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

oops

[j0nb0y]

you picked the wrong field. Go to law school, or get your mba. Or at least your masters in something. With just a college degree, you'll be stuck low on the totem pole for the forseeable future.

Or maybe that's just what happened to me =[

Re:oops

[Twylite]

Two words: "business acumen". If you don't have it, you're not going to succeed at running your own business.

If you want to be a contrator, get some real business management training, or team up with someone who has it.

If you want to have a successful business, you'll need technical experience and business experience.

Market yourself, build a portfolio, network. Focus on service -- people respect good service. Find a niche market and take control of it. Get your contracts in writing and understand the legal issues around them. Protect yourself by using a business form that provides limited liability. Understand the work involved in a contract and the amount of money you need to cover all expenses and required profits, and don't take jobs that aren't worth it. Prefer contracts that leave you with an opportunity for recurring revenue (more contracts from the same source, or reuse the work/knowledge in other contracts).

This is just a generalized step, but...

[Dark Coder]

1. Join a local freelance contractor group or website
2. Advertise, advertise, advertise
3. Shoe-string budget (macaroni-cheese and Top-Ramen)
4. Network, network, network (the social kind, not the other kind)
5. Brush up on phone etitiquette
6. Learn legalese on contractual languages or hire a lawyer
7. Complete the job
8. File taxes regularily
9. Profit!

Best advice for becoming IT consultant

[Safety Cap]

1. When you swipe the shopping cart, make sure you take the kind that don't have the auto-locking wheels
2. The motorists usually don't care that your windshield-washing bucket isn't filled with *cough* cleaning fluid
3. A "Will compute for food"-sign is novel enough to get an extra few bucks from the yuppies when they're stopped at the light; just make sure you deplace every few days
4. The best food scraps are found in Tai-food restaurant trashcans

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?

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.

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

In addition...

[Seraphim_72]

Chances are that the "jobs" you have gooten so far are the "kiss and a check" kind of jobs. They are the kind that after 10 hours of troubleshooting a job - because you couldn't talk the customer out of trying to put Wi-Fi in thier 4 story house and the WAP in the basement, you end up asking for $50 because -well, you didn't realy get the job done. So you walk out with your check, and a kiss for being a sweetheart about the whole thing.

I build computers for people on the side, and it is a fun hobby that makes me a little bit of money to support my Athlon64 habit. I go buy the parts, put it together, drop on your choice of OS, and preinstall the minimum of software so that getting on the net is not a death sentence for your new machine. Before I deliver it, I offer a $10 discount if I can install linux on the machine as a dual boot. I then deliver the machine (or they pick up) and and give them "The Talk" and answer questions (takes about an hour) - in the end I charge $50-100. Now for me this is a hobby, I am just under Dell for total price for the same hardware and I give free tech support for 6 months to boot.

In short - I and people like me are the death of your vision.

There are a lot of us out there and even with great networking you will not beat our niche. And you certainly aren't going to make a living out of it.

What you need to do is look for a real job, get the experience and start to collect a clientelle on the side. Hopefully someone you know will start a real business and need some outside consulting - and then you just may get on the road. Not to be unkind, but there are an awful lot of very good techies scraping the ground for any cash that will come up - dont plan on this buying groceries any time soon.

Somewhere on Slashdot there was notice about a three part series about becoming a consultant - wonderful to read, very honest and inspirational -cant find it though sadly :/

Sera

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.