The work we do is not something we take up to fill our time. For most of us, it helps to feed and clothe us but more than that, it fulfills our need for a purpose in life and desire for achievement. So, unemployment is abhorrent to the spirit of a human being. When I establish myself as an independent contractor, the onus of having enough work falls on me alone and my success is directly correlated to my ability to market myself at a price that meets my requirements and expectations.
Figuring out how much to charge for my consultancy services is, to say the least, not an easy task. I would require a strong understanding of market conditions to take stock of whether my services are in great demand and short supply or vice versa. To illustrate, if the prices have been brought down because most or all components of the service are being performed by machines or outsourced to cheaper locations, it makes sense to bring my prices down rather than fight the flow, as I would be left with no work. Of course, any good marketer will tell you that pricing a service is a balancing act between market driven and cost-based services. A failure on my part to understand the larger picture– where everyone tries to sell high but buy low – would translate to financial hardships and disturb everyone whose lot is linked to mine.
For many services, social media has expanded the competition and turned many services into commodities. Talent exchanges have routinely been used to find translators, graphic designers, and copy writers for pennies on the dollar. They are now expanding to include “higher” skills in IT, R&D, Legal, F&A and other professional disciplines. While many freelancers use these sites to find business opportunities, the challenge is to determine whether one can be competitive while covering required costs.
Being an independent contractor can be expensive. As an independent contractor, I am solely responsible for paying federal and state employment taxes, paying for healthcare insurance, and carrying liability insurance. When I work on a time and materials basis, I am only paid for hours worked. I am not compensated for the hours spent marketing my skills. Pension planning rests with me. After factoring in all of these costs, the rate paid must justify the effort extended.
Here are some universal truths I have gathered along the way. A regular job provides the kind of safety and stability which independent employment can never offer. Even for skilled workers, there is an attraction in not having to manage their own affairs, find work for themselves, and undersell their services so that they can get the contract; even if the income is lower.
So, if you are considering a career as an independent contractor, you need to have a strategy in place to calibrate your bill rate in such a way as to keep the contracts coming in. I trust that some of the following tips on managing your bill rate may come in handy, to your endeavors:
It is better to go seek employment, if you find that what you are earning over a period is consistently not paying you enough to meet your expenses, overheads, payments to others employed by you and leave you with reasonable profit margin (which should at least be equal to what you would be earning if you had a paid job; if not more!) If any of you have perfected a different approach, please write in and share it with us!
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