The Hidden Costs of Going Freelance

snydeq writes: IT pros lend firsthand advice on the challenges of going solo in Bob Violino's report on the hidden costs of going freelance in IT. 'The life of an independent IT contractor sounds attractive enough: the freedom to choose clients, the freedom to set your schedule, and the freedom to set your pay rate while banging out code on the beach. But all of this freedom comes at a cost. Sure, heady times for some skill sets may make IT freelancing a seller's market, but striking out on your own comes with hurdles. The more you're aware of the challenges and what you need to do to address them, the better your chance of success as an IT freelancer.'

Comments

uh?

[Anonymous Coward]

I'm seeing all this as though it's a choice. Like there's some guy with well combed hair, checking his watch and driving a lexus who makes the choice to begin an exciting new chapter in his life.

Do you stupid fucks seriously think I want to work like this with no insurance and dental and being afraid of starving?

THERE'S NO FUCKING JOBS YOU IDIOTS

Subby needs to get his teeth knocked the fuck out with a clue stick.

Re: uh?

[Hognoxious]

don't do anything extracurricular in terms of continuing educaiton

Alanis Morisette, is that you?

Re: uh?

[jellomizer]

I have learned the degree does matter. Not that it is the only criteria or an absolute but I have found people with degrees especially with undergrad have a bit more roundness to their personality.

When we are teens and early 20s all we want to do is focus on one thing going to college forces us to diversify.
I found people without degrees or took extreamly specialized classes tend to be good in a small area, then be grossly inadequate in others.
A programmer needs to know how to administer a mid sized system, do general DBA tasks, look up what they don't know, treat customers well, explain things so a non-programmer can understand, know about the business that they work for.

Those liberal art classes we need to take are useful and key to success. It is just a shame that liberal arts majors are not required to take 200+ level math and science so they get diversity in their education

Re: uh?

[Redmancometh]

I've found that devs (working devs!) without degrees tend to have a far more broad knowledgebase. Typically they are part of the "IT culture" and are immersed in learning 24/7.

Too many degreed devs do it for money and only know what they were taught in school. Most dont even bother to remember ASM/C in favor of high level languages.

Someone who feels development helps define them as a person is usually far more competent.

There's overlap, but that's been my experience.

Re:uh?

[Jason Levine]

The key reason why I don't freelance is because I suck at selling myself to new people. Once I am in they tend to love me, but before that I am just like any other smo.

I have this problem too. This is second only to "need a steady source of income" in reasons why I only freelance on the side. I know I'm good at what I do, but when it comes time to sell my talents to others my brain suddenly turns on me and tells me that I know nothing and there are tons of people out there who know more than I do. The latter is true - there's always someone who knows more than you - but just because others know more than me doesn't mean I know nothing. Still, it's hard to battle your own brain.

There's a term for this: Impostor Syndrome. You feel like a fraud who is going to be discovered at any moment - all despite the skills you have or your works being well received. I've heard from many IT professionals who feel this way also.

Re:uh?

[tompaulco]

Do you stupid fucks seriously think I want to work like this with no insurance and dental and being afraid of starving?

You apparently are not aware that it is possible to obtain insurance and dental without getting it from an employer? Well, it is a relatively new thing that started in only the 1920s.
In fact, I have had insurance outside of my employer (several different employers in fact) for about 20 years now. Although the employers like to make you think you are stuck with them and their insurance is cheaper, in fact that has never been the case. Why would anyone even think that buying insurance from the company store would be cheaper than buying it from hundreds of companies that are competing for your business? I have always maintained outside insurance for my family because it was cheaper than the family plan offered at my employer. Occasionally it was cheaper to insure myself with the company because the company would cover part of it. At other times, where the company listed health insurance as a benefit, it was in fact you, the employee, who paid 100% of it, so how is that a benefit, especially when it is available cheaper outside of the company?

Re: uh?

[CodeArtisan]

I found people without degrees or took extreamly specialized classes tend to be good in a small area, then be grossly inadequate in others.

I previously had an incompetent Jr employee under me, who happened to have a doctorate...

Meanwhile, the billionaire founders of Google, Microsoft, Oracle, Facebook and Dell are college drop-outs.

Well, there's certainly sufficient anecdotal evidence there to create data.

Re:uh?

[Qzukk]

You will always save money when there are hundreds of companies offering a product over when there is only one product available.

If you're 20 and healthy then yeah, getting a personal policy all by your lonesome will be cheaper than joining a risk pool of employees of all ages and health levels.

