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[Discuss] how to contract correctly?

On 8/28/2013 9:22 AM, Eric Chadbourne wrote:
> Good morning most awesome BLUers.  Question for you contractors.  How 
> do you bill your clients?
> About a month ago I resigned from my job, paid my bills a few months 
> in advance, and have decided I want to and be an independent 
> contractor.  I have never done anything like this before.  So far I 
> have been very fortunate in picking up more business than I can handle 
> just by talking with people and using craigslist.  I've been charging 
> by the hour though I notice clients seem to prefer charging by the 
> project or milestone.  What's the best way to go about billing folks?  
> Increments of a certain dollar amount?  How do you do it?

Whoa! Stop! Danger Will Robinson!

Here's a list of things you need to do right away:

 1. Get some competent legal advice about the risks you're accepting by
    being a Sole Practitioner without benefit of a corporate shield.
    Right now, a single judgement could encumber your future earnings
    for years and cost you thousands of dollars in legal fees just to
    fight off a "nuisance" suit.
 2. Consider incorporating. Many attorneys charge over $1,000 for
    forming corporations, but there are deep discounts available if you
    shop around. Just having a corporate shield will insulate you from
    enough risks that it's often worth it.
 3. If you don't incorporate:
     1. Take steps to protect your personal assets. Something as easy as
        declaring a "Homestead" can give you important legal protection
        if you own a home.
     2. Get prices and decide on Error and Omission insurance. Frankly,
        if someone is thinking of bringing a tort, simply knowing that
        you have an insurance company who will fight for you will
        prevent most nuisance suits.
     3. Think about using a service bureau to provide you with
        accounting, sales, insurance, and other things you may not want
        to do yourself. They're not cheap, but some will "hire" you as a
        W-2 employee and assume many of the risks that you'd otherwise
        need to address by yourself.

> A second concern is if my luck does not continue and I have to go 
> several months without any clients.

Save all your money, and get ready for a boom-and-bust lifestyle which 
will follow economic cycles.

 1. Have a talk with your landlord and/or roommate(s), and make a deal
    to pay when you're flush and ride when you're not.
 2. Candidly assess your needs and habits, and try to discard
    /everything/ that is not essential to keeping you warm, fed, and
     1. Pull the plug on cable TV or satellite. Do it now, and bank the
        money for a rainy day.
     2. Arrange to share an Internet connection. Set this up /NOW/,
        before you have to: my neighbor's WiFi was my only connectivity
        for months during one really low quarter.
     3. Learn to like oatmeal a lot. You can survive for months on a
        diet of rice and beans, and spend less than twenty dollars a
        week doing it: it's good for your weight, too.

> How do you stay busy?

I'd suggest that you get involved with an open-source project, but that 
won't pay the bills. ;-) As a businessman, your problem will never be 
"staying busy", but rather "finding time", because when you're /not/ 
doing technical work, you need to work the Rolodex and line up your 
/next/ job, /and/ the one after that. Trust me on this: you're not a 
techie anymore - you're a salesman, and it's the hardest job you'll ever 
have. You'll need to rehearse effective sales tactics constantly, 
because just meeting someone in a hallway won't get you remembered: I 
used to offer free inspection and cleaning for one server or PC, and I 
would let /everyone/ know that my business phone number was on the 
sticker on the side of the machine, and I got more calls from those 
visits than from any other tactic.

Of course, when you're not on the phone selling yourself, there will be 
time for bookkeeping, for keeping up with new releases and the latest 
trends, and for rehearsing your elevator speeches. You can fill in the 
minutes between show-up and being admitted to a business by looking up 
other firms in the building, and thinking of the pitch you'll give 
/them/ on your way out. Get an easily-remembered domain name, and recite 
it endlessly to anyone who will listen, everywhere you go.

Oh, and you won't miss the TV. You won't have time.

> Do you partner with other contractors and share when you have too much 
> work?

You'll need to have a list of other companies who will subcontract to 
you when they're in need, and it's best to form alliances /before/ your 
phone stops ringing. Jack Boyle at Cleverminds is a square shooter, and 
you'll do well to keep in touch with him and anyone else who might need 
something done, or who might be able to recommend you.

Good luck, and good hunting.


Bill Horne

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