Right before the birth of our third daughter, I went independent. It’s been over two years now, and incidentally I’ve now been away from my last place of employment for longer than I worked there. It’s a weird feeling, especially when all of your being was wrapped up in your work, to realize you’ve now been away from that work for longer than you did that work.
Anyway, I say all this to say that I’ve had a sort of crash course in being independent over the past two years, and wanted to use these column inches as an answer to the following question I received from someone who is recently also thinking about ‘going independent’:
I was wondering how you made the decision to go independent and how you got started?
This question opened up a lot of emotions for me, not through any fault of the asker, but because all of my mistakes come rushing back to the surface. So I’m writing this in part as catharsis and another part as a guide for those that want to go independent.
The decision on going independent was covered in my previous post on this subject, but I’ll quote the relevant part for completeness:
I’ve known for a long time what I want out of life; I want financial freedom. I want to see my kids grow up. I want to enjoy each moment of my life. I don’t want to live to work; I want to work to live. This may seem foolish, I know, but think about any time you’ve worked for a company and their direction changed, and suddenly that thing you identified with no longer existed. Would you continue to wish you “lived to work” then?Me, from Starting Again
That’s why I went independent, because no job I’ve ever had (and no one I’ve ever talked to) has been financially free without putting in 90 hours a week to someone else’s dream. Even if they were financially free, they never saw their kids, they didn’t enjoy life, and they certainly didn’t ‘work to live’.
We have a rather crappy deal with employment, at least here in the United States: sacrifice yourself with the hopes of being free for 20 years when you’re too old to enjoy it and you’ve missed your life, your kids growing up, and your youth. To make matters worse, there’s this collective disillusionment that this is how Things Should Be.
This also means that if I ever found a job that was fulfilling that satisfied the above, I’d be hard pressed not to take it — but I’m not sure it exists. I don’t want to sound unnecessarily negative; but if your job has all of the above and you only work 40 hours a week, let’s talk.
So with that goal in mind, I went independent. Now, here’s what I wish I knew in 2019:
Staff Augmentation or “Sub-contracting” is just Employment without Benefits and with extra work
This was not a shock to me, but I state it because if you move from W2 Employment or W2 “Contracting” to C2C or 1099 Contracting, you haven’t gained anything, except that you can actually say “No”. You may lose the contract, or they may let you go, but you can say “No”. That’s something, right? Depending on who you’re sub-contracting or providing staff augmentation for, the client still sees you as a pair of hands, to do implementation work or to enact whatever
harebrained amazing idea they have. You have no built in vacation, and you have no PTO. You have no health benefits, and if you don’t sit your ass in front of a chair, you aren’t billing. If you aren’t billing, you aren’t getting paid.
Oh, and by the way, there’s a natural ceiling to this sort of work; if you can crack $150 / hour for 40 hours, you’re doing amazing. I’m currently billing around $120 an hour because that’s how the contract is set up. I have very little negotiation room there due to the industry.
That sounds like a lot, right? It’s not. 1/3rd of your money goes to taxes (I am an LLC taxed as an S-Corporation, for those of you that knows what that means), and you have to pay yourself a salary; anything over and above that salary is taxed at income tax rates, minus whatever expenses your business has.
Oh, and now you’re tracking business cash-flow (separate business bank account) and accounting and invoicing (quickbooks) and payroll (Gusto), and all of that is an expense against your business. And by the way, any time you need to work on Quickbooks is not billable time. Oh yea, and you now need to keep track of your hours (I use Nokotime). So now you’re working 40 hours a week (billable) plus 5 hours a week non-billable.
Oh yea, you now need a tax accountant; and for even the simple business I run where I do my own bookkeeeping, that’s $1500 a year for business tax preparation and forecasting. (I splurged and also use that accountant for personal taxes as well, which tacks on another $1000).
Now, keep in mind, all of this is without doing any marketing or niching down; just hopping from contract to contract and hoping you find work (either multiple clients to get you close to 40 hours, or a ‘whale’ client that nets you a consistent 40 hours).
Oh yea, and Hourly Billing is Nuts.
A Consultant is not a Contractor, and Is Not Staff Augmentation.
