Being an Independent Consultant

Back in my independent consultant days I remember reading the following article by Janet Rhul. The message board she posted it on is no longer active, so hopefully she won't mind me reproducing it here.

For those who stop by here who wonder what authority I have to spout off on the subject, I'll explain. After 7 years of filing schedule Cs in 1995 I started a truly entrepreneurial venture, Technion Books. To do that I had to put at risk a significant amount of my own money. I had to come up with products the public was willing to pay for. I had to learn how the distribution channels worked that would get my products to the customer and I had to make the customer aware that my products existed and that they would be worth their money.

It took me a couple years to get things working completely, but I pulled it off. In the process I've earned a couple hundred thousand dollars not from middlemen who but from a public who decided they wanted what I had to sell. It was only after I did this that I came to understand how deluded I had been about being truly self-employed when I worked through middlemen, be they brokers who found me consulting clients or publishers who got my books on bookstore shelves in return for 89% of the book's profits.

So on to the discussion of "What the 'Independent' means in IC."

An awful lot of people seem to think that the only difference between an independent contractor and an employee is that the IC can file a Schedule C or corporate return and claim more tax deductions.

While this might have been true in boom times, it is true no longer. Let's look at what the real difference is.

ICs run a business that offers goods or services to the public. They know that until they find a match between what they offer and what the public wants they don't have a business. In contrast, the employee merely looks for someone to give them a guaranteed week-in, week-out paycheck, in some cases merely for showing up, and over time comes to believe that employers owe him a job.

This is a fundamental difference, and one that all too many people in IT don't quite grasp. Every successful business person must get clear on the fact that NOBODY OWES THEM ANYTHING. No matter how brilliant they might be or how much they enjoy their work, when they run a business they must understand that they are offering something to the public, and the public is free to buy what they offer or turn away.

Think of it this way. You are a customer for hundreds of thousands of businesses. No one makes you buy Hershey bars, Nike sneakers, or a Lexus. For that matter, no one makes you buy CPA services or roach extermination either. The companies offer their products, make it clear to you why you might be happier if you bought those products, and then get out of the way, hoping you'll take the bait.

This is how real independent business operate whether they are selling candy or software development services. Unfortunately, a huge obstacle keeping a lot of IT people from making the switch to an entrepreneurial mode seems to be a huge sense of entitlement, spawned in the boom times, which makes them feel that the world owes them a living doing what they've learned how to do.

It doesn't. And if you intend to keep making a living with what you love to do, you will have to realize that, just like professional musicians, painters, and self-employed accountants the world owes you nothing unless you can get across to the world why what you are selling is worth paying for.

How do you do that? By understanding how your customer thinks and then describing what you offer in terms that match the way that customer thinks about what they want.

How does this work out in real life? Well, when it comes to getting paid for software development skills the employee says, "I'm looking for someone pay me $90/hr because I'm a terrific Java programmer." They do not ask "does the public want a Java programmer, good or bad." They do not give the public any reason why they should want to pay that $90. If the public comes back and says "I've found a great Java programmer who only charges me $50/hr" they shower the public with abuse and stalk off to sulk.

What does the successful business person IC, also using Java say? Something like this: "Mr. Public, I can give you software that will quickly repay the money you invest in it. It will cost you $X but because your will be able to cut $Y in other costs and increase the number of people who buy your own products, you'll get a payback of $Z within six months, making it costly to avoid purchasing my services."

There aren't a lot of technical people who take the latter approach to selling themselves, but among my acquaintance those who do are still working even now.