If you're 60 then getting a personal policy all by your lonesome will never be cheaper than joining a risk pool padded out by the 20 somethings buying the company plan. Unless you're talking about buying high-deductible ER-only coverage, in which case your tricycle doesn't even rank with the Ferrari's everyone else is getting and you should feel bad for claiming it's a better deal because it's cheaper.

Missing cost

[AK Marc]

The Slashdot header says cost, TFA header says "pitfalls". One I've seen that is either (or both) is sales. When you are freelance, you have to spend time bidding, designing for bids, building client confidence, and other things that aren't billable.

If you aren't prepared to spend 20% of your time on unpaid sales, you aren't ready to go freelance. Yes, that's a high number. But in a down/slow time, it'll not be far off. When things are good, you'll be spending a few spare minutes on the next job, but if you only plan for the best, you'll only get the worst.

Re:Missing cost

[m2pc]

Meetings can be another time waster and non-billable. Unless you specify upfront that _any_ time spent with the client is billable, you will eat the cost of sitting through sometimes hours-long meetings just to define the project you will bid and be paid on.

On top of that, some clients will expect you to meet them wherever they need you to be, even if it's several hours away, again at your own expense.

I've been freelancing for the past couple years and love it, but just keep this in mind!

Not on the list: time for getting new client

[cerberusss]

Couldn't find it on the list: time for getting new client.

I've been doing the contracting thing, where the client hires me to extend their on-site team. Recruitment agencies call me, I have an intake over the phone with the client and then meet them face-to-face. So I don't recognize the things mentioned like "fixed-price contract", I just have an hourly rate. You can spend anything from a couple of months to a couple of years working for the same client.

I very much like it, but I work 4 days a week. That one day a week is really useful when the contract ends, because then you'll have to start emailing recruiters, looking for the next project. The phone and face-to-face interviews take hours, and it's hard to stuff that away in the usual 9-5 business hours.

The iOS job market is great currently, so it's not hard finding a project.

Re:Not on the list: time for getting new client

[cerberusss]

Well, I'm on site and outsourced teams aren't. And the price difference isn't that high; the big outsourcing firms like TCS ask about half of my rate.

That said, my current client is outsourcing more and more. First testing, but now also half of iOS development.

Re:Not on the list: time for getting new client

[swb]

In my experience, flat-rate projects succeed or fail by the contract terms. The deliverables have to be fixed and the project completion has to be extremely well-defined so you can declare it complete when the deliverables are complete. Scheduling should also be part of the contract so that client delays can't sap momentum and drag the project out. All change orders should be time and materials at a rate significantly higher than the flat rate average to discourage scope creep.

I usually see the problem with flat rates as being lack of client acceptance (using troubleshooting or whatever as an excuse) and delays as the main problem and vague deliverables contributing to both.

Overall, you have to be hard negotiator AND willing to tell the client "the deliverables are completed as specified, I'm not working anymore". Few businesses are willing to do this and even fewer individuals, which is why T&M is always the safer play.

Degree shows you can finish what you start

[perpenso]

Because its the degree that matters...ffs

The degree demonstrates two things:
(1) A base level of knowledge, which does not necessarily indicate talent in the field so its not the sole qualification.
(2) An ability to **complete** a long bureaucratic process that includes some uninteresting tasks. That may be the more important thing demonstrated.

Re:Degree shows you can finish what you start

[Copid]

Just as importantly, it gets you past the resume filter, "Must have a degree." Most of the time, if you don't get a job it's because they never even bothered to call you.

Re:IT workers shouldn't freelance

[AK Marc]

And I've had programmers take down a 1000+ user network by "testing" by turning on a test network, where it mimicked the real environment, down to the IP addresses and such. Of course, they didn't tell anyone else in IT what they were doing, and they had admin access to the networking gear because the CIO was ex-programmer and programmers are the best IT workers.

Of course, when the calls were rolling in that the network was down, I got in trouble for unplugging their test gear. Programmers are best when contractors. They roll in, give you buggy code, and wander off. You don't have to keep them on the payroll.

Re:60% tax

[aaarrrgggh]

You can pay a lot of taxes, but (in the US at least) you can do a solo-401k retirement plan, which will let you save $37k with zero taxes and $17k with just 15%. You can also deduct expenses, and if you are creative with your business structure you can avoid some other taxes.

Re:60% tax

[Actually, I do RTFA]

You automatically rank in the highest tax category as a freelancer. Of every buck you make, 60 cents go to the state.

If that happened to you, without you suddenly making the income that would justify it, for the love of heaven seek out a tax professional. You do have to pay both your half and the employer half of FICA. But, almost certainly your tax bracket should go down*. Or you FUBARed your taxes.

