The Contracting Life: Caveats to Cashing In

By Deborah Rothberg  |  Posted 2006-09-29

The Contracting Life: Caveats to Cashing In

At pay rates of up to 30 percent more than most IT professionals, the prospect of becoming an IT contractor makes many tech workers see dollar signs.

Its more than money, however, drawing them in: Its variety. Some find the influx of new and different projects to be more satisfying than the static labor in corporate IT departments.

"I find it more intellectually challenging than a 9-to-5 gig," Wes Trochlil, president of Effective Database Management and an independent consultant, told eWEEK.

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"I have a lot of flexibility and the ability to choose my own projects. If something is not interesting to me, I can say no thanks," he said.

Trochlil had worked for a series of nonprofit companies before becoming an independent consultant seven years ago. Hed seen a big need for the types of CRM (customer relationship management) services he offered, from software selection to implementation and ongoing maintenance, a need that led him to switching paths.

"I felt like I could have a broader impact, and I think Im learning a lot more. I have the opportunity to explore new things that are out there. And because I am consulting, I have access to a broader range of software solutions," he said.

If greater intellectual challenges, flexibility, control over workflow and a broader impact sound too good to pass up, youre probably among the thousands of IT professionals considering turning themselves and their skills into a business for hire.

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But to do so without awareness of the range of benefits surrendered—from stock options, office space, a steady paycheck and, in many jobs, a structured plan for career advancement—becoming an independent contractor could be rough to manage.

eWEEK spoke to five experienced IT contract consultants to find out what qualities and skills they considered essential to a successful independent IT worker. Among a slew of advice, four caveats rang out most frequently.

Next Page: 1. Youve got to crave flexibility and independence.


. Crave Flexibility, Independence "> 1. Youve Got to Crave Flexibility and Independence

IT contract work is, in essence, about being available to fill whatever technical gap your clients are suffering, and rotating between multiple clients. Odds are that a contractor wont be doing the same exact work from month to month or year to year. Yet, not every worker with the requisite skills thrives in this environment.

"This is not for people who dont adapt well to change. Youve got to be interested in researching new ideas," Robert Abate, principal at RCG Information Technology, an Edison, N.J., IT services provider, told eWEEK.

Others flourish under a range of challenges, responding well to change, pressure and even worries about when theyll nail down their next gig.

"I like that I constantly face new challenges. Youve got to have a personality that thrives on pressure or difficult situations, that enjoys the challenge of meeting new customers," said Abate.

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One of the biggest, most glaringly obvious differences between a corporate office job and independent contracting is socialization, as independent contractors spend a significant time working stag.

"Probably the single biggest thing with being a solo practitioner is that you dont have a staff. You dont have other colleagues around. Even though I belong to several different networking groups, its not the same as water cooler chat," said Trochlil.

The type of individual who gets antsy without water cooler chat is prone to lose focus after long hours on their own.

"Theres an aspect of isolation, especially among consultants that work out of their house. Often, theyre not exposed enough to new markets and good ideas [because theyre] not interacting with a lot of companies," Matthew Moran, an IT consultant and author of Turning Technology Into Solutions and The IT Career Builders Toolkit told eWEEK.

Without a boss or corporation telling people where theyre needed and when their work is complete, many contract workers natural tendencies toward becoming workaholics cause them to lose track of the balance between their lives inside and outside the office.

"One of the downsides is work-life separation, as work will creep in and take over your life. Conversely, and especially when you work from home, things from your everyday life can reach in and take over. You need to have good structure," Ted Demopoulos, speaker, author and principal of Durham, N.H.-based IT consulting firm Demopoulos Associates, told eWEEK.

On the flipside, its important to understand the difference between downtime and time off.

"When you finish a job, it may seem like you have some time off, but its more like downtime. If youve got a week or two before something starts up again, this is a great time to get things done and network," said Demopoulos.

If keeping your work momentum going, even when no work is coming in, is a problem, this too will be an issue when running a consulting practice.

"Personalities count. You cant have too high a need for social interactions. Not all successful people can be successful consultants, and the big reason for that is some people are just not self-starters. They dont maintain momentum without external stimuli," said Demopoulos.

Next Page: 2. Youve got to be comfortable in the role of a marketer.


. Comfortable in Marketer Role"> 2. Youve Got to Be Comfortable in the Role of a Marketer

On the need to be your own salesperson, marketing team and constant bulletin board of your services, the contract workers were unanimous.

"If you dont believe that consulting will put you in a sales role, youre not ready for consulting. There is no way around it: Youre going to have to market what you do," said Moran.

Marketing can be done by traditional ad-placing and word-of-mouth, but the most successful contractors dont limit their self-promoting to these routes.

