The Army of the New Independents

http://jacquesmattheij.com/the-army-of-the-new-independents

by alltakendamned • 11 years ago

64 31 11 years ago

noelwelsh• 11 years ago

I don't know that under-charging small companies last all that long. When we first started out we were greatly undercharging, and after a few years almost went under. Luckily for us we figured it out just in time.

Nobody should aspire to be a replaceable unit in any case. If Joe down the road can replace you, yeah, it is going to be tough being a small company.

There is another side to this that I think is worth exploring. For a long time capital has had a significant advantage over labour (see rising inequality). I think we might be at the inflection point where the capital costs of so many businesses are dropping to the extent that capital's advantage is eroding. I'm thinking of bootstrappers and so on. Obviously capital still helps, and the relative advantage isn't uniform across all sectors or industries (if you want to do something for consumers you probably need capital; likewise space exploration or bio-tech), but I think a sizable number of people are in the situation where they can own their output.

Joeboy• 11 years ago

The only way I'd ever make it past the "ballpark figure" requirement is by working in finance in London, which I don't really want to do.

I mostly work for less than that, deliberately work maybe 50% of the time, and consider myself embarrassingly well off compared to most of my peers. I don't think my plumber friend earns as much as I do, but I'm not bothered by the idea that he might.

I am down with the idea that we should avoid racing to the bottom, I don't think "union" is a dirty word, and maybe there's even some kind of argument that I have an ethical responsibility to work full time even though I don't want to. But from where I stand this piece seems a little divorced from (my) reality.

Maybe it's something to do with being called Joe.

dasmoth• 11 years ago

I don't understand the idea of "...an ethical responsibility to work full time" at all. Why shouldn't the amount of labour you want to sell be open to negotiation?

The fact that it's relatively hard to find "normal jobs" in my field in formats other than full time is one of the factors that makes me seriously consider the jump to freelancing.

BSousa• 11 years ago

I'm probably in the same place as you. Had very great offers (and I mean really great ones) in London for working in finance.

I ended up contracting/freelancing instead for a nice company that still pays me decent money (less than half of the London one) and is actually doing something I believe in and, as you, makes me better off compared to my peers, but also allows me to live in an amazing place and have a much better quality of life.

walshemj3• 11 years ago

£70 an hour is a £560 day rate which is a tad high but 450 for generic programming is quite achievable out side of finance of course its hard to avoid getting caught in the IR35 trap.

thaumaturgy• 11 years ago

This pretty well matches my personal experience, fwiw. I was pretty content as a youth to have a full time job working for someone else, then I saw a couple of really good, young, skilled people get unceremoniously "let go" one day. A few years later it happened to me, and I ended up bouncing around from job to job for a while before starting my own business.

I didn't start my business solely because of employment issues. I was still employable, I could've gone and gotten another job. I wanted to be able to provide something to lots of different businesses at the same time, and striking out on my own seemed like the best way to do that.

But, seeing other people lose their job and losing my own at one point completely destroyed any belief I had in job security. I naively believed at first that only "bad" employees get fired; as long as you were valuable to your employer, your employer took care of you.

So launching my own business seemed like better job security. Except, that was naive too. I really didn't understand all of the benefits of employment: paid time off, a schedule, mostly reliable income, all of the resources that a larger business has, and most of all, the ability to leave work at work and go home and live an entirely different life.

I think the social contract between employees and employers is pretty broken in the U.S. at the moment. Employees are spending way too much time at work on Facebook and Reddit and other things; employers largely aren't treating their workers as anything other than human livestock. But I still wouldn't recommend getting into business for yourself to most people. It's tremendously difficult.

A little less than 10 years later, and I'm doing OK and my business now employs other people and is still growing -- very, very slowly -- but I'm still attracted to a stable, reasonably well paying job.

beachstartup2• 11 years ago

destroyed any belief I had in job security

your story exactly parallels mine. living in cold, harsh reality for the past few years has really opened my eyes to a lot of things, including many philosophical questions about what society is, how it works, and how it's broken. it has also taught me to respect a wide variety of professions that i once thought were bullshit.

basically, a lot of these societal 'truths' (about jobs, marriage, school, money, housing, government, etc.) that we accept as really just projected ideals that dress up reality for mass easy living. these ideals (they're myths, really) have worked for decades and are beginning to unravel. just look at the state of employment, gender relations, inequality, debt, financial shenanigans, civil liberties... it's a circus of epic proportions. yet people are so afraid of breaking out of established tracks until they're forced against a wall. it's a complete mind fuck.

kind of a dark take on it, but really it's just a transitional phase, it's not the end of the world. i think a lot of people feel a general anxiety even if they can't articulate the concern. this, even though the economy is ostensibly recovering.

having said all that, i would never take another tech job ever again with anything less than $10M in the bank, a very small (but real) possibility. my tolerance for bullshit from any superior would be exactly zero. sorry, can't do it.

and as i'm sure you know part of 'seeing the truth' is realizing that your business could fail in a matter of weeks - you sound like the kind of guy that is also mentally prepared for that. if everything were to go south for me tomorrow, i would rather work as a bartender or whatever somewhere warm and cheap and just live out my days being a beach bum. i don't need a company or employer to work on my own hobbies. truth.

jqm• 11 years ago

You would still take a job if you had 10M in the bank? I might.. but it wouldn't be for the money. It would be out of interest (which is already what I do).

dognotdog• 11 years ago

I'd like to add that engineers/developers can hardly do the jump to being independent in the described situation, but there many lower paying jobs where this is being done, too.

