experience, no support staff, and no financial backing whatsoever. I'm doing this because I don't want to work for "The Man." Did I mention I'm 20 years old? Please hire me."

Them: "Uh, no."

People become independent IT contractors after they have 20 years of experience and get fed up working for other people. They can do this because they have 20 years worth of personal contacts, industry knowledge and hands-on experience to draw from. You have none of those things.

You say you're willing to work for less. That's good, because you're going to be working for a lot less...like zero. Oh, and were you aware that you'll have to pay more in taxes at the end of the year because you're an independent contractor? Hope you like 1099 forms because you're going to be seeing a lot of them.

This is one of those things where, if you have to ask for help, you're better off not doing it. If and when the time is right for you to quit your 9-5 job and contract yourself, you'll know it. By that time, you won't have very many questions at all, which is a good sign that you might actually be sucessful.

You haven't even given yourself a chance to hate the 9-5 IT job yet. You might as well try. Who knows, you might actually enjoy it! Stranger things have happened.

A few rules of thumb

[Radical Rad]

Feast or Famine

IANAIC but I do play one on my CV. :-) Expect that you will experience the feast or famine syndrome. In other words, at times you will get no work when you need the money or offers of work that you can't accept because they demand more time that you can spare from projects you have already accepted. Working with a partner may help you to smooth out those peaks and troughs. One person can be lining up work while the other is finishing up a project and both can pull all nighters if a deadline looms.

Learn from the dot coms

You will need a bankroll. Kind of like the dot coms venture capital. Don't blow it all on plush offices in Mountain View with a company masseuse and free energy drinks. If you are living in your parents basement, stay there. But do have a dependable vehicle and a respectable wardrobe.

Don't underestimate your time. Include a fudge factor.

If you are going to have to make a living from this. You need to charge an hourly rate that will pay the bills while you are researching things you aren't familiar with. You can't go on site and look like you don't know what you are doing. You are on the clock and the client wants results for their money. Also charge enough to cover mistakes that you may make and cannot in good conscience charge a client to fix.

Get requirements in advance and in writing.

If you don't do this, you will get burned. Don't make exceptions to this rule. Don't start work until the client has agreed to what is to be done and has signed the dotted line. Changes also need to be signed off on before you do any work on them or you will get burned. By the way, did I mention that if you don't follow this rule you will get burned?

Been there, Done that.

[His name cannot be s]

I've been an independant contractor for 14 years.

I started when I was 20.

I'll tell you some things I think you should know, and you can take it or leave it.

I don't have any post-secondary education, and I've never taken a class on anything Computer Science. I *have* worked my ass off on more platforms and languages than you can imagine.

First off, if you are going to be contractor/consultant, make sure that you are an expert in at least one field. Get jobs related to that. After that, keep learning. Become that expert in as many fields as possible.

Secondly, Always ask for too much money. It will improve your bargaining ability, and it will make your client think you are worth more than you really are.

quoting you:
I realize that I might make signifigantly less, at least at first, than I could working for a company, but I would rather make less money and be more fulfilled working for myself.

Ha-ha. I'm not sure what it's like where you come from, but I made $161,000 last year. No shit.

It sounds like you need more experience before you start. My first jobs I literally fell right into, and secured myself a spot where someone needed my skills bad. You need to be needed, not just wanted.

Here's what I recommend to young folk wanting to make that mark:

ALWAYS BE INTERVIEWING. Take a full time job, but never stop looking.

ALWAYS BE READING. If you can't read Alot really fast, learn how. I don't know how I learned that, but I can blow through more text faster than pretty much anyone I know. It has saved my bacon more times than I can count. I worked for 11 months teaching C, C++, Java, and Unix for a company once, with extremely good results. The trick? I didn't know Java when they hired me, but I did two days later. You need to LEARN fast, not just read.

BE OUTSTANDING. If you can type 60+wpm, you won't look like a twit.

oops, the wife just came back.

I'll post more later.

Re:Been there, Done that.

[His name cannot be s]

Ok, I'm back ;)

THE BAG OF TRICKS. I have a 20 gig pocket drive I carry around with me these days. It started off as a couple of floppy disks in the early 90's, graduated to CD in the late 90s, and now I have this USB pocket drive. I keep on it all sorts of utilities and tools that I use to do things people just don't know how to do. Some of it is homegrown, some open source, some shareware. Stuff like the Sysinternals tools, etc. Collect these. Know How To Use Them.