We tend to misuse the word “Consultant” in the software world to mean contractor, or freelancer, or staff augmentation. It is none of those things. Those things are hands for hire (or literally, a free lance). A Consultant is someone you call when you have a pain or you are making a bet the business proposition and you don’t know how to do it.
If you want to be a consultant, (and I think that’s a good place to be) you aren’t going to be optimizing for being a contractor, freelancer, or staff augmentee. But how do you do that?
I leaked it before: You niche down and you spend time marketing. That’s one of the problems with billing hourly, is that if you note above, I have no time to market if I’m billing 40 hours a week. One of the other problems with being a freelancer is that you are interchangeable with all other freelancers; with the only differentiator being how cheap you are. Living in the DC area, I can assure you I cannot compete on price, and nor should anyone engage in that race to the bottom.
So if you want to be a software consultant and not be stuck spending 40 hours a week billing, you need to find a niche and burrow deep inside that niche. You need to market the hell out of yourself, and you’ll be playing the long game. It could take several months for you to get leads from marketing you’re doing. So in my case, I’m currently working around 50-60 hours a week: 40 billing, and 20 doing marketing. I’ll talk more about my business plan below, but it’s one I wish I had on day one.
Figure out who you want to help, and what problems they need help solving as quickly as possible
Who’s your Target Market? What do they need? How does that intersect with what you do? If you don’t want to be just another pair of hands, the first thing you need to figure out is: Who do you want to serve? What business problems do they have? How are you uniquely suited to solve those business problems? How do those business problems intersect with what you know? In my case; I’ve worked in lots of industries and team sizes, and have worked in several different verticals; but most consistently has been B2B SaaS, and most of my experience is with .NET. So the ‘vertical’ (it’s really a horizontal, but whatever) I know the best are .NET teams that operate in a B2B SaaS space.
But, that’s still pretty broad. B2B SaaS is a huge market; and .NET B2B SaaS is somewhat smaller, but not really enough to be able to differentiate. What if, instead, I niched down on .NET teams that want to transition to microservices? I mean, that’s a pretty specific situation; and it’s going to be relatively small compared to the rest of possibilities, so that makes it an OK thing to niche down on. But, as I said above, what business problem do you help solve? Transitioning to Microservices is not a business problem, sorry. So what business problem can I solve? Scaling is certainly a business problem, capturing new lines of business is a business problem, decreasing risk is a business problem, and microservices could help with all of these problems. So as of right now, I help .NET teams transition to Microservices; and the business problem I’m solving is reducing the risks associated with scaling your technology. My target buyers are CTOs, and so my marketing needs to speak to CTOs. VPs of Engineering will definitely pick up on the marketing; but I’m not speaking directly to them. I want to speak to the decision maker, because that’s the path of least resistance for buying and also because a VPE may not have enough experience to say “Hey, we should probably bring a consultant in to help with this” whereas a CTO generally would say, “Yea, if I can spend $250K to save us from a multi-million dollar failure or to get $20MM in new business, I’ll happily do it”.
I’d like to note that I’m figuring this out as I go; and that’s one of those things you should be aware of when you start a business as an independent: It’s just you. You’ve got your knowledge. You’ve got whatever books you can read or have read. You’ve got masterminds, coaching classes, and business coaching consultants that can help you; but you’re the one that has to figure this stuff out.
Learn to love Sales and Marketing aka Help Others In Public
Once you know who you’re going to serve and how you’re going to serve them ( I contracted with a marketing coach to help figure that out and to put together a marketing plan), you now need to understand that your life is now marketing and sales. Well, at least 20 hours of it. If people don’t know who you are, you can’t help them. If they don’t know what problem you solve, you can’t help them. If they don’t see you every time they search for an answer to that problem, you can’t help them. That’s marketing. Whether it’s a podcast, or daily blog posts, or an email list, or LinkedIn content, you have to make yourself helpful and visible to the people who have the problems you help solve.
I have two podcasts (one is being re-tooled to line up with the new focus), and both of those are lead magnets. Last Week in .NET is a topical news show covering… well.. what happened last week in .NET; and the-soon-to-be-re-tooled Build Better Software was a podcast with software leaders on how to build better software. (I will announce when the re-launch of the Build Better Software Podcast is complete; until then you can catch up on old episodes at the link above). Last Week in .NET is a way to help .NET teams in general keep up with what’s going on through focused links and color commentary; and the lead magnet at the end of every show is a call to action for my free microservices email course. When the BBS podcast is re-tooled, it’ll be an even tighter trust building tool for CTOs, at least that’s the goal.
