IT consulting: Is moving out on your own the right move?
Is it time to give up the work a day world and start your own consulting business? Experts weigh-in on the pros of cons of going your own way.
By Rich Hein
Have you ever thought about building your own tech consulting business? If so, you're not alone. Creating your own schedule, getting paid better, working closer to parts of projects you're passionate about and specializing in a specific area of expertise are appealing benefits.
Whether you're a full-time W-2 employee or consultant getting a 1099, remember that the grass isn't always greener. The role you will excel at will depend on who you are and what you want. "Both are viable career paths and it can largely be a choice based on personal style and preferences," says Alan Levine, principal and CIO at Enabling Digital.
It's understandable why you might be considering going down the consulting path. For some, a full-time position can grow stale from working in the same environment, seeing the same people and dealing with the same problems day after day. "There can be an inherent lack of diversity, more limited exposure to different approaches. You may only experience certain types of projects once and only have one shot at success -- for instance, a major CRM application implementation," says Levine.
Many times in your career you may find yourself at a crossroads. Neither direction is the right or wrong path, but if you consider the pros and cons carefully, you should be able to make the smarter choice. To help you get closer to the answer, we spoke with c-level tech experts to find out what you need to consider.
Current market trends
In a recent report IT resourcing provider, TEKsystems surveyed businesses and found that heading into 2015 Q2, a majority of businesses (51 percent) planned to hire more IT contractors. "Most IT leaders are not seeing significant changes in terms of budget expectations, confidence, impact areas or difficulty in securing skill sets as compared to when we entered the year," research manager Jason Hayman wrote in the report. "But, where we have seen significant change is in the area of contingent hiring, which has seen a major shift towards increased hiring plans. Employment growth was robust in 2014, at least by recent standards, and most signs point to continued growth in 2015," Hayman writes. This bodes well for IT pros considering moving to the consulting sides of things.
However, Matt Brosseau, CTO at Instant Alliance, says he's seeing something different in today's IT world. From his perspective there is a definite push for organizations to bring more talent in-house. "More and more companies want to bring talent and unique skills in-house to stay ahead of the technology curve," Brosseau says.
That said, there will always be a place for the tech consultants. "With more companies starting to implement cyber-security, cloud collaboration and mobile systems there is certainly still a place for talented consultants to serve as a subject matter experts during implementation and upgrade projects," Brosseau says.
Is your skill set up to par?
Unless the organization you're working for is truly a digital company it's difficult to stay ahead or even keep up with the technology curve. As a result, full-time employees working with one employer could find themselves with a skill set no longer in demand or with fewer job opportunities. "Not being able to work on the newest, most relevant systems means that your skillset may become outdated. This obviously isn't universal, but it is a real risk of long-term, full-time employment within technology," Brosseau says.
Working as a full-time employee you are locked into whatever technology your company employs. It could be the newest, hottest technology or it could be a legacy nightmare. Chances are it will be somewhere in between. If you're going to move into consulting consider freshening up your skills. There are a number of ways to do this. College or online courses, boot camps, LinkedIn groups and developer meetups are a great way to find opportunities. There are also a number of free learning opportunities online.
Less control over the project
Levine says that people considering the consulting path must recognize the differences that come with the role. You will have a finite amount of time working in any one role. Consultants make recommendations but that doesn't mean companies always listen. This can be a frustrating scenario when you see an organization setting themselves up for problems later.
"As a consultant you may be making recommendations and developing strategy and plans, but not be the final decision maker. You may have less influence over the actual implementation. Focus may be on short-term deliverables and even if these deliverables involve long-term strategy and plans, you may not have the opportunity to see those plans through. Rather than the continuous refinement and adjustment you might make as a full-time CIO, you may only get one shot, or be invited back only at discrete points for updates," Levine says.
You pay for everything
From healthcare to vacation, you pay for it all. As a consultant there are costs you may not have considered and as our experts report it will be far more time consuming than you anticipate. "There is, of course, the overhead associated with consulting, business development and marketing, administration and accounting/finance. You must be prepared to devote serious effort in these areas," says Levine says. (This LinkedIn article highlights the monetary differences between being an independent contractor vs. a full-time employee.)