The painful truth about freelancing

[Anonymous Coward]

When I read some blogger bragging about the great joys of freelancing, I want to beat them over the head. Sure, you can make a living, for a while... and if you have the right skillset you might even make good money... for while! but skillsets change over time and although you can reskill, you'll never be as good at tomorrow's tech as what you are with today's.

What counts most in business is connections. Freelancers by definition don't have connections. When work dries up, no one has has their back.

These freelancing is greeeeeeat bloggers are like some guy bragging he picks up lots of babes. Maybe he does. Maybe he doesn't. So some harsh truths:

> the freedom to choose clients,

Truth: You will beg for work, take anything thrown your way, and be thankful for it.

> the freedom to set your schedule,

Yeah. Lots of time to do what you want "between jobs"

> and the freedom to set your pay rate while banging out code on the beach

Truth: Payrates are pretty low. You are competing with guys in third-world countries. Some of them write sucky code, sure, but others are very good, and they can live very comfortably on what for you is a meager wage.

Freelancing can mean varied work and even good pay... for a while! but there are many advantages of working for the man: job security, safety in numbers. and being able to fallback to a career in management which has good pay and doesn't demand you're up to date with the latest tech.

So next time someone brags about being a freelancer, wonder why if business is so good he is able to waste time blogging, and while you ponder this question, give him a wedgie.

Re:The painful truth about freelancing

[Anonymous Coward]

I agree. I have done some freelancing (because I had no other job).

1) There is hard competition. There is always some guy from india or china (or africa) who offers to do the job for 5 USD/hour or less - and have PhD + work experience in that particular field and his costs of living are much lower than yours.
2) It is very difficult to get enough money for living. You might get some good deals but in practice there are times when you cannot get no work so I hope you have a house and some savings or otherwise you will end-up living on the streets.
3) If you become ill then you have no income at all.
4) You waste time writing business proposals and other material which takes time and you never get paid.
5) Lots of work is done without paying the taxes (it is often even so complicated if your money flows are from multiple different countries and you contribute with some other guy from other country and pay him something etc). However, the amount of money is often so small that many authorities don't even bother to track you down.
6) Yes. You can do it while you are unemployed. At least in some european countries you are allowed to work to get very small amount of money (thought you in theory work as a contractor) and at the same time be unemployed (they do rarely check these) - but if you get caught you might lose all your umemployment benefits. Also it might work if you are a student and want to get some part-time work while studying.
7) If your past customer wants to sue you for some reason, you better have money to pay for lawyers. It might become interesting if you get sued and transferred to another country (if theory you might even get criminal charges if you do something very stupid like try to sell your customers private information to somebody).
8) Projects change all the time which might be "interesting" but is very demanding. You have constantly learn new things and cannot fully specialize into anything.
9) It is yet another way to destroy labour law benefits and unions in europe - you beg for some shot-term projects and the pay is often minimal.

=> People do it because they might get some money and they cannot get any other job.

Plus sides:
1) You get some work experience which might help you to get a "real" job.
2) If you are able to get good clients/contacts, you can maybe have a reliable source of income.

Re:The painful truth about freelancing

[Jason Levine]

A friend of mine who freelances full-time told me I should quit my day job and become a full-time freelancer. And, yes, there is a temptation there because the freelance rates I charge are over 3 times my day job's hourly rate. However, whenever I look into it, I quickly realize how much more I'd need to make just to stay at my current level (once you factor in health care and other benefits I'm currently getting), how much I'd need to work unpaid (to drum up more business), and how much my "salary" would fluctuate month to month. That last one is a deal breaker. I'm supporting my wife and two kids. I can't afford to not know how much I'm going to be making month to month because the work has dried up for a couple of months, but might pick up soon (maybe, perhaps). I need that steady paycheck so I can budget how much we can spend on necessities, how much we can spend on niceties, and how much we can save. I have nothing but respect for those who freelance full-time, but don't listen to anyone who tries to claim that it is easy and 100% guaranteed to make you more money than a full-time job.

Re:The painful truth about freelancing

[ranton]

What counts most in business is connections. Freelancers by definition don't have connections. When work dries up, no one has has their back.

While freelancing has its downsides, this is absolutely not one of them. Almost no one has better connections than a good freelancer / consultant. It can be hard to build a good network when you stick with a single company for years. When you are constantly meeting new people at new consulting gigs, you will build a network very quickly. And these are people with the power to make buying decisions, or else they couldn't hire you as a freelancer. So your connections on average will be with much more influential people than most full time employees.

