I just read a post by Joel Oleson that outlines several kinds of “gotchas” that independent contractors frequently face, including having start dates get shoved off indefinitely, having to wait to get expenses reimbursed, and never quite knowing when your paycheck will actually come. Having been independent (with the exception of two full time gigs totaling about a year and a half) since 2003, I thought I’d post a little about how I got here, and lessons I’ve learned.

How I Became an Independent Contractor
As they say, necessity is the mother of invention. Or, in this case, misery was. I was working as a W-2 contractor at a client in 2003, and I was getting paid quite handsomely for someone in their mid-twenties, doing CMS on a highly-visible public web site. It was one of those “perma-temp” positions where I could have easily stayed on at least another several years. A recruiter contacted me about a 3 week position in Seattle, and I thought he was crazy for wanting me to leave a cushy job for a 3 week contract. However, my current client was so stressful that I actually went to the doctor thinking I had an ulcer. At that point I decided it was time to take up the recruiter on his offer.

It was 2002, and I had heard numerous horror stories of dot-com workers being unemployed for a year or more, so I was a little worried, to say the least. After the first 3 weeks, my contract got extended. Then it got extended again. I was in a constant state of stress, thinking I was permanently 3 weeks away from unemployment. Ultimately, the 3 week contract lasted about 6 months. 3 weeks after that contract finally did end, I got another contract with the same Mom and Pop consulting company. Then I got another contract. And another. After several years I had a track record of not being unemployed for any great period of time, and I decided it wasn’t as risky as I originally thought. (I have to add, though, that as a single woman with only herself to support at the time, the level of risk was decidedly less than what others out there take when making the same decision.)

A turning point for me came when I interviewed with a technical training company, and they offered me a salary about a third less than what I thought I could get consulting, so I suggested they pay me that salary for 9 months a year, and I would consult for 3 months of the year, keeping my skills “”fresh. They looked at me like I had two heads and I realized I had made a mental shift from being an employee to being independent. Why? One of the first lessons I had learned once I got on my own was how to negotiate.

Put another way, I’ve met people who say, “How could you contract? I could never do that. I wouldn’t want to do that!” I realized I was different the day I felt like answering back, “How do you do what you do at that full time job? I could never do that!” I’m not saying either way is better, just saying I slowly became aware of a mental shift within myself about my attitude towards being independent.

<Lessons Learned
Some of these will seem pretty obvious, but take on a whole new meaning when you have to exprience it.

  • Cash flow is inconsistent.
    “Well, obviously,” you say. I find this can be one of the largest mental hurdles to overcome, however. I’ve had numerous conversations with my spouse along the lines of, “How long do you think it will be before you get another contract?” I always have to reply with an answer of, “I don’t know. It’s usually ‘x’ amount of time, but I can’t promise that.”

    For folks who are used to having a certain amount of money each month go towards expenditures and another amount each month going towards savings, in my experience, it has not worked like that. When I make money, I make more than I need. When I’m not working, I make $0, which means I’ve got a negative cash flow. This is where forecasting and a track record can come in handy, to be able to forecast earnings and spending over a longer span of time than just several weeks or a month. The good news is, the longer you’re independent, the more “data” from past experiences you have to work with.

    Bottom line, when you’re working, make sure you’re stashing the cash in the bank, because you’ll need it for those in-between times.

  • Negotiate your rate
    I’ll share several stories that illustrate the value of negotiating.

    I charged the same rate to all my clients for several years. Since it’s not considered polite to talk about your wage with others, I didn’t really have any idea if my rate was appropriate for my skill set or not. One day a fellow contractor asked me what my rate was during a private conversation and I told him. He said, “You could charge probably 25% more than that.” I responded, “Well, but I like having work. If I upped my rate, it would take longer to find someone willing to pay the higher rate.” He pointed out that if I charged 25% more, and it took 25% longer, I was breaking even and working less. As obvious as that sounded, it had never occurred to me in such simple, mathematical terms. My fear of unemployment was driving my rates down unreasonably.

    Getting back to that contract I had in 2002, I actually started the contract out getting a certain amount per hour, and during the contract was able to negotiate a higher rate. I threw a number out to the company I was contracting through, and expected them to half the difference between my old rate and the new one I had proposed, or do something similar. Instead, they pretty much gave me what I asked for. I was totally shocked. That day I learned that there’s so much we don’t get because “we ask not”. (I’m not sure, but I think women are not as forth-coming in asking for what they want as much as men are. Having the guts to ask, at times, has to be a learned skill.)

    The worst that can happen in most cases (with exceptions, of course) is someone can say “no”.  That being said, if they say no, you have to be prepared to walk away from the deal. It’s your prerogative to ask, and theirs to decline. There have indeed been times when I experimented with raising my rate and after getting too many no’s I decided I was pricing myself too high, and I lowered the rate again. It’s a dance.

    I know this is a very private issue and I’m putting a lot of myself out on the line personally to blog about this, but I want to share this because it’s been difficult for me to know what to charge without going around and asking people. If you work for a company full-time, you negotiate once and then you get pay raises. When you’re a contractor, you negotiate at the beginning of the contract and you don’t (typically) have the chance to raise your rate during the course of the contract, so it’s important to set your price point correctly from the get go. It takes practice and confidence.

