Notes of a "retired" consultant

Over a period of about two decades of my life, aside from one three-year period as an employee, I ran my own business as an independent software consultant. I was only reasonably successful at it as measured in money, but I found it very satisfying. For twenty years, I was my own boss -- which sometimes meant taking direction from others with fewer legal protections than I would have had as an employee. But it allowed me to focus on the task to be done, with a clear goal and finish in view, and to know that each hour I was being paid for was a productive one. It also let me take time between well-paying projects for other projects that interested me, such as the rather unsuccessful EightyRez and the spectacular flop Time Czar.

In the end, the economic downturn of the 00's and the steadily rising cost of health insurance made it uneconomical for me to continue as a consultant. If I had sales skills to equal my technical skills, I might still be succeeding at it. But being in my fifties now, I find it more comfortable to have an employer making my health insurance affordable.

Now being Older and Wiser (LLC), I can offer some advice to others considering a similar career. No guarantees, and I'm not responsible for incidental or consequential damages of following this advice. In some cases I'm advising you to do what I did, in other cases to avoid my mistakes. I won't necessarily tell you which is which. If you know me personally and you're curious, ask me privately.

First, last, and always, remember, it's a business. If anyone talks to you about being a "contract employee," terminate the discussion. Such a "client" wants to avoid the responsibility of taking you on as an employee, but won't give you the respect due to an independent business. Approach potential clients as clients, not as no-frills employers. By doing business with a customer, you give up numerous legal rights of employees; you have to depend on your own ability to maintain a proper business relationship.

An important part of getting the respect you'll need is to develop a specialty. This means spending time and money acquiring the necessary skills. In addition to a computer and development software, you may have to spend money on equipment and developer subscriptions. Developing a product, either to license to the client or to provide a unique service, can be a good plan.

Don't be afraid to charge a good rate. You're missing various benefits of an employee, and paying double Social Security. But these aren't the reason a client will want to pay you more than an employee; you have to show that you can fill a need. You have to be able to come in and complete a task. You have to be willing to put in lots of hours when needed, knowing that you'll be able to take free time later.

Always read the contract, and be prepared for serious negotiating. I've been handed some ludicrous contracts and, in some cases, had to walk away from the negotiations. For instance, you might get a contract stating that the client owns anything you might think of which benefits him. Such contracts aren't unusual with employees, but are intolerable in a business relationship. On one occasion, I was handed a contract that required me to do an indefinite amount of work over a specified time period and then fix all bugs for free. If I'd signed this, there's no telling how long the client would have been demanding free work from me. A support agreement for a specific task is one thing, a free-work extension to an hourly rate another entirely. (That was one of several absurdities in the contract; when I presented a list of unacceptable features to the client, they immediately terminated negotiations without another word.)

Always take a copy of the contract to read; never let anyone pressure you to sign on the spot. If in doubt, get a lawyer to review it. If you can, get the client to sign a contract your lawyer has drawn up.

Forget about agencies, unless you can find one that recognizes that you're running a business and treats you accordingly. Most of them are just "contract employee" marketers. But joining with others in a consulting business may be a good move; you can share office space, join together in getting accounting and marketing services, and complement one another's skills. Networking skills are vital; keep in touch with other consultants and join with user groups. Other people in the business will often be your best source of leads, especially if you provide them leads which you can't use in turn. And being the person at the user group who can answer the tough questions will certainly help your business reputation. Doing these things is part of the hours you put into your business, even though you aren't being paid for it.

Either study up on the tax laws, or get a good accountant. You probably can't afford a bookkeeper, so you'll at least have to learn how to maintain records good enough to satisfy the IRS. Pay special attention to the home office and personal computer deductions; the government has created major bookkeeping hurdles to supporting these deductions in an audit. But if you can do it right, a home office can give you a huge tax break. You'll need all the breaks you can get to make up for that double FICA tax.

Remember that being fired is part of the job. A client may just not be able to go through with the project. As long as you've been treated fairly, keep a good relationship with the client going. You may even want to do the close-out work for free if your client is genuinely stuck for money. Few consultants succeed without repeat business and good references.

At this point you may be wondering why anyone would want to go through all this. The truth is, most people wouldn't. But if you're the kind who wants the satisfaction of running a business, finds pleasure in going into a place and solving a problem, and doesn't care for protective cocoons, it can be for you. And if you do it right, it can be a successful living.

Last updated December 27, 2004

Copyright 2004 by Gary McGath

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