The allure of going independent as a software developer is undeniable. But is quitting your job and venturing into the world of contracting or consulting the right move for you?
While the freedom and potential rewards of self-employment are enticing, it’s crucial to weigh the risks carefully before making such a significant decision. I want to share the benefits and risks of starting up your own consulting firm, and my approach to minimize the risks.
The Benefits
Flexibility: As a contractor, you have greater control over your schedule and work-life balance. You can choose your projects, set your own hours, and work from wherever you prefer.
Autonomy: Enjoy the freedom of being your own boss and making decisions without needing approval from a manager. And depending on your client, a lot of time you can cut through a lot of red tape and get the feature or product done a lot faster.
Potential for Higher Earnings: Contracting can potentially lead to higher earnings, especially if you’re able to negotiate favorable rates and secure high-paying projects.
The Risks
Financial Uncertainty
- Income Fluctuation: Unlike a traditional job with a consistent salary, income as a contractor or consultant can be unpredictable.
- Lack of Benefits: You’ll be responsible for your own health insurance, retirement savings, and other benefits typically provided by employers.
Work-Life Balance
- Blurred Lines: When you’re your own boss, it can be challenging to separate work from personal life, leading to burnout.
- Isolation: When starting out, working alone can be isolating, especially if you’re used to the social interaction of a traditional workplace.
Business-side of things
- Legal and Administrative Burdens: You’ll need to navigate a complex web of legal and administrative requirements, including taxes, licenses, and insurance.
- Client Acquisition: Securing clients can be a time-consuming and competitive process, especially in the beginning.
- Market Fluctuations: Economic downturns or changes in industry trends can significantly impact your business.
Reducing the Risks
Out of all the risks I mentioned above, The most important ones in my opinion are client acquisition and income fluctuation. Here are my strategies dealing with those two risk when I quit my job and start my independent consulting company are:
- It’s crucial to have a solid financial runway to cover your living expenses during the initial period when you may be building your client base. I recommend aiming for at least two years of savings to provide a safety net. I know the first year of consulting might be very unstable in terms of contracting. If you don’t get a lot of contracts the first year, you might want to start using the rest of your savings to transition back to a regular full-time employee. While still trying to find more contracts, start to send in your resume and start doing interviews for a regular software developer job. If you find more contracts… Great! If not, it’s good to have a fallback position.
- Line up at least 1 contract (In my situation, I was lucky enough to have 3 contracts lined up, which accounted for around 60 hours a week for the first 3 months). No one on the market knows you yet, and there is no word-to-mouth on how good you are as a developer. Use this first year to market yourself, network with other professionals. If you can handle it, take in as many contracts as possible. This can be potentially really tough for you mentally. Your work/life balance could be abysmal. But it is very important to gain as many client as possible in the beginning.
Conclusion
While the decision to become a contractor or consultant can be exciting, it’s essential to approach it with caution. By carefully considering the risks and conducting thorough research, you can make an informed decision that aligns with your goals and financial situation.
In future posts, I will discuss some of the ongoing things you need to pay attention to while managing your own software consulting company. I will also share my own journey to give you a personal look on what it’s like to go independent.