    And of course, you’ll get further in your negotiations when there’s a level of trust between you and the person you’re doing business with, that neither of you is trying to take advantage of the other, (i.e. don’t be an ass and claim you’re worth more than you are. You will regret it later.)

  • Changing areas of expertise can be hard
    I worked with CMS for 4 years, and caught wind of the fact that the next release would be a part of SharePoint. I decided it would be a good idea to try to start getting SharePoint on my resume, even if it was 2003 and the “pre-CMS” version, so that people would hire me for SharePoint work when 2007 was released, since the average joe wouldn’t necessary know that CMS was actually a part of the new SharePoint, since “CMS” would not be in the name of the new product.

    It took me a full year and a half to get on a SharePoint project. People wouldn’t hire me because, “You’re a CMS person. Why would I hire you to work on a technology you have no experience in?” It’s the whole chicken-and-the-egg thing. When you work at a company, they realize it’s in their best interest to get you ramped up on new technology so you’ll be marketable when the new technology comes out, so they might put you on a project as a junior level consultant, or something similar. However, as an independent consultant, I found it was hard to get any sort of credibility in a different technology.

  • Not having consistent co-workers has pluses and minuses
    There’s not much to say here other than the obvious: you know that obnoxious person in the next cube? You’ll find you’re much more patient with them because you know in several months you’ll probably never see them again. But the same goes for that really bright and talented person in the cube on the other side.

    Since you won’t typically have people who do the same thing you do surrounding you for the long term, it’s important to form relationships with people you can learn from, so that even after you’ve left a contract, you still feel like you can ping them with questions. This has been one of the more difficult aspects of being independent, for me. (At first, I thought to myself, “Being the only one on this project means no one can tell me I’m wrong! I like this! It strokes the ego!” But after a while I found myself thinking, “Holy cow! What if I’m WRONG?! No one here does what I do! Who will tell me if I’ve totally screwed up?”) Luckily, the advent of the “social networking” technologies has greatly reduced the isolation that can come from being independent.

  • Training is tricky
    Whereas a company can budget a thousand dollars to send you to training, plus give you a week off work, if you’re on your own, you have to eat both the cost of the conference plus the amount of time you’re not billing, (which can sometimes be the larger of the two numbers.) Amazon.com suddenly becomes much more attractive than other training options. And when you do splurge on a conference or a class, you’re more likely to squeeze it for all it’s worth, (which is a good thing).

    On another positive note, I’ve found that if I decide I do want to take time off to learn something new, I don’t feel guilty about charging a company for that, since I’m not billing for that time. Bottom line: I get to be the one who makes the call about what is best for my career. If training is worth it, I’ll pay for it, and no one can tell me “there’s not budget for it” (except for me.)

  • Be flexible about time off
    One of the benefits people often attribute to “being their own boss” is “having control of their schedule”. As Joel so aptly pointed out in his post, you might get time off, but you don’t always get to choose when you get that time off. You might have thought the project would start this week and end four weeks from now, so you can take that week-long vacation when it’s over. If the project gets pushed off a week, you either have to reschedule your flight, or tell the client you won’t be available and risk them walking away from the contract. (This gets back to good negotiation skills!)

    I remember a trip to Cancun I took, which I literally booked 2 days in advance. I knew I had the next week free, and I didn’t know when I would have free time again. Yes, I paid an exorbitant amount for the ticket, but it was the only way I knew I would actually get a vacation in, without losing a contract somewhere down the road, or have to take a “loss in pay” for not working a week, when I knew I’d already be “unemployed” for that immediate week.

    On a related note, contracts nearly always extend beyond their original dates, in my experience. If you have another offer for a project at the end of the “official” date of your current project, by all means, you have every right to let your client know your end date is a hard date. My point is that it’s often foolish to plan a big trip or something similar based on the end date of a contract, since that date often moves. I find it better to tell my client from the very start of the project, “I need this particular week off.” That way, if the project is over, no worries. If the project continues, you’ve set expectations from the very beginning.

  • Maneuverability is good
    Often times, people in great big companies are only allowed to work in their “region”. I find that by working independently, I have the freedom to work with multiple companies in a city, or multiple groups within a large company, and thereby have a lot more options to find work than someone who has to work within the bounds of a particular consulting company. I did three projects for HP: one on the west coast, one in the midwest, and one on the east coast.

I used to live in Dallas and I flew somewhere else every week for many of my projects. Last August I started working exclusively in the St. Louis area, and I have to say that I’ve truly enjoyed working with a group of very talented SharePoint developers, including (I’m going to name names now) Todd Kitta, Matt Bremer, Mike Beatty, and Matt Holt. One of the most frustrated things for me about working as a contractor has been that I often have felt like I have worked in isolation, on projects all over the country. In St. Louis I’ve found a community of consulting companies who truly care about their clients, who I can partner with, and fellow SharePointers I can learn from. Who knows? Maybe I’ll give up my “independent” hat one day and partner with some of these like-minded folks. In the meantime, I’m enjoying the ride.

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Owner of Savvy Technical Solutions

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