how to be an ic (plus! job-market tips for everyone!)
DESCRIPTION
How to Be an IC (Plus! Job-market Tips for Everyone!). Howard Fosdick (630)-279-4286 [email protected]. ( C) 2001 FCI. Evolved from an FTE * IC since 1988 * 1-person shop by choice Contract Programming (CP) * DBA : Oracle, SQL Server, DB2 * SA : Unixes, Windows - PowerPoint PPT PresentationTRANSCRIPT
1
How to Be an IC
(Plus! Job-market Tips for Everyone!)
Howard Fosdick(630)[email protected]
(C) 2001 FCI
2
How did I become an IC ?
Evolved from an FTE * IC since 1988* 1-person shop by choice
Contract Programming (CP)* DBA : Oracle, SQL Server, DB2
* SA : Unixes, Windows
Consulting* User Group Founder (IDUG, MDUG, CAMP)* Author (books & articles)
* Presentor * Management Consulting
3
Why am I Giving this Talk ? 2 Consulting Paradigms
Proprietary OpenSecret information Open negotiation for for negotiating power for trust relationshipsCompetitors Cooperation / CoopetitionStrength thru secrets Strength thru working togetherDirect Marketing only Indirect Marketing (“Pay me now!”) (“Sow seeds, reap the harvest later”)Trade Secrets Sharing knowledgeCompetitors (ICs, No competitors contract firms, FTEs, (just difficulties like 1706, Headhunters customers, everyone!) and Brokers!)Gimme, gimme ! Give to get
TraditionalOpen Source Consulting
4
Outline
1. Definitions2. How Employees are like contractors3. IC Business Models4. What are Your Goals ?5. Legal Status of your firm6. Rates7. CP Firms, Brokers, Recruiters8. IRS 1706 and AVLs9. Selling Yourself10. Contracts, Payroll, Insurance, Finances, Retirement 11. Getting Gigs / Jobs12. Resources
5
Definitions
FTE = Full Time EmployeePTE = Part Time EmployeeW-2 = Employee1099 = How non-employees get paidCorp-to-Corp = How corporations get paidIC = Independent ConsultantCP = Contract Programmer or Contract ProgrammingConsultant = Advice giverMgmt Consultant = Advice giver to managementPure IC = IC gets their own gigsBrokered IC = IC goes through a Broker to get gigsBroker (aka Bork) = places Contract ProgrammersRecruiter (aka Headhunter) = places FTEsContract Firm (aka Body Shop) = Broker, Headhunter,
CP Employer Big 5 Consulting Firm = Actg firm with all FTE CPs
6
“We’re All Contractors Now!”
Employee
Implied Deal :“You don’t screw up,we don’t fire you”
Company-providedcareer planning (ie career path)
Defined benefit planDefined health plan
Company-directed training
Rule 1: They employ you because it pays them to!Exercise : Calculate your cost and your benefit to your company
Disposable resource (ie “contractor”)
Implied Deal :“You’re here only as long as we choose to keep you”
Self-directed career planning (ie career path)
Self-directed retirement (401k)Selectable benefits
Self-directed training
1980s Today
7
Who Moved My Cheese ?
“He knew it was safer to beaware of his real choices than toisolate himself in his comfort zone.”
by Johnson & Blanchard, p. 75
“Companies don’t take care of you,you take care of you.”
8
Be a Realist
Rule 2:
The job market works the way it works
+ Figure it out+ Work it to your advantage
-- You can’t change it
-- Fight it and you suffer
-- It does not care what you think
-- It does not work “the way it should”
-- It does not care what you think the best product is
Note: if you’re Bill Gates ignore this foil...
9
Rule 3: There are many ways to be an IC
Goals
BusinessModels
Values
Kinds ofWork
Etc.
Based on different ...
