Any advice for a would be self-employed web consultant?
August 10, 2005 11:58 AM   Subscribe

I am considering starting up a small (one person) web consulting business, offering web design and development, newsletters, blogs etc. Advice from those with relevant experience would be much appreciated.

Background: I have always been an employee, mostly for large organisations and I'm currently employed in a reasonably well paid, but drastically under challenging and largely un-related area (technicalish writing). I am young enough (late 20s) and unencumbered enough (supportive girlfriend, no kids, little debt) to be considering this move seriously. I have previously worked in web development and design. I am not a stellar designer or developer, but I think I know enough to do good job and have a good eye for what needs to be done in terms of web projects. I am based in Toronto, Canada.

Of particular use would be advice that relates to: Marketing (I'm thinking a blogging on the Internet and how it relates to your business as well as networking/referrals).
Fees (I'm aiming for reasonable but sustainable, hard data on the market is surprisingly hard to come by but I'm thinking perhaps $30-40cdn/hour).
Self-employment (I'm hoping for a reasonable trade off between my current security, comfort and ease for a future that is more self-defined, fulfilling, varied and perhaps somewhat cash poor, at least for now).
posted by pasd to Work & Money (15 answers total) 7 users marked this as a favorite
The most common advice given in situations like this is.. don't just quit and set up shop.. either build up a business in your spare time before you quit or save up six months of living expenses and then go for it. I didn't do either, but I became self employed at age 17, so I had a safety blanket. Six years later, it's going well.. so definitely do it, but make sure your ass is reasonably covered.

Make sure to keep up with modern trends so that you can become unique in the marketplace unless you want to be tied down with dull HTML "tweaking" jobs. For example, Ruby on Rails is currently big business, almost anyone doing it can get work within days.
posted by wackybrit at 12:06 PM on August 10, 2005

Another word of advice: No matter how well you are doing one month, always be conservative with your funds and anticipate the possibility of having no customers or income the next month. When I was freelancing, I went from $30-40/hr at 40+ hrs/wk to $0 for more than 2 months (around 9/11/01). This can be pretty tough to manage if you're used to regular paychecks.
posted by p3t3 at 12:12 PM on August 10, 2005

This article, About Going Solo, was linked to from Lifehacker yesterday. I think it's a really solid look at the realities of starting a business like this.
posted by MsMolly at 12:30 PM on August 10, 2005

$30 to $40 canadian is probably too low. You have to charge enough to make it through the weeks with little or no hours.

Also, I don't know how it works in canada but in the states I pay a lot more in taxes being self employed. An extra 7% right off the top for social security. Most accountants will tell you to set aside a third of your income to be safe.
posted by ryanissuper at 12:36 PM on August 10, 2005

You're in Toronto, good luck. Getting people there to pay for anything is a pain in the ass. :-S If you want that much money you will have to be very picky with your clientele. You will find plenty of people, especially in a city that size, that won't want to pay more than $15 an hour. Yeah, it sucks. Oh well. There's plenty that will pay too, but they won't beat a path to your door until you find them.

If it's any comfort, I think the city I live in (Kitchener/Waterloo) has even more cheap people. Could be the worst in the country (I've been told several times this by others that don't live here).

I guess what I'm saying is be prepared. There will always be someone willing to undercut you (especially at $30 - $40 an hour) and you need to have solid reasons why the customer needs to buy service from you instead of him.

I'm a bit too lazy to check, but in Canada you'll pay *less* taxes when working for yourself, since you won't pay EI. Means you won't get EI as well, which can be a real bummer...
posted by shepd at 2:11 PM on August 10, 2005

It just occurred to me how much of my US-based advice is out the window given that you live in Canada - tax concerns, healthcare concerns... hm. Interesting.

Anyway, what's left: wackybrit is right on, when I was striking out on my own to do consulting (of a similar type), I took a bit of business with me from my old job, but wish I had done a LOT more client development. I made a decent hourly rate, but worked very little for several months such that I was just barely making it. For this reason, it was fun while it lasted (and very relaxing), but not sustainable.