SOURCE CONTROL. Real consultants know how to use source control and configuration management tools. The Good: CVS, Subversion. The Other Good: Clearcase, BitKeeper, Perforce, Starteam. The Bad: PVCS, Visual Source Safe. Get access to these types of things, and learn what they do and how they work. Don't try to come into a job and not know what they are, you will look unprofessional--if they wanted unprofessional they'd get an employee.

BE TECHNOLOGY AGNOSTIC. Your primary focus is MONEY, not the furthurance of a particular ethos or technology. If you are a Java Zealot today, you are going to look like quite the hypocrite when your next gig is a .NET project. I solved this one with the mantra: "All Software Sucks", therefore I don't really like any of it. When you are unattached from the technology, you sound like you have a broader experience, and are not a 1 trick pony.

LEARN THE HISTORY. Read lots of books about the 60s, 70s, 80s, and 90s software development. Steven Levy's HACKERS gives you a nice foundation. Read about IBM, Microsoft, Oracle, Sun, Borland, and all these companies that make up our world today. Learn who those major players are inside those companies. Who's the CEO, who calls the shots. Who Invented Java, C++, Perl, C#, Linux, etc... A broad understanding of the field you work in gives you insight into where it may head.

KNOW THY MACHINE. From circuts to desktops. How many times have you installed windows. Do you know where everthing is in the Registry? What are all those damn files for? How do device drivers work. What SDKs do you need to make software and drivers? Ever made bootable CD's from scratch? What do all those CMOS settings do? How many versions of Linux have you installed, and used? You should have at least become good at several, and understand the fundamental differences between them. Know editors: VI, Emacs, Notepad, etc.. Open up your computer. What does everything you see do?

Now for some Personality related items:

DON'T GET MAD OR ANGRY, and NEVER EVER CALL A PAST CLIENT STUPID OR RETARDED. When talking about past experiences, they should always be positive. You won't get hired for gigs if the client thinks that you are going to give them a bad rap later on too. You need to be professional and friendly, 100% of the time. You are not there to be potentially explosive. Contractors are disposable, if they don't like you they will drop you like last weeks laundry. Your #1 goal in this line is to Get along with people. Especially if you can't stand them. :p ohh! Read "How to win friends and influence people" by Dale Carnegie. VERY IMPORTANT.

Well, that's what I have on the top of my head. If I can think of some more I'll post again :)

Finally, an ask slashdot I can answer!

[YankeeInExile]

I have been contracting for most of my adult life.

My list of ten tips for success:

1. Find a niche. Learn some obscure system or language that will set you apart from the herd. Do you want to be one of 7,412 guys who spent the weekend installing distro and now call themslves Linux consultants, or the one guy who has experience integrating MumblefrotzOS with ObscureDatabase?
2. Go for breadth. (This contradicts number 1). While specialization is a good thing, you also will need to answer any question of the form Can you....? with Yes!.
3. Build a portfolio. Take on non-paying projects for non-profit groups that will give you absolute technical control and complete them and polish them well. Write good code. Document it well.
4. Set limits. Decide how much you want to work in a week, and then limit yourself to that schedule. Don't fall into the trap of thinking "I could go to the movies, or I could bill three hours on Project P." Have work time and play time.
5. Partner with a starving artist. Nothing will turn a potential client away from you as fast as a great piece of code with an ugly face on it. If you don't have an eye for UI, hook up with someone who DOES, and trade her skills for yours.
6. Do it because you love it. You will spend a lot fo time doing this. If you do not LOVE coding/software enginerring, go find a comfortable job where you can slack off and disappear in the organization.
7. It is okay to play hard to get. Do not take the project where the client comes to you and says, "well, we spent 90% of the budget hiring Joe Loser and we can't use anything he wrote - we want you to do the entire project for 10% of the budget." These people will not reward your hard work with loyalty. They will forever see you as a door mat.
8. Learn to write good contracts/specifications. Most clients really don't know exactly what they want, so you are not going to get anything like a reasonable specification out of them. That means you need to write a specification for what you intend to write, and then get the client to sign off on that. Add on time-and-material for any changes that deviate from that written specification.
9. Work with a mentor. Find a successful contractor that does something like you want to do, and work with them for a few years. Swallow a little pride and take the crumbs from their table - successful contractors always have more work than they can do personally, and will be glad to sub out simple projects to a newcomer.
10. Never fail to deliver on a contract. Bad news travels ten times faster than good news. Getting out from under a reputation as a flake is nearly impossible.

My advice?

[obeythefist]

Don't do it.

A 20 year old with no experience wants to become an independant IT contractor 3 years after the biggest dive in the IT market in history?