10
There are many ways to be an IC
TechTrainer
Permatempw/ specialExpertise
Solo Contractorthru Broker
SmallContractorFirm
Pure IC
“Expert”Partnership getcontracts thruvendor
others
DBAPartners
11
Business Model Parameters
one a few many
narrow (1 product) 1 topic (eg DBA) generic
on own via contract firm or broker
local regional national international
weeks months yearly “perma-temp”
piecemeal typical DBA / SA expert or “Name”
Number onPayroll
Breadth ofExpertise
GettingGigs
Travel
EngagementLength
Rates
12
Business Model - Example #1 Technical Niche Specialist
* Tech support in small shop for obsolete niche technology
* Makes 2 * FTE salary
+ 10 years there (“perma-temp”)
+ Very customer focused
-- When this client goes away ?* Has saved $$* She’s very smart,
will certify on new technology while on “downtime”
13
Business Model - Example #2Contract Programming Thru Broker
* Senior developer
* FTE w/ CP firm => IC on 1099 w/ Broker
* Gets gigs via 1 trusted Broker
+ No effort to get gigs+ Choice of gigs+ Choice on travel+ Flexibility
-- Pays big % to Broker
14
Business Model - Example #3Technical Trainer
* Started as FTE CP in CP firm(C++ & Unix => Java & web)
* Then worked thru Brokers, did not like them
* Did Training on the side
* Evolved into specialty training for certification
* Now travels to teach a couple courses / month
+ Flexibility to raise her kids while making reasonable $$
15
Business Model - Example #4Experts Contracting thru Vendor
* Claim “expert” status on 1 software product(published articles, speeches, books, UGs)
* Tight with software vendor + referrals thru the vendor
-- dependency -- vendor kickbacks
+ High Rates ($100 -> 500/ hour)
+ Short Contracts
+ Travel
* S-Corp (partner-controlled, 6 people)
16
Why be an IC ?What are Your Goals ?
+ “Be my own Boss”
+ More interesting Work
+ More Money
+ It’s your Passion
+ Alternate Lifestyle
+ Ego
+ _______________
Exercise : make your own rank-ordered Goal List Self-awareness is key !
==> more control over worklife / life==> be an entrepeneur
==> greater choice of gigs
==> get paid for overtime==> be a techie but make mgmt $$
==> techie passion==> entrepeneurial = build a company
==> work when you want
==> have people listen to you==> “make your own rules”
==> fill in the blank with your goals
17
Ways to Work
VendorIT Shop Contract Firm
Brokered IC
FTE W-2 (hourly) 1099 Corp-to-CorpPTE PTE Corp-to-Corp 1099
W-2 (salaried)
Pure IC
For Illinois business bookletsand legal forms see www.ilsos.net
18
Sole Proprietorship
Partnership
+ You took no action+ Simplest tax filing-- Unlimited liability
-- Common property-- Unlimited group liability
Non-corporate
Forms of Business
Taxes
Liability
(aka, the Legal Status of your business)
1.
2.
These drive everything:
LLC(Ltd Liability Co.)
19
Subchapter C Subchapter S
-- Taxed Twice+ Large Companies
+ Taxed Once+ < 50 Employees
Corporations
Forms of Business
Corp Employee
Taxes
Liability
1.
2.
+ Limits Liability
20
Rates
* The contractor version of employee’s salary
* There are no “rules”
* Everything is negotiable
* Know typical rates
* Know client’s target rates
Knowledge is the key !
21
How To Compute Rates
50 weeks / year * 40 hours / week = 2000 hours / year
So: $40 / hour = $80,000 / year
And: If you make FTE Salary of $80,000, your Rate is $40 / hour (ex-benefits)
Your Rate to Employer is : $40/hour + Benefits
Average IT work-week = 48 hours
If your Salary is $80,000 and you work 48 hours,you should be paid $96,000 !
22
Rates Vary By...
Training
SmallShops
Documentation
“Name”Experts
LargeShops
PC / LANSupport
DBA / SASupport
Architects
DesignArchitects
Super TechSpecialists
$$$
lower
higher
Government
where you work, and what you do
MgmtConsultants
Help Desk
23
How Much You Gotta Make ?
* 2 * FICA ( 2 * 7.5 = 15% )
* Benefits
* Retirement (SEP-IRA or 401K)* Health Insurance (go Group)* Disability Insurance “ “* Other (employee health club, dental, etc.)
* Corp Fees
* Tax prep * Insurance (General Liability)* Unemployment Comp* Corp filing fees * Etc.
* Bench Time ?
Assuming 1-person S-Corp
Good Rate = 2 * FTE SalaryMarginal = 1.5 * FTE Salary
24
Rates and Salaries ?
Sources
computerworld.com
informationweek.com
datamation.com
earthweb.com
realrates.com
dice.com
(Blue = online & print)many others...
itworld.com
25
How Contract ProgrammingFirms Work
President/Founder
Brokers /“VP Placements”
ContractProgrammers
1099’s
W-2’s (hourly)
Corp-to-Corp
1
3 + 1
60
Billing andLegal Treatment
W-2’s (salaried)
26
How Brokers Make Money
What Client pays $200,000/yr
What CP gets $120,000/yr
What Broker makes $80,000/yr
$100
$60
The Broker makes the spreadbetween what client pays and what you’ll accept.
Most Brokers key on reducing your rate !
Is this Broker worth $80,000 / year ?