About the billing rate: shepd seems to know about your geographical area, but 30-40 CDN seems intuitively low, particularly if you can get some work for US firms. Consultants in the US don't generally come that cheap (decent ones, anyway). Explore that aspect a bit more, and if your first client instantly says "yes" to your billing rate without trying to negotiate, maybe raise it $5 for the next client, etc.

Oh! Also, bear in mind how much the cost (and apparent cost) is influenced by your estimate of how long each project will take. If you overestimate, your client would be pleased in the end, but may needlessly pass up the contract in the first place if you've WAY overestimated. Conversely, noone wants to hear that you've underestimated, though many will come to expect it from new-ish contractors. Built at least a bit of padding into your estimates from the get-go.
posted by rkent at 3:13 PM on August 10, 2005

Another factor that newbies tend to leave out of pricing is nonbillable time. You'll be putting time (and money) into various admin overhead including marketing, bookkeeping/taxes, continuing ed, etc. To maintain the same net income, you're either going to need to work a lot more hours than you do now, or else bill a higher hourly rate to cover overhead.

You've talked about your ability to be a web developer, but have you also given a hard look at your ability to be a business manager, project manager, sales rep, proposal writer, presenter/speaker, negotiator, customer service agent, IT help desk, and collections agent? If you want to go beyond the $15/hr jobs, you really will find need to handle most/all of those roles. The exciting part of that is MORE CHALLENGE. Then again, that's also what makes it sometimes suck ass.

If at all possible, sign up with some local small business support programs and avail yourself of their business plan consulting services. For instance, there are nonprofits that help just minorities or just women to figure out how to get the business launched, set realistic budgets and pricing, etc. Some even do long term followup such as networking groups and mentoring, or microloan assistance.
posted by nakedcodemonkey at 4:36 PM on August 10, 2005

Never, never, never give up. (Winston Churchill)

Seriously - I'm self-employed, and the area where you know you'll be OK is when the times are quiet financially or you're chasing clients for late payment and NEVERTHELESS you can keep your motivation and enthusiasm going - self-employment is not for the faint-hearted but the rewards (for me) are far greater than being an employee. If you truly enjoy your job you'll be good at it and also have the stamina to keep going when the going gets tough. If it's what you really want to do, then do it, and do it whole-heartedly.
posted by FieldingGoodney at 5:57 PM on August 10, 2005

Things I learned from freelancing web design / programming:

1. Always write up a contract. In the contract, specify the scope of the project, the amount to be paid, and when the project will be completed by, and then STICK TO IT. I had many a client that dragged projects on forever, or turned little projects into huge projects later on down the road.

2. Charge more money. You'll have a tendency to want to undercharge to bring in clients, but in the end you're just screwing yourself - you'll end up with bad clients and no money. People expect to pay a certain amount for quality work.

3. Be picky about your clients. Try not to just accept any old job just to bring in the money. Only accept clients that will be good clients - ie clear about their goals, pay on time, stay in contact, etc. This is where that 6 months of savings that wackybrit mentioned will come in handy.

4. Do paperwork. Yeah, you're in it to do web design / programming, but you're also running a business. This means contracts, invoices, expense tracking, etc. are not optional.

4. I'm not sure how taxes work in Canada, but here in the US I did not have income taxes taken out of the money I collected freelancing. So, come April, I owed the government quite a bit of tax money. If Canada works the same way, be sure to set aside money throughout the year to pay for your taxes.

5. Get a website with a portfolio. One of the best ways to advertise your skills.

6. Treat it like a real job. Have set business hours. Get up, shower, and dress as if you were going to a job, or at least going out in public. It may take some of the fun out of working for yourself, but you'll find yourself much more productive. And, you'll prevent your business hours from slowly creeping into your personal life until you're spending all day at the computer and never seeing sunlight.

And I wholey agree with what p3t3 said - save your money. One of the biggest stresses of being self-employed is not knowing exactly how much or when that next pay check will be coming. I can't say I loved being self-employed, mostly because it was forced at the time (I couldn't find a job) and because I was doing several things wrong. With the knowledge I have now, however, I would definitely consider being self-employed again.
posted by geeky at 6:07 PM on August 10, 2005 [4 favorites]

My advice is not to do it. If you were a superstar, such that people want your work, I'd say go for it. But if you merely provide an adequate level service, a level that many other people can provide, then the amount you can bill per hour is roughly equivalent to the lowest amount anyone in town who can do a similar job bills per hour.