According to recent data from Gallup, the average U.S. worker works just under 47 hours a week. Running your own business will likely require more. Any good small business owner will tell you that between doing the part of the job you love, keeping your financials straight and marketing yourself in both the real and digital world is a full-time job and half.
Working as a consultant, you do get paid more but there is all the overhead you have to pay for, combined with the need to steadfastly pay taxes owed. Those who aren't careful about putting tax money aside can find they owe big tax dollars when the April 15th deadline hits.
"Obviously you are responsible for estimated tax payments as there will be no withholding and self-employment taxes. That is offset by the availability of additional deductions for expenses such as home office, equipment, software, travel and entertainment," Levine says.
Most find it easiest to work with an accountant to figure estimated taxes and then pay on those estimated taxes. Making sure this tax number is correct will save you a lot of heartache come tax time.
Paying for healthcare
Paying for healthcare on your own can cost more than your mortgage depending on the size of your family and medical needs. There are things you can do to mitigate the cost. Does your spouse's organization offer decent healthcare? If yes, it will likely be cheaper to be added to that plan than getting one independently. Others have formed LLCs with other contractors to take advantage of group rates.
"Healthcare is now available through the Affordable Care Act, and often you can join professional associations that offer group health plans. As your business grows, there are options to provide small-business group plans as well," Levine says.
No paid vacations
No surprise here, working for yourself means if you're on vacation you aren't billing any hours and that means no incoming cash. As a result, you'll find many consultants take their work with them on vacation.
"Consulting allows for a lot of flexibility. Professionals are able to focus on the part of their job they enjoy most and seek out projects that offer those specific experiences," Brosseau says.
However, setting your own hours is great but distractions are everywhere. You've got to be great at time management and productivity if you've got any hope of having a successful business or a personal life.
Things happen that are out of your control. That's why having multiple clients is always the safest bet. "No consulting opportunity will be as stable as a full-time job. Project budgets get cut, new software options make implementations obsolete, and there are a lot of variables that could lead to a one-year consulting contract being shortened or all together terminated," Brosseau says.
It can get lonely
Understand going into tech consulting that for many jobs and contracts you will be working on your own with limited interaction. This can be tough on people who need the human connection of working in an office.
Are you financially ready?
There will never be a perfect time to make a move this big, but quitting your job with no cash to float you through the tough times has ended many dreams. Before you quit your full-time position, make sure you have clients lined up and a cash reserve to get you both through the startup phase and through the lean times.
Find a mentor
Finding a mentor to help you along the way can only increase your chance for success. Are any of your coworkers consulting on the side? Have you checked your social networks for friends who are consulting? You could also look into trade groups online where you can ask questions of other contractors. Here, for example, is a LinkedIn discussion on full-time employment versus IT contracting.
Consider doing both
Starting your own business working as a tech consultant can seem scary, which is why the perceived security of the full-time job can seem like a great path for those who can pull off working as a consultant while not give up your day job. However, you need to be acutely aware of your contractual obligations to your full-time employer specifically around intellectual property.
Another thing to keep in mind if you go this route: You need to be sure you aren't conducting any personal business on company time. Whether it's phone calls, company computers or emailing from work, it's a mistake that's sure to bite you. "You must steadfastly avoid conflicts of interest and be very careful to be able to devote both the required time and energy to both," Levine says.
Being a consultant isn't for everyone. You need to be a jack of all trades and be able to learn quickly. It takes preparation, agility and the courage to hang your hat on your skill set and the ability to market yourself.
Consultants are necessary to get the job done and the need for them is going away. Some of it comes down to critical timing. In other situations an organization might realize it will need a skill only during the implementation phase of a project and other times they simply need someone out of their internal hierarchy to separate the politics from getting the job done. There are opportunities out there -- you just have to be willing to go after them.