Brokers get 10 - 60 %typical 33%
27
Why You Care About theBroker’s Mark-up
(1) The spread may be too large(you’re making less than you could!)
(2) Client bases all retention decisions on their cost (not what you’re making)
Example: Time to reduce contractor costs !
Susie SE = $225/$60You (brokered) = $100/$60Joe “Pure IC” = $80/$80
Who they gonna keep ?(and why does Susie SE accept a rip off ?)
Assuming all areequally useful...
28
How Recruiters Make Money
New FTE’s 1st-year salary = $90,000/yrRecruiter @33% makes = $30,000
Upon placement, the Recruiter makes either :(1) Agreed-upon fee(2) Percent of new FTEs 1st-year salary
The Employer pays the Recruiter,==> the Recruiter works for their interest !
Recruiter is not your friend nor do you pay him.
Do not disclose your negotiatingthoughts to the Recruiter !
Recruiters get $10k - $40kper placement(20% - 33%)
Example:
29
Why are many Brokers / Recruiters Unethical ?
* They do real work, they deserve to get paid
* But their pay is sometimes outrageousas is their behavior !
Why ?
* No startup / entry costs * No capital required* No manufacturing costs (pure profit potential)* It’s all convincing (1) Client and (2) CP
* Each placement really counts !(eg: place 3 FTEs you make $60k this year, place 6 you made $120k ! )
* Superior knowledge yields manipulative power
(see A. Zanevsky, Contract Professional)
Client
Techie
30
Example Sleazy Broker / Recruiter Practices
* Selling resumes* “Enhancing” your resume w/o your knowledge* Presenting your resume to a client without your permission* Page Flipping* Stealing / selling company phonebooks* Selling IT staff lists* Stripping references* Bogus resume cross-references* Misrepresenting (lying) to either Client or CP
(esp. about Rates or the Work to be done)* Expenses never reimbursed* Non-payment* Suing you as a form of intimidation* Keeping you “on the line” by sending you to an inappropriate interview* Abusive contracts* Abusive non-competes* “Jennifers” and “Guys”
Credit-check your broker: www.experian.com @ $20 - $30
31
Why Brokers Predominate
* IRS 1706 : a Rider passed w/ 1986 Tax Act by special interests
* Designed to force all IT workers to : Be employees* To enhance role of CP Firms* Easier for IRS to collect taxes
* Legally Ambiguous
* Allows IRS to “reclassify” IC as an “employee” !* Burden of proof & penalties are on the “Employer”
* Practical result -- (1) Many companies will not do business w ICs (1099s and S-Corps)
(2) Brokers / CP Firms flourish !! (3) Approved Vendor Lists (AVLs)
Client IC Client ICBrokeror CP Firm
Book on 1706:www.icca.com $27
32
How to Handle 1706
* Understand the “20 Questions”
* Have multiple clients-or- :
* Stay at each client <= 1 year
* Pay your taxes scrupulously (use Enrolled Agent / CPA)
* Form multi-person IT firm
* Use Umbrella Firm
Client ICUmbrella Firm
See: www.pacepros.com orwww.contractorsresources.com
Umbrella Firm : * Employer of record * Billing, Admin services * Group-rate benefits
33
Microsoft “Perma-temp” Lawsuit
* $100 Million cost
* Plus legal costs
* Big impact on IT
* AVLs and Brokers everywhere !!
“yuck, yuck!”
34
AVLs
* Shields IT shop from potential IRS 1706 Liability
* Liability is the real reason for AVLs
Client
AVL
CP Firms
Brokers ICs
CP ICsFirms
ICs
Subcontracting = What a mess !
35
IT Professionals Lose !
IRS 1706H1B
UCITA
IT Labor is:
* Young* Non-political* Unorganized* Lobby-less in DC
“Special Interests are the greatest threat to democracy in America” -- President Jimmy Carter
36
Hiring -- IT Manager’s Viewpoint
* Shortage of qualified people* $10k - $50k to hire ONE* $10k - $20k to train * 10:1 effectiveness ratio between candidates
=> If you find a good person, grab him fast !=> Whoever you hire must be worth their training costX Don’t lose good peopleX Hire attitude & related skills (not exact skills match)
Rules :
Results :
37
2 Hiring Responses
GATEWAYS
FACILITATORS
* The “Rules” people”* “I just work here”* Require exact skills match* HR
* “Is this person good, if yes, how do I hire her?”* Deal-makers* Problem-solvers
IDENTIFY & KEY ON THE FACILITATORS !