Also, I am compeletely amazed by how idiotically this is handled by management with respect to software development, where the code can have negative net worth without the guy who developed it, and knows its ins and outs. And people put on contract work will eventually leave these untenable situations, especially if they are competent.

Call be bitter, but I am quite disheartened when I see how much opportunity and talend is squandered for some temporary short-term gain, like "reducing" fixed costs by outsourcing.

wheaties• 11 years ago

I had this exact conversation with a friend over beers last week. It basically went like this, "You're only charging X per hour? I make that now as a full time dev with health insurance, a 401k and the expectation that I will have a job next month. You're under pricing your risk." He then asked me to buy the next round. Cheeky bastard.

jacquesm4• 11 years ago

the expectation that I will have a job next month

That's an assumption on your side. Likely it will pan out for the near future but be careful about relying too much on that assumption.

He then asked me to buy the next round. Cheeky bastard.

Hehe. That should remind you not to brag ;) I hope he got something useful out of it.

wsc981• 11 years ago

There's an acquaintance of mine working as a freelance (ZZP) C# or Java developer for Bose in the Netherlands. I always try to encourage him to either switch jobs or negotiate a higher tariff. He currently earns only 35 EUR an hour (excl. VAT) but he thinks it's a decent income. I really think no developer in The Netherlands should ask anything below 50 EUR an hour (excl. VAT) and even that is quite low.

P.S.: I think one mistake many freelancers make is using the word 'wage' instead of 'tariff' - in my mind it has a very different meaning and to me I feel less powerful / in control if I would talk about e.g. a 'fair wage' with a prospective client.

dutchievandyk• 11 years ago

I get to charge 75 euro per hour for php development. Java / C# should command at least 100 euro per hour in the Netherlands.

jacquesm4• 11 years ago

Agreed. He should at least triple his rates. And if Bose won't have him at that rate then plenty of others will.

whoisthemachine• 11 years ago

One of my first experiences out of college was with a company that did this. It was pretty tough to watch a bunch of people I had worked with get laid off and then ironically asked to work as contractors. Most of them did not turn around and start working for the company as contractors even though the offer was made, mostly out of spite. Some of them did become independent contractors, though.

jacquesm4• 11 years ago

Out of spite I'd jack up the price significantly.

mooreds2• 11 years ago

I left a company in the early 2000s (quit, not laid off, if it matters). Then they needed help with something that I'd done. I was happy to help, at the highest hourly rate I could imagine asking for (probably wasn't enough, I was only a few years out of school)--paid up front, thank you very much.

I waited to start working until that check was in my hand.

I had friends who worked for that company as contractors who ended on a list of creditors. I wanted to avoid that fate.

brudgers• 11 years ago

The 50% rejection rate over pricing is reasonable given the degree to which Jaques has established himself. For a newly minted independent, the percentage of potential clients who will only pay ~$0 is much higher than for someone with a strong reputation among people who have a strong sense of the business value expertise adds.

The sorts of leads a new consultant gets are more along the lines of can-you-do-me-a-favor personal connections. There's much more "You're a jerk for expecting me to pay money" and "I didn't think a suspension bridge across the Colorado Canyon would cost more than $500."

New independents deal with amateurs more frequently than is typical for established consultants. The race to the bottom is a function of that, not always ignorance. Pricing is a good way to get to "No" quickly.

For a newly minted independent, "no" is still better than bad projects which end with not getting paid. The critical rejection rate for a newly minted independent is the rejection rate over retainers. Sure with your former company, so long as they are not downsizing because of a financial shortfall, then payment down the road might be acceptable. But with amateurs, retainers are critical both in terms of financial safety but for screening the amateurs who will view you as a professional from those who will treat you as a rube.

kfcm2• 11 years ago

Anyone who thinks $140/hr (or whatever per project rate is) is too high, consider the following.

My CPA in a Midwest/Great Plains rural town of 10K people charges $175/hour. Her firm has 5 other CPAs. The town has around 20 CPAs total.

My attorney charges $90/hour for advice only. Nothing else. $90/hour just to discuss a problem (pro rated per minute) or BS. If there's real work to be done (contract creation/review, legal issues, etc), it's more. He's in a town of 2K people.