My references from businesses I worked as a FTE are mostly other senior level developers and some mid-level managers. My references from my time as a consultant are directors and senior VP's at multinational corporations, and owners of small to medium sized businesses. Guess which ones I hand out to prospective employers? I don't even plan on using them as references anymore, because last time I did 2 out of 3 of my references called me upset that I didn't ask them for a full time position first. I'll just ask my network for an opportunity next time.

Re:The painful truth about freelancing

[judoguy]

I've freelanced on and off for over thirty years. I'm 62 and no degree and I'm currently making around $170,000 a year. Not as much as I'd like, but I'm getting by.

What are you whining about? Make yourself marketable or go away. I have learned whatever I needed over the years to to make myself desirable to clients. New languages, etc., whatever it takes.

Now as a member of the bewildered elderly, I simply told my current client I'd do whatever they need. No whining to be working only with the latest tech, no complaining about maintenance instead of new development (I'm doing both at the moment), just agreeing to make their life easier in return for a decent rate.

Clients (and employers) are very happy to get someone with serious skills and experience who'll just shut up and work. I have seen many, many younger "developers" who couldn't design a relational database properly if it meant the firing squad. Who think that a couple of years coding meant they deserved to be rich right now. Prima donnas who flock to the "latest" hot language without being able to do fundamental problem analysis.

Aww, get off my lawn.

Re:The painful truth about freelancing

[KingMotley]

The simple truth is that you need to line up a long term (9-12 month) freelance contract before you quit your day job. Take 50% of your paycheck and sock it away into a savings (or stock market) account. Then you are set. When you are between jobs, draw from that account. When you are working, then deposit into that account 50%. You'll be set with a 9-12 month cushion after your first gig. When you get down to the last 2-3 months, consider looking for a full time job again. Rinse, repeat as necessary (although, I haven't ever had to go back to full-time, yet).

The life of the IT contractor

[jafiwam]

The life of the IT contractor is always intense.

Re:The life of the IT contractor

[plopez]

You probably did not see the movie. In fact, if I had a dollar for every time I chased after a car driven by mad scientist with aliens in the trunk, I'd probably have 3 dollars.

Mostly FUD: Film at 11

[CaptainOfSpray]

Yes, those things listed in TFA are important but they are not that difficult to handle. The worst thing about TFA is that it mostly does not offer the obvious solutions.
1. Getting to work remotely is straightforward. Don't ask for it till you have done an onsite contract first. Prove that you deliver. Then you can be trusted.
2. NDA. Yes, insist on the "standard exceptions" or walk away. There are plenty of other fish in the sea.
3. Yes, you have to educate people you work with. Also true when an employee.
4. Riding out storms. It's not hard to build up reserve money in your business - simply park some of the profit. I always had 6 months worth. You have to park quite a lot anyway, so that you have it ready when tax payment day comes.
5. Keeping up to date. Yes, that's tricky - but you do NOT need to chase the Flavour-of-the-Month like employees do. I only needed to change direction once in 20 years - plenty of earning opportunities always there
6. Reconcile agile and fixed-bid? That's ridiculous FUD. No freelancer is so stupid they do fixed-bid with open-ended requirements, surely? Leastways they only do it once. Every freelancer I have ever worked with was on time and materials.
7. Communications gaps. This is not a threat, this is an opportunity! This is where the freelancer can shine, by doing the internal communicating that the customer is themselves is incapable of. I have done this on every project, and got kudos for being helpful.
8. Time management. Ho hum. Everybody, freelancer or employee, has to manage their time.

Time needed for handling getting requirements and doing proposals? You call that non-billable? No, Dorothy, you roll that into your daily rate.

Re:60% tax

[tompaulco]

You automatically rank in the highest tax category as a freelancer. Of every buck you make, 60 cents go to the state.

You are automatically in whatever income bracket your income qualifies you for, just like anybody else.

You have to keep your own pension in mind, and let us face it, most programmers are not that good at selling themselves. While exceptions are there, once you start as a freelancer, you might start to appreciate those pesky sales droids a lot more.

Pension? BWAHAHAHA. Oh, thank goodness the company has my back. Yeah, right! These days, when you work at a company, you ARE an independent contractor. There is no pension. There is no retirement unless you are paying into it yourself (and they might match you for a few percent). As soon as they can find somebody that they think can do your job for a nickel cheaper, you are out the door. There is no loyalty from the company, but if you aren't loyal to the company and not willing to work 12 to 16 hour days every day, then you are "unprofessional". If you don't give two weeks notice, you are "unprofessional". But they can walk you out the door at a moment's notice, and that is supposed to be okay.