Remember, working for yourself is like having three jobs: marketing, accounting, and whatever it is you want to do. You will end up working at least 12 hours a day if you want to get 8 hours of "real" work accomplished.
posted by kindall at 7:05 PM on August 10, 2005

As geeky said, a contract is a good thing. Before you quit your day job, talk to a lawyer and pay him/her to draw up a boilerplate contract you can use. Make sure it specifies that you don't do "work for hire" and that you keep copyright in your work until paid.

Marketing -- find a niche. I stuggled for a while, then did a couple sites on a particular CMS that doesn't have a lot of designers who are familar with it. Now, a couple months later, I have people beating down my door to hire someone who "knows the system". Also, if you can find a small or mid-sized hosting company company somewhere and get into a mutual deal with them (you offer their clients a discount, they refer their clients to you for design), it can be pretty sweet. A lot of smallish hosting companies will be open to this sort of thing, especially if they specialize for a particular typ eof site (see above about finding a niche).

Have at least six months' living expenses set aside before you go to full-time freelancing.

Don't expect to have days off. Don't expect to have weekends. Eventually you'll get there (I've been at it nearly a year and I'm just starting to reclaim my weekends), but not at first.

Price yourself reasonably, but not too low. Work out exactly how much money you need per month to live in your current situation, multiply that by two, and divide by forty. The result is the bare minimum you need to charge hourly (in the U.S., Canada with its different tax structure may warrant something different). As you go along, raise your rates; you'll find that more experience means less time needed to complete a project, so your rates will have to go up to compensate.

Network. Network. Network. Everyone you meet is a potential client.

If you're going to do any work for clients based in the US, read this first.

Never, ever, ever give up. If this is what you love doing, it will be worth it, believe me. May of this year was the first month that I had more money coming in than going out, and the time leading up to that was dark and discouraging. But now that I look back at it, I realize I can't see myself doing anything else. I guess what I'm saying is to make sure that this is something you can't not do. Because if you don't love what you're doing, you will not make it.
posted by ubernostrum at 9:01 PM on August 10, 2005

In terms of your hourly rate, don't forget that if you're running your own shop then your costs are covering all the infrastructure.. ie. software, hardware, backup, insurance etc.

So you must charge a bit more that just a freelancer who's working in-house.
posted by bruceyeah at 10:31 PM on August 10, 2005

Response by poster: Thanks very much for all the advice. I have been asking these questions of as many relevant people as I can think of, and patterns are emerging:

- Remember non-billable.
- Love what you do and do it well.
- Save for a rainy month.
- Get a contract.
- Don't charge too high, don't charge too low either.
- Remember to do the paperwork, make the phone calls, get out and network.
- Find a niche and excel in it.
- ...

All these things I might have come up with myself, but having people who have actually done this for real point them out as priorities is extremely useful.
posted by pasd at 5:34 AM on August 11, 2005

Read loads of books. Especially on self-improvement, communications, movitivation, sales, etc. It will do wonders not only to your own growth, but will also help build yourself a solid foundation for going thru the hard times.
posted by arrowhead at 2:58 AM on August 22, 2005

I did exactly what you're planning on doing - in Toronto too. In the same field, except we are more geared toward the entire internet communications world, than just design and basic development, but the idea is the same, except I hire people like you };-> !!!!

My experience and advice:
– totally agree with trying to build up your clientele BEFORE you leave so you have some established work happening
– find a business mentor, talk with them a lot
– plan, plan, plan
– learn, learn, learn
– read, read, read (metafilter, Slashdot, all the nerd sites)
– set goals, practise keeping them and re-writing them
– eventually joining a networking group (I did, worked great!) will be important

I disagree with the comment earlier about Toronto companies not paying. I/My new company gets paid well, the only time things get tight is when I haven't planned well enough, called back enough people or simply done enough work myself.

Good luck
posted by iTristan at 2:51 PM on March 23, 2006

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