"If you have personal relationships, leverage those. Through my contacts as a teacher, I meet people at a lot of companies. I also do a lot of writing, things which generate conversations that can lead to assignments," Richard Kesner, Ph.D.,

Northeastern University lecturer, and president and senior consultant of Boston-based RMK Associates, told eWEEK.

One of the easiest traps to fall into is to assume that if there is an influx of work now, it will still exist in six months or even a year.

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"I found that I was like a lot of other consultants in that I was immediately successful," said Demopoulos. "I left my job with live contracts and promises of consulting gigs. I started with a bang. After a few years, and this happens to a lot of people, your clients no longer exist."

Nearly every consultant had a horror story about an instance in which they had been caught off-guard by a slowing of workflow.

"You believe that if youre working 40 to 50 hours a week on a project that you always will be, and are not [doing any] sales and marketing and touching back with old clients. Suddenly, that contract ends, and you havent done your homework. Sometimes it could be as much as a year or two that your name wasnt out in the marketplace," said Moran.

Although many get into contracting because they crave independence, partnerships are essential to a successful business.

"Its important to have a partnership strategy," said Kesner. "Im on many virtual teams with people who share my specialty in IT or need it to round out their organizations. To each case, I bring specialization, credentials and seniority in the market. Thats a way of really positioning yourself—Im very busy all year, and I dont do a lot of marketing. Everything comes from these partnerships."

Next Page: 3. You must know how to manage the fiscal end of your work.


. Can Manage the Fiscal End of Your Work "> 3. You Must Know How to Manage the Fiscal End of Your Work

It is essential to your financial success to know what sets you apart from the competition.

"I am very entrepreneurial about this," said Moran. "You are the whole company. Your contract is an agreement between two people, trading value. What is your value? You need to have a coherent value proposition."

Finding something unique about your skill set and what you offer a company is an essential part of the marketing and rate-setting process. Once youve set yourself apart, youve got to stick to what youve decided.

"Have a realistic idea of what your rates are going to be and dont discount them easily," said Moran. "Create a differentiating factor which allows you to show the market value you bring. Dont discount it because you are desperate for work. Let them negotiate you down. Be willing to compromise. But make sure you get a minimum commitment from people, an amount of hours each week you will be able to bill so you can better gauge what your income will be."

Many first-time contractors set their rates too low because theyve misjudged their expenses.

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"A lot of times when people leave a corporate job, theyll take their salary and divide it by 2,000 hours, realize they were making, say $20 an hour, decide to charge $30 per hour and conclude that theyll do just fine. But, they dont realize that you cant bill out 40 hours a week without working 60 or 80," Joshua Feinberg, a West Palm Beach, Fla.-based IT consultant and author of The Computer Consulting 101 Professional Kit, told eWEEK.

Feinberg points to a few useful, widely used income guidelines for those starting out.

"The first thing you want to look at is the utilization rate, the ratio of the hours you are billing to the hours you are working. Billing 30 hours per week, or a 75 percent utilization rate, is a good place to shoot for," he said.

After understanding your utilization rate, its important to understand where your money is going.

"For every dollar you take in, one-third will go to sales, marketing and promotional activities. This money could later on be used for your first salesperson position," Feinberg said. "The second third is administrative costs, from insurance to retirement and FICA benefits, lab equipment, training and certifications. The third part is what you can afford to pay even another technical person as a salary so you can take on more clients."

Finally, many feel that the money spent on a financial consultant to help ensure business is going in the right direction is invaluable.

"Its never too early to find a CPA to be one of your main business advisers," said Feinberg.

Next Page: 4. Youve got to be business-savvy.


. Be Business-Savvy "> 4. Youve Got to Be Business-Savvy

Its imperative that a contract or independent worker understand ITs role within an organization, even more so than if they still worked in a traditional IT department, away from the center stage of an organization. In many cases, this buffer zone allows the stereotypical IT professional to have an attitude toward nontechies.

"A lot of IT people have the stupid users attitude," said Moran. "You run into people who frustrate you because they dont use things properly. Well, your mechanic feels the same about you, and you probably dont feel the need to learn your engines parts so he wont speak down to you. Their job is not in technology."

This wont float in the consultant role. In preparation for any foray into consulting, Moran encourages people to get as much experience as they can in understanding the way businesses operate.

"Very often, IT is in this ivory tower buffer zone. If all youre receiving are change requests, youre not immersed in other departments. This departmental immersion allows you to begin to learn how a business operates and how to work around missing features or bad design," he said. "If youve never had that immersion with the people using your product, you very well might have to take a business class. Technologists must learn to speak business."

Although Moran views the IT role as primarily business-supporting, he believes insightful technologists will find ways to leverage this to their advantage.

"Understand your role in the organization and that it really is a business-supporting role. On the other hand, youre in the unique position to impact positively in the company, to be their hero. You could be the person who makes all their troubles go away," said Moran.

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