38
One Way to Sell Yourself
Rule :
Specialization sells
Exercise :
Define your Calling Card
Prioritize, defineyour 3-part pitch
10seconds
Your Calling Card= quick “Trump Card”
Summary : “Who I am andwhat I can do for you”
Resume : “Here’s proof ofwhat I can do for you”
2minutes
30minutes
39
Certification ?
* Industry trend
* Vary by the Cert :* Cost* Difficulty* Marketability
* Enforces-- Vendor-dependency-- Specialization (at expense of generalization)-- Keeping up-to-date is a chore
* Becoming a requirement for some IC roles (sometimes a Trump Card)
Inexperienced -- use it for instant credibilityExperienced -- another hoop to jump through
It’s up to you to determine Certvalue for your area
See coriolis.com,certification.com
Joe SA
40
You Need a Longevity Plan
* Avg contract consultant lasts 6 years
* By age 40, < 22% of IT technicians still do technical work
Why ?-- Technical change-- Burnout-- Business model change-- Industry change+ Choice+ Career evolution
As as per Computerworld*
*
Change will happen,be prepared to handle it!
Involuntary
Voluntary
41
How Skills Become Obsolete -- Example
Primary
2ndary
Obsolete
1981 1991 2001
MVS
MVS
DOS
DOS
MVS
VM
VMDOS
OS/2
OS/2
Linuxes
Unixes
Unixes
Windows (desktop & server)
Exercise: map your chart for OSs,DBMSs, Pgming Languages, etc.
42
Skills for Optimal Success
Technical Skills
Business Skills
(Taxes, liability,finding clients,selling yourself)
Personal Skills
(Psychological,Sociological,Leadership)
New Technical Skills
Corollary: Technical skills are only the necessary preconditionfor larger success
Rule 2: Technical skills plusother skills yield greater successthan technical skills alone
43
Contracts
* They are serious
* You better understand them
* Everything is negotiable
* 2-party versus “brokered” or “subcontracted” (3-party)
You have legally agreed to what your contract says ;Nothing anybody says matters.
Or pay a lawyer to understandthem for you.
“Offensive” provisions are commonplace,negotiate out the worst:
* Non-compete* Non-disclosure* Unlimited Liability* Location of adjucation* Severability* Software warranty See samples on
realrates.com andicca.com
44
Insurance
1-person Corp Larger Corp
* General Liability (GL) * Errors & Omissions (E&O) ($300 - $500) * Workman’s Comp * Employee Liability * Fidelity Bond * Other Bonds * Company Auto * Etc. ($ thousands)
See www.ccbsure.com www.techinsurance.com
45
Why Liability Predominates
$0 cost to Plantiff to launch lawsuit
Defendant pays $$ to you,you share with lawyer
Plantiffwins
$0 cost to Plantiff
Defendant pays $$ for legal fees
Contigency Fee System makes the U.S. the Land of Lawsuits“Law Suit Lotto” : no cost to play, and you just might win !
Yes No
46
How Do You Pay Yourself ?
* S-Corp => Corp Accounting, plus 4 quarterly tax filings plus year-end
Alternatives = Do it yourself PC-software H&R Block CPA Enrolled IRS Agent
allincome
Your S-Corp
You
Corpexpenses
payroll
FICA (2 * 7.5%)Fed WH TaxState WH Tax
“I didn’t know!”
All Corp accounting must be separate from your personal finances
47
Finances & Retirement
* Learn how to invest(or pay someone to do it for you)
* Investments determine how well you’ll live after retiring
Vehicles :
* SEP-IRA* Supplemental SEP* SAR-SEP* 401K* Various IRAs* Annuities (Fixed and Variable)* Stocks vs Bonds vs Cash vs Real Estate vs Etc.
“I quit !”
48
How to Get Gigs / Jobs
Pay Someone to find them
DirectMarketing
IndirectMarketing
Brokers(Recruiters)
* Do what Brokers do (“Be your own bork”)
* Do what Brokers can’t do* Clients come to you due to your visibility
gig me,baby !
49
How to do Direct Marketing
ID Companies
ID theirTechnologies
ID Contacts
* Where* Its business* Its structure
* Software* Hardware* Size* IT dept. structure
* Who* Titles / positions / roles* Phone #s / email addresses
Create/maintainRelationships
* Takes time* Difficult due to changes* The hard part !
50
Where to get Direct Marketing Info
Lists :* Local business directories* Purchase IT magazine mailing lists* Other lists
(eg: conference lists, proceedings, user groups, software vendor lists,
hardware vendor lists, lotteries, etc.)Online :
* Online discussion groups & boards (automated scanning)* Company websites* Job websites* Popular techie websites
Print :* Newspapers (Sunday Tribune)* IT trade magazines
Face-to-Face :* Conferences, User Group meetings, Trade Assocations, industry meetings, networking events, etc.