I hope you like eating cardboard! I hate to sound negative but your enthusiasm is almost comical.

But in an effort to be more constructive, I would have to say that in your current position it is simply not a realastic objective to be independantly wealthy with your current level of expertise.

Doing contract work is certainly an option, many of my first jobs were contract and I gained valuable experience, however, in order to start working I had to work for a few people for nothing just for work experience to get paid attention to in interviews. Contract work for a bigger company is a good idea because it will not only give you the experience you need to be taken seriously, but you will also get a better feel for what both the contract market and the IT market is really like. And trust me, I have a university education and while the knowledge is useful in later life, university education will not prepare you for the mercenary world of IT human resources.

Whats your unique selling proposition?

[t482]

The best way to sell yourself is by promoting solutions that you provide.

Small business - firewall/hosting/email servers?
Workflow?
Antispam solutions?

Ensure that you are not just promoting "general IT
service skills" have something unique.

Sell to small business, but realize they may stiff you. Small business are easier to get as customers, but typically have less money and expect more than their larger counterparts. Try to get a vertical industry niche. Retail, Law Firms etc. And then tailor solutions to them. Once you have a specific solution you can go after the only place in IT there is real money - the fortune 1000.

Get some contacts of people who specialize in certain things. Its impossible to know everything - exchange, linux, groupwise, time matters etc.

Finally, be aware it will probably take 3-7 years before you develop a "decent" living. Once you have the customer base life gets a lot easier.

It can be done

[netfunk]

I have to throw in on this topic, since I've been doing this for several years now.

First, contracting is roughly akin to prostitution. You might think you're escaping some sort of pimp/whore relationship by not working for A Big Company, but you really are doing the same thing, just for multiple bosses. To be perfectly honest, you're trading a safety net for the possibility of more income.

That safety net is damned important, though. A lot of people don't have the stomach to function without it. There's nothing wrong with that, though.

Things like "health benefits" and "401k plans" and stuff go right out the window. You better get some health insurance out of your own pocket. (Listen to me...You Better Get Some Health Insurance!)

The people turning the Cogs of American Capitalism as 9-to-5 coders aren't as dumb as you suggest. Many of them are brilliant and talented, and they are focusing on building interesting things. Someone else is worried about finding revenue for them to do so.

And blahblahblah, money isn't everything.

So here's what I think: it's not the idea of a "normal job" that offends you. It's the idea of a boring job you can't stand. You don't want to maintain someone's else's shitty code, you don't want to write some buzzword crap pie that is neither spectacular nor innovative. I suspect that making someone else money is really secondary...it's a sour grapes response for being relegated to mediocrity.

Yeah, I can dig that.

So for you, based on the paragraph of you that I know, I would say: find an interesting job. I know, easier said than done, especially in this market. But there's bound to be something out there. Take some interviews (take them regardless of what else you do), and find the company that is building something interesting, and failing interesting, find the company that is building something beautiful. There's a lot of edification in elegance.

Ok, so about contracting.

Here's my advice. Find a vertical market.

My first paying jobs were writing Java code when no one did that. Later, when I was out of college and looking for work so I could be a Normal Person, I landed a job doing Linux and Mac development, because no one did that, but I did it for fun in my spare time, so I was naturally qualified for a job that couldn't be filled. If you're spending time on any open source project of any weight, chances are you are in a similar position. I just had the luxury of poverty...Linux was my primary OS out of need, but it paid off when command lines and C code and kernel builds were second nature to me. If you take these things for granted, that's good for you, and something you should try to convey in job interviews and contract pitches. Employers want smart people that can pick up new things above all else, right?

So I went to work for a company in Orange County doing Linux video games (you might have heard of them). When they went out of business, I moved in with my parents (turning in my membership card in the Normal Person Society), and started doing Linux and Mac game development, on my own, for companies that needed it. You know what? Nobody else did that. Now everyone needs a Mac port or a Linux dedicated server...people call me and ask if I'm available. I've been jokingly introduced at trade shows as "The Linux Game Industry". Vertical market, baby.

I don't live with my parents anymore, but I never got my membership in the Normal Person Society renewed. I guess that's a happy ending.

There are _always_ markets where people will pay top dollar for talented individuals. In the 90s, it was Java, and Linux, and embedded stuff, etc, but you can pull out any number of good examples for any era.