Auto dealers in towns/cities ranging from 5K to 200K population are charging between $90-120/hour for mechanic's labor. Not including parts/supplies. Oil changes at many dealerships range from $45 to $70. (Oil changes at mom and pops run $25-30.)

Dentists? I just saw an ad for a newly opened dental office in a metro area. Special for cleaning, x-rays and such was like $75 from a regular rate of around $350.

Electricians? $80-100+/hr easily for a good journeyman or master. Not including service call charge. That was in 2011. ( A good electrician rate thread from 2009: http://www.electriciantalk.com/f15/when-did-you-last-raise-y... )

$40-75 to mow your lawn. $40-50 to clean snow from your driveway.

Technologists make things which can bring in (or save) hundreds of thousands to hundreds of millions of dollars in revenue, but seem to consistently undervalue their worth.

markyc2• 11 years ago

none of those guys can be easily outsourced overseas though

kfcm2• 11 years ago

That's not entirely correct. Accounting and non-trial legal positions can be outsourced overseas (cf, http://www.cpapracticeadvisor.com/article/10741227/what-tax-... ), or H-1Bed. Most of the other positions can have the "cheap labor" come here (eg, legal or illegal aliens). Most of the billable rates don't go to the workers of companies which do this though.

But this digresses from my original point. There are independent business owners who do charge the same or more than IT workers on a per hour basis. They know the value of their work (customers either don't know how to do it, or don't want to), and charge accordingly.

deciplex2• 11 years ago

I'm pretty sure your comment was tongue-in-cheek, but I'm taking it at face value for the hell of it:

Horror stories of outsourcing cheaply overseas, where doing it ended up delaying the project and sending it way over budget, are so commonplace now that you really need to define 'easily'. I would reword your statement:

none of those guys can be recklessly outsourced overseas though

...but it no longer supports your point :-)

raintrees• 11 years ago

Passing on costs is a long term pattern. Relatively recently (40 years or so - I did say 'relatively') United States' Congress' changing of the defined benefit (DB) plans to defined contributions (DC) was a prime example (ERISA - think 401K here) and now some in the USA's House of Representatives are trying to get out of bailing out State's shortfalls for State's DBs: http://www.gpo.gov/fdsys/pkg/BILLS-114hres41ih/pdf/BILLS-114...

Not likely to pass, necessarily, but a sign of the times.

Citizens of countries with Central Banks live in debt-based economies, and thanks to many of the recent gyrations to "correct" some of these economies, more currency has been created. To me, this is another reason to consider raising rates even higher, to offset the weakening currency.

mooreds2• 11 years ago

I think this is a great list of the costs of being independent. However, he did skip over the benefits, which are:

Closer ties to the market--you are much more employable as a contractor, because you have to be! You have to seek out and sell yourself far more than an employee does, which means you know who is buying what.

The ability spread risk across several clients. This is not always possible in the same week or month, but if you are a contractor and are only working for one client for months at a time, you aren't a contractor, you're an employee with no benefits. Seek out other clients and spread your risk.

The flexibility to work when you want to work. Both in the small (when you want to start working each day) and in the large (when you want to spend down some of your savings in vacation/tech exploration/etc and not work for a while).

The ability to turn down work. Don't discount this as a benefit. If you are an employee, your choices are 'do the work you are assigned', 'ask your manager for different work' or 'walk'. If you are a contractor/independent, you have much the same choices, but 'walking' is far less risky, due to the your awareness of the market and your multiple clients (see above).

DanielBMarkham• 11 years ago

I aim for roughly 50% rejections based on the rate I’m charging,

Shoot for 90%. As long as you keep pumping the funnel with more conversations, a lot of "nos" are just noise on the way to a "yes"

One note here: in most cases, being a 1099 is a much more honest relationship than being an employee. Some of the saddest folks I've seen in my IT career were extremely smart people who thought they had security in an IT job. Such a thing does not exist, no matter what they call you.

walshemj3• 11 years ago

What the article doesn't mention that the tax authorities in some country's don't like some types of self employed contractors.

Ask a UK based contractor about IR35 and you will get an earful - though of course lawyers and accountants are allowed to continue as before - got to keep those greasy engineers in there place old chap.

jacquesm4• 11 years ago

I'm not familiar with the situation in the UK though I know some freelancers/contractors there, can you explain a bit more about this?

walshemj3• 11 years ago

For certain types of self employment typically IT consultants HMRC unless you pass a lot of hard to pass tests you treated as an employee for tax purposes.

Self employment can if done via a Limited company reduce your tax rate drastically - but of course it was only selectively targeted self employed accountants and lawyers can carry on as before.

http://en.wikipedia.org/wiki/IR35

Most IT consultants work through umbrella companies to get round some of the disadvantages -but you cant make use of some of the tax advantages a re al elf employed contractor can.

The Army of the New Independents

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