Now the podcast is on top of both daily blog posts and the email list (if you’d like to join the email list, there’s a CTA at the bottom of this page). And the email content is — you guessed it, geared towards .NET teams that want to scale their technology using Microservices.
Now that conferences are back on, I’m spending more time on CFPs; that’s part of the marketing as well.
It took me two years to figure this stuff out. I wish it hadn’t.
Have some cash in the bank, or be prepared to bill hourly to keep the lights on.
In the ‘what I do’ business, advising .NET CTOs on transitioning to microservices, there are two main services I currently provide: An $8000/month advisory retainer where I’m on call to answer your questions 24/7, or a custom project; where depending on your needs and business goals I tailor the offering. There will be generally a roadmap/assessment because figuring out where you’re going and how to get there is the first step in any venture, and custom options over and above that, like training or technical oversight.
The business model is generally to have a few retainer clients at one time, and no more than one custom project at a time. That custom project, by the way, is value-priced, and the scope is determined last after the value is determined, not before (If you’re interested more in Value Based Pricing, you’ll want to follow Jonathan Stark).
That way, we figure out how much our budget should be, and then we scope the work to fit that budget. It aligns your success with the client’s success and greatly simplifies the working relationship.
But, since there may be periods of time where you don’t have clients, your project prices have to be able to sustain you through those periods; but you’ll always need to be marketing so starting out you may be hourly billing to keep the lights on while changing over to the retainer/custom project model. If not that, then sock some cash away.
Either Pay To Figure Stuff Out or be Prepared to Spend Time to Figure Stuff Out
Here’s a yearly look at how my business does and where the money goes, with the income being hourly billing:
If you bill by the hour, you have very little profit. See that number? 7.7% profit. That means that billing is essentially a treadmill that I can’t get off of until that number goes higher. The profit number lets you invest time into improving your craft and your business. If that number stays low, it’s hard to work on your business because you’re working in your business. I don’t know what that number should be, but I assume at least 30%. I do know that 7.7% means that I spend more time spending time to solve problems I have than I can spend money to solve my problems. That “Professional Services” percentage? That’s how much I spent on business coaching/consultants last year to help me build my business. That number is shockingly close to the profit number, percentage wise.
Profit is not a dirty word when you’re an independent. It’s what allows you to get better at what you do, without having to work yourself to death to do so.
A higher profit means I can pay to have marketing people help me figure out how to tailor my message. It means I can focus on my strengths and pay business coaches to help me with my weaknesses. It means I can spend more time with my kids. It means we as a family can take a vacation when we would like to.
You need to have success and failure metrics
Right now I know the exact metrics that will let me know I’m on the right track for the podcast, email list, blog posts, etc. I track email signups for my list, and podcast subscriptions. If those don’t have the intended effects then I need to rethink both my marketing and whether I’m solving a problem that needs to be solved, or is expensive enough to solve with outside help. Those are leading indicators, but they help me figure out if my message is resonating, find out if I’m actually helping people.
If you can focus on a problem that is acute and expensive, put your efforts there
Transitioning to Microservices is not an acute problem, but it is an expensive problem. It will often have opportunity costs and business metrics tied to its success (like ability to attract new business without doubling operating expenditures), and a large risk of failure.
I spent several months looking for an acute and expensive problem, but couldn’t find one that aligned with my skillset. For instance, Brent Ozar helps make SQL Server Go Faster. SQL Server is expensive, and if you have a problem, you’re going to feel it pretty heavily. That’s a good acute and expensive problem to help solve.
A bird doesn’t care about swimming and a fish doesn’t care about flying
Put another way, when fishing, you don’t use food you like to eat, you use food the fish likes to eat (with credit to “How to Win Friends and Influence People” by Dale Carnengie). As software people we think that somehow business people care about software and want us to build software. They do not. They want a solution to their business problem. If you can’t find a business connection to what you do; then you shouldn’t try to sell that service. And most of all, you are not in the business of writing software. You’re in the business of solving business problems. If you can do that with zero lines of code, so much the better.
