[Baypiggies] Consulting

[Roderick Llewellyn]

Hello all! I have done a lot of consulting during my career. I generally 
found that it fit my lifestyle and mentality much better than fulltime work. 
Most of my clients were very small companies (often ones just started up) 
where the company's founders had some ideas, rarely very fleshed out, and 
wanted a professional software developer to implement them. Recent changes 
in the market make consulting more difficult (though I am on a contract 
right now). The rise of open source has caused some firms to believe that 
they don't really need very sophisticated engineers, as they think they can 
simply download anything they need off the web and really just require a few 
junior people to wire it all together. This means there are many fewer 
positions than there used to be. Also some companies believe that if they're 
going to outsource (to consultants) anyway, they might as well offshore. 
This effect has driven some consulting rates down to little more than 
grocery-bagging wages. This is a kind of rambling set of considerations that 
may or may not be of any use to you. But I do have 35 years experience doing 
it. I won't answer specific questions of the form of "who should build the 
GUI" because I don't know you. These are more general points that anyone 
contemplating moving into consulting should ponder.

Now one problem you should take note of, mentioned but not detailed by a 
prior poster, is the issue of health insurance. If you are young, you 
probably give almost no thought to it (I didn't lol)... since it is 
extremely cheap at that age, hey your're immortal anyway, and you'd rather 
have a fast car, right? lol. If you are 40 or so this issue should be given 
a lot of thought... and even if you're much younger it can affect your 
career planning. While you're young, get a private policy and hold on to it. 
Occasionally during your consulting career you may take fulltime jobs, 
particularly as mentioned above due to the increasing scarcity of consulting 
positions (worth taking anyway). These will generally offer health 
insurance, and you will be tempted to drop your private coverage as you are 
basically wasting money. I did this. I then found out once I left my 
fulltime position that health insurers have no intention whatsoever of 
insuring anybody over 50 and are not even enthusiastic about insuring those 
over 40. They will look for any excuse to avoid insuring you and there is no 
law preventing this, medical insurance is not a right in America. If you are 
really lucky and/or good at negotiating, when you are forced to take a 
fulltime job, you may be able to get your employer to pay for the private 
insurance you already have, rather than putting you on their plan. Company 
type plans are usually more expensive than individual plans. COBRA and 
programs like that are entirely useless because they only guarantee coverage 
for 18 months. I've briefly checked out the einsurance site mentioned by a 
prior poster. So far as I can tell, it is merely a gateway into the regular 
insurers' application processes. If they've turned you down applying 
yourself, they will turn you down applying thru that site. While the health 
reform bill might help, its effects at this time are unclear (I'll admit it, 
I haven't read all 2700 pages or whatever lol). In any case, it's likely 
that (to risk waxing political for a moment) as soon as the Republicans 
return to office they will rip down this bill. During the last ten years 
before you qualify for Medicare private insurance will become very 
expensive. To get insurance, what my domestic partner and I did was form a 
2-person company. California law does not permit health insurers to deny 
coverage to corporate customers due to preexisting medical conditions, but 
the insurers CAN deny coverage if your company does not earn enough revenue. 
You also must have at least 2 people in your company. You should form an LLC 
and use that for all your billing (even if health insurance still is of no 
importance to you despite what I've said). Most modern companies will not 
issue 1099 tax forms to individuals anymore. They like "corp-to-corp" 
billing. So make a corp. You can use LegalZoom or other online legal site to 
create an LLC at low expense.

There are numerous "job house" type firms that hire you as a full-timer but 
call you a "consultant" and shop you out to their clients. This is usually a 
very bad arrangement for you particularly as you get older, though it might 
provide good experience when you're young. It's basically like a condo 
(combines the worst features of owning a house and renting an apartment). In 
this case, it combines the worst features of full-time work with the worst 
of consulting. First, you are not guaranteed any specific "duty cycle" of 
work, not that there are really any guarantees in this world anyway. When 
you are not working (because the job house doesn't have anything for you 
right now), you probably won't get healthcare, and they may not even cover 
it while you are working. Second, they will want a HUGE cut of whatever 
outrageous rates for which they're billing you, leaving not very much for 
you, but I don't have any figures for this. This kind of arrangement may be 
helpful for meeting people, whereupon you can eventually strike out on your 
own. Naturally they will force you to sign a "no-compete" clause that may 
delay your actual ability to go work for firms they originally put you on 
to. Third, you basically represent the job house to the client. The job 
house is MUCH more concerned with their business relationship with their 
client firm than they are about you. If there is even the slightest 
complaint from the client firm about you, even if totally ridiculous, 
your're out. And you can bet the client firms know this... so you're always 
treading on thin ice. They will blame you for anything that goes wrong. 
(this is basically true whenever you act as a consultant).

Regular head-hunters I've found generally useless for finding consulting 
work. During the dot-com boom, firms were so desperate for talent that even 
positions which had been specced for full-time, you could negotiate yourself 
into a contract. With the generally lousy economy, hirers are "feeling their 
oats" and will generally not negotiate over anything, they'd rather just go 
to the next candidate even if you are more ideal. Most firms don't want 
consultants as they believe consultants don't have their "corporate 
culture". They want people who will work very long hours (I'm talking small 
companies here) for small stock grants (i.e., they want fools lol). Most 
head-hunting firms don't even really have consulting work.

I found in my consulting career that I was not working probably 30-40% of 
the time. This is somewhat made up by higher pay rates. But be aware, as I 
said above, that these days a lot of firms intend to pay almost nothing. 
I've seen wages offered not infrequently between $10 to $20/hr. To some 
degree you are competing against Bangalore and guru.com, whose goal is to 
drive consulting rates down to rock bottom levels. You may have to look 
around for quite a while before you find something good. I did. I'd been 
looking for 3 years before I found a contract in Feb. One advantage (to me 
anyway) of consulting is that I am over 50, and most small firms have no 
intention of bringing anybody into their firm of that age as full-time 
employees. With consulting that is much less of a problem. They want you for 
what you can do, not what you look like, what kind of music to which you 
listen, what style of eyeglasses you wear, etc. They will be much "crisper" 
in dealing with consultants. They're (hopefully!) paying you a high hourly 
wage, so they will waste very little of your time with meetings, team 
building excercises, corporate culture indoctrination, and such. I've never 
been cheated in billing... but do be aware that as a consultant, if the firm 
is having any  money problems at all, you are the absolute LAST person to 
get paid. PG&E ranks WAY above you! If a client becomes late in payment, 
it's a good idea to find out why early on. Most consulting contracts do not 
contain an interest term, so your clients have an incentive to delay payment 
as long as they think you will actually continue to work; thus your final 
payment is most at risk. If you continue to work for many months without pay 
because the firm claims "financing is around the corner", you should be 
aware that you are essentially acting as an investor (the money you would 
have been paid is being used for other things, and you're at risk if they 
fail)... as an investor you should be entitled to some consideration. In 
some cases I've been able to negotiate stock or royalty deals when this has 
happened. They haven't really worked out, but it's better (maybe) than just 
ending up with nothing. Again, if the client firm is more than say 2 months 
late, there is probably a major problem, and continuing to work there is 
very risky. Naturally the more you work, the more money you will lose if 
they go under, so it becomes harder and harder to just walk away (since you 
will certainly not get paid your back fees if you do walk away). You will 
have a contract, but suing is usually pointless because A. the firm has no 
money and B. the courts take so long to render any decision that the firm 
will have vanished by the time you get a court hearing, and also C. legal 
action is very expensive. So risk management becomes important in this case.

Hope this helps a little. - Roderick Llewellyn