The world is filled with unemployed Visual Basic coders that took a college course on it because they heard there was money in it. It is _trivial_ to stand out from the herd. This is NOT measured in how many programming languages you know, but by what you can do, what you can pick up o

Some tips

[bsdbigot]

IANAL, but my wife's boss is - I wrote a general contract for my consulting/programming services, and he liked it very much. The only thing added, on his advice, was a clause that both parties wave the right to trial by jury; this is important because if you end up getting scruxored by a company, it precludes their lawyers from using a lot of BS legal maneuvers to indefinitely delay the case from being heard. On a similar note, you could build some sort of clause that limits suits by requiring arbitration. But please, check with your legal counsel before taking either of those as "the way to go."

Second - word of mouth is king when you are starting up. I can't begin to tell you how many good contracts I got simply through friends/associates of clients. Of course, this is much easier when you (as I have) target small business.

Third. Incorporate. Again, use a lawyer here, and probably also a CPA. My CPA has some sort of thing he did for me which "sets up a temporary injuction against any attempts to pierce the corporate veil." I don't really know the specifics, and I'm not sure I want to, but it sounds like a good thing.

Once you're incorporated, remember that you ARE NOT your corporation. This is an important mental distinction you must get straight in your own mind, especially if you start doing a lot of business with friends or friends-of-friends. Put in writing corporate policies (one of mine is requiring a signed contract and 50% deposit on work over $1000), and adhere to them at all costs.

For hourly work, be smart about your rates. For example, my hourly rate on an expected workload of 40 man-hours is 50% of the rate for 1 man-hour. Base your 1 man-hour rate on a budget of say 5 to 10 1-hour jobs per week (or less, if you expect less) and make the assumption that that is the best you will do for a while (i.e. adjust this to your necessary take-home). Remember, as the President of YourCorp (and probably also Chairman), you have the power to change these rate tables, as the business dictates.

Last - treat every customer as though they are the most important client you have. Always be cordial and prompt with delivery of service. Ingratiating yourself in this manner is important to getting follow-on business and word-of-mouth jobs. Remember that they may not have your level of understanding of computers, so you have to not talk to them as a technogeek, but be careful also not to condescend.

I wish you luck - it's a tough thing to get going, but it is a very rewarding experience.

A few suggestions

[FJ]

My father-in-law owns his own business. I asked him once what he thought about owning your own business. Keep in mind, he's been self employeed for almost 30 years & his business made about $200,000 in net profits last year.

* Getting started will be very tough. With no past work history and little experience, you'll have a difficult time getting a foot in the door. The first few years be very grateful if you break even with expenses. More than likely you'll go into debt. He said the first several years they went to garage sales to buy Christmas gifts for the kids because they couldn't afford to buy things at full price. He also grew about 70% of his own food on his farm just to break even. Starting will be hard.

* You will pay more in taxes being self employed. A lot more. If you thing the government likes to take a bite out of the working class, wait until you are your own business.

* You don't get health care or insurance. You may not think health care is important, but remember: If you don't work, you don't get paid. A serious illness could cost you a contract job. Getting hospitalized for any length of time will put you under a mountain of debt. Good health insurance costs a lot.

* You don't get a matching 401k plan or pension. That may not be important to you now, but it should be. It is never too early to start a retirement fund.

* Unless you eventually hire an employee, your business is only good while you own it. Let me explain. What are you expecting to do in 30+ years when you want to retire? If you are a one-person shop it won't be worth much because your clients deal with you, not your company.

* Get a lawyer. Be careful of what contracts you sign. If a client wants you to sign a contract it is to protect them, not you. You need to protect yourself.

* You may need an accountant. Small businesses are much less likely to be audited than individuals.

* If you are a white male, you don't qualify for any minority contracts or some small business loans. That puts you at a disadvantage for some jobs.

* Be sure what the payment terms are and get everything in writing. If you are going to impose penalties for non-payment be sure your clients know this.

* Be sure your clients know what you are going to do and what you are not going to do. Having delt with contractors you'd be surprised how easily a misunderstanding can happen and how quickly it will turn a relationship sour.

All those negatives aside, he said that he enjoys his own business. He has about 4 months out of the year where he works 6 days a week 16+ hour days but he enjoys the work and he is relatively free the rest of the time. My father-in-law is also to the point where he doesn't need to go looking for new work. He is well established enough that word of mouth brings him more work than he can handle.

Personally, I'd recommend getting another job first. A friend of mine decided to work for a non-profit organization. It gave him a low stress work environment and a really good feeling about his work. He didn't get rich overnight but it does give you something to put on a reference and a small or non-profit company may be more willing to let you do work on the side than any large company. It will also help make business contacts.

Just my $0.02. Good luck.