You need to talk to your customers
So I fumbled around a few times starting out; and didn’t talk to customers. I offered what I thought I would want. Since I’m not a perpetual money machine, I’m a terrible customer for me.
So I started to talk to customers in my target market — CTOs and VPs of Engineering (this was before I had whittled it down to CTOs and .NET specifically) in B2B SaaS businesses. First people I knew in my network, and then cold outreach on LinkedIn — yes, LinkedIn. Where CTOs are easily found. (Now I also use Rands Leadership Slack to learn, but not to sell). I try to reach out with a relevant-to-them ask, and basically say “Can you help me <learn more about thing you’re good at>?” I’m taking this further now and interviewing software leaders for podcasts, so we can all learn from them, and people tend to respond better to a podcast interview request than they do ” can I pick your brain”. Anyway, my success rate is 8%. That’s about average as I understand it, but it means if you want to interview 4 people for customer research a new service you’re building, you need to reach out to 50. Yes. 50.
It also helps to know how to ask questions to get people to talk to you, and for that I’ve used and abused Michele Hansen’s book, Deploy Empathy (also, she appeared on the Build Better Software Podcast to talk about Customer Research, and I highly recommend that episode).
Anyway, you need to learn to talk to your customers. People in your target market. Not to ask them “Would you buy X?” but to ask them what their problems are, what they could wave a magic wand to and make it go away, what they spend their nights thinking about. Clients don’t buy services for problems you think they have, they buy services to solve problems they actually have. Talk to them. Me focusing on helping .NET teams transition to microservices? That came out as the source of a recurring business problem with several of my interviewees. Is it a viable business? We’ll find out.
Businesses are a gamble
If you want to print money, open a laundromat or dry cleaners (at least, that was true before the pandemic). If you want to try to match what you love with people who have a problem you can solve, that’s a gamble. It’s a gamble on how good you are at showing how to solve the problem, and how good you are at solving the problem. It’s a gamble to figure out how to talk to your target market in a way that resonates, it’s a gamble to figure out if they’ll buy what you’re selling. It’s all a gamble. Nothing is written in stone. You will be wrong, a lot. It’s all a learning experience for next time. If you don’t want to gamble, don’t open your own business, get a W2 job instead. Even though it is not arguably safer, it at least feels safer.
Start out with who you want to serve, and what problem you want to solve.
Talk to your target customer, and find out what problems they have.
Refine what you solve based on those conversations.
Offer free or at cost beta services to test out the service.
Write daily. Speak often.
Refine your positioning as much as possible. You don’t want to be compared to other people.
No one will shoot the basket for you.
Hourly billing is a trap. Get out of it as soon as possible.
Resources I’ve used and wish I had on tap in January of 2019
- Jonathan Stark – “Ditching Hourly“
- Jonathan Stark and Rochelle Moulton – “The Business of Authority“
- Maggie Patterson – “BS-Free Service Business Podcast“
- Colleen Schnettler and Michele Hansen – The Software Social Podcast
- Stacking the Bricks (luckily I had been a listener for years)
- Rochelle Moulton – Be Unforgettable
- Seth Godin
- Michele Hansen’s Deploy Empathy Email List
Countless other books recommended by the Software Social podcast and The Business of Authority podcast.
Note: Anything that sounds really smart is probably from one of the people I mentioned above. Anything that sounds like “Hey, that was a dumb move” was probably by yours truly.
2 thoughts on “11 things I wish I knew before I went Independent”
Oh yeah, the C2C contractor type of jobs are total traps. Aside taxes, you also have to pay for your medical insurance. And the demands of the ropes just keep rising. Good luck if you get stuck in a gig using Extreme Programming, where you pair program for 8 hours straight. No way for you to take breaks or reap benefits of delivering quickly.
Thank for writing this article.
I don’t find hourly billing to be a trap at all: you just have to charge more. I bill at $300 an hour, $200 an hour for my “friends & family rate”, and it offers a lot higher profit margin. It’s harder to find clients, of course, but you have a lot more time to do that when you’re getting paid what you’re worth.