51
Indirect Marketing (Marketing through Visibility)
* Move around within a long-term client* Teach a class* Write magazine articles* Be quoted in magazines* Write for web zines* Give presentations* Be a user group leader* Write a book* Participate in online discussions* Develop freeware* Informal networking
(FTF at conferences, user groups, etc)* IC letter to employment ads - printed / online
52
-- How to Keep a Long-term Client (Transfer around within 1 client)
* Be best on your team* Have a reasonable rate
* Work for all managers* Make no enemies* Appearances count* Results count (not “reasons” aka excuses)* Manage your emotions* Sociological & psychological insights key
IndirectMarketing
Long-term survival is a sociological endeavor
53
Vocational
* Biz partners, leads, CPs * Company co-founders
Institutions
-- Teach a Class
Research
Experience : -- 0 leads ? Yours ?
-- Pay low+ Satisfaction high
IndirectMarketing
54
-- Write Magazine Articles
How to Get Published --* Call editor with your idea* Match the style, length, content
of what they print* Be Accurate; respect their deadlines* Editors will rewrite your English* Improve with practice
Experience ---- Pay poor -- Declining due to web+ Satisfying+ 1 - 20 leads / article
(depends on magazine)
IndirectMarketing
55
-- Be Quoted in Magazines
How to Get In --
* Be “a real IT contact” for a staff writer* Respect their deadlines* Return their calls fast!* Be quotable* Be up on imminent announcements
Experience --+ Makes you “the expert”+ Good leads-- Disruptive
IndirectMarketing
56
-- Write for Web Zines
How to Get Published --
* Same as print media
-- Not refereed, lack status-- Readership ?-- Pay poor + Satisfying=> Suggest Print/Zine combo
Experience --
-- 0 leads ? Your results ?
IndirectMarketing
57
-- Give Presentations
A Public Job Interview
* Users Groups* Conferences* For-profit organizations
+ Great visibility+ Establish you as an “expert”
Experience --
+ Good Leads? Your results ?
IndirectMarketing
58
-- Be a User Group Leader
+ High visibility+ Instant credibility+ Online presence (eg: Sysop / moderator)-- Time intensive (unpaid) Experience --
+ Good Leads+ Personal development
+ Speaking skills+ Leadership skills
? Your results ?
IndirectMarketing
59
-- Write a Book
How to Get Published ==> Produce the book !
+ Expertise (“She wrote the book on it!”)+ Satisfaction -- Effort Required-- Pay -- Obsolesence
# ofauthors
1 2 3 4# books written
# ofauthors
$$
IndirectMarketing
60
-- Internet Discussions
A Public Job Interview
* Pick right forum (topic, size)* Don’t flame / be professional* What you say could be held against you* You’re not talking to a person,
you’re talking to the world !
Experience --
+ Good leads + Friends and learning, too!-- Brokers/Recruiters scan them-- Spam
IndirectMarketing
61
-- Develop Freeware
A Product displays your talentsplus provides the foundation for your company !
(If you’re a Web Developer, make your resume a “wow” website)
Oracle Examples :* Alertview* TOAD* Statspack Viewer
Indirect Marketing
62
Resources
The only Association for ICs
www.icca.orgwww.icca-chicago.orgThey sponsor GO CONSULT on Compuserve800-779-8911 for info
Dues $175 - 275 / yearChicago $30 - $45 / meeting
Annual conference: St. Louis in June
ICCA (Independent Computer Consultants Association)
63
Resources for ICs
Websites for Contractors
* realrates.com* cpuniverse.com* icca.com* guru.com* 1099.com* pacepros.com* nase.org* ilsos.net
Associations
* Independent Computer Consultant’s Association (ICCA)
* National Assocation for the Self-Employed (NASE)
Magazine
* Contract Professional
Books
* Janet Ruhl * Computer Job Survival Guide* Answers for Computer Contractors* Computer Consultant’s Workbook* Computer Consultant’s Guide
* Herman Holtz* How to Succeed as an IC* The Business Plan Guide for ICs* Consultant’s Guide to Getting
Business on the Internet* Gerald Weinberg
* Secrets of Consulting* Peter Meyer
* Getting Started in Computer Consulting
64
To Learn More...
FTE ?
Read Ruhl’sComputer Job Survival Guide
Read Ruhl’s IC books -or-Peter Meyer’s book
Check out ICCAand PACE
Check out websiteslike realrates.com etc.
Yes No
65
??
? ?
?questions...
?
??
?