Thursday, June 29, 2006

Why be a consultant?

In the last week a few different people have asked me about the pros and cons of being a consultant, so I thought I'd start the conversation by posting some thoughts here.

First, the pros. The most important thing for me is increased freedom to choose what I work on. I keep in touch with quite a few people in IT, particuarly in Melbourne, and I frequently hear about interesting projects. As a consultant, I get the chance to be involved in them, while as an employee I'm restricted to what my current employer is working on. I intentionally said "chance to be involved", because of course some of those aren't using consultants, and some are using consultants, but for some reason I'm not suitable. Even so, right now there are plenty of opportunities. When you're working inside a company, not only are there fewer choices, but most companies only present you with one - the one they'd think you should or would most like to work on. You rarely get given choices at all.

I can also increase the choices available to me by changing by rates. At the extremes, it would be easy to set my rate high enough to not get any work at all, and if I said that I was willing to work for free I'd have lots of choices. There's a happy medium somewhere in between, and it's up to me to find it, taking into account how interesting the work is, how much I need or want to earn, and anything else that seems appropriate. Some people say that you should always charge the same amount, and I do have a standard basic rate, but I think it would be self defeating to let something I really wanted to work on slide by because we couldn't find an agreeable rate (on the other hand, there's always a bottom line below which I'll just walk away and write some articles or work on my own software). In principle an employee can "change their rate" as well, by changing their salary, but it's a little more complicated for an employee!

Another pro is the treatment of intellectual property. To be clear upfront, I've got no interest in intellectual property that I'm not entitled to, or that I created for a client while I was under contract. However, when you're an employee the common law on intellectual property is quite broad, and covers anything related to your employment, even if it's something that you do outside of working hours on your own equipment. Many companies don't seek to enforce their rights, but some companies do, and you can easily end up in a grey area where a previous employer might seek to enforce their rights to something successful. It's not an issue to me right now, but I can see how it could be, and it was one of the drivers that lead me to consulting in the first place, many years ago.

Flexibility of working hours is another pro. Not so much on a day to day basis, but over the course of a year I can to some extent choose how long my contracts are, how long between contracts, and whether they're part time or full time. In the next 12 months I hope to spend more than the standard four weeks with my family. This needs to be balanced against how much I want to earn - it can be hard to say no when there's work available.

Because one of the downsides, probably the major one, is less predictability. When my current contract ends, I can't be sure that there will be more work available - particularly interesting work - starting at the right time. In some sense, there's more flexibility in this area when you're an employee, since your employer may choose to take you off one project early to start you on another one. That's not really acceptable behaviour for a consultant, at least not in my view.

Another con is that you need to be looking for work more often, almost continually. You need to pay more attention to keeping in touch with your network, broadening it, and establishing and maintaining a reputation. I think this is called marketing :-) None of this is paid work, and it can be time consuming. I view writing articles, presenting at user groups and conferences, and even writing this blog, all as parts of my marketing efforts. I need to approach them with more discipline than if I was an employee.

A logistical concern is that, at least initially, the timing of your pay can be less predictable as well. As an employee, you got paid a fixed amount each month, probably on a fixed day. As a consultant, you do some work, you invoice for it, then you wait for payment on the invoice, then you can pay yourself. The invoice may be for a small piece of work, but it might also be for a larger piece of work. The client may pay promptly, or they may drag their feet a little. Many companies quite reasonably don't pay until 30 days after invoice, which even on a monthly invoice can be 60 days after you first started the work. I handle this by paying myself a fixed monthly wage, leaving money in the bank when there's an excess, but the transition from employment to consulting can be awkward.

When you're a consultant, you also need to do everything yourself. I've already mentioned marketing, but you also do sales, accounting, web site construction, email configuration, do your backups, pay bills, produce invoices, create your own business cards, and anything else that needs to be done. To do your accounting, you probably need to understand a little more of the tax lawy than you do right now - for example, about alienation of personal services income. Doing all these things yourself can be a huge change from working in a large company with lots of support staff. The corresponding plus is that you get a lot more insight into how business works, and when every dollar comes out of your own pocket, you become more conscious of costs and you get a better insight into why your managers were so concerned with restraining expenditure.

There is probably a lot more, but I need to head off and do some other business now. The last thing I want to bring up is that I'll try to remember all these things as more people get involved with Cogent. People need to be able to choose their work, change their rates, be flexible with their time. I don't want people working with Cogent to leave because they're not satisified in these areas. It will be a different kind of company *s*.

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