Ask HN: Can a contractor earn as much or more than a full-time employee?
8 comments
Contracting can be very lucrative. It is also extremely flexible. It also involves a lot of tasks that you don't need to think about as an FTE.
Importantly, it also usually grows through a daunting non-linear curve where:
1. [Scary Phase] you don't have enough work in the beginning and don't know how to find it and freak out and look at FTE job listings and think about giving up.
2. [Frustrating Phase] you start accumulating good clients and bad clients and have to learn to avoid new bad ones and shake existing bad ones; you feel like you're always working with the bad ones and are neglecting the good ones.
3. [Lucrative Phase] you're good clients keep coming back with fresh work and you've really gotten the hang of getting new leads without even trying and you have more work than you can handle on your own. And if you have good business instincts, you're earning quite a lot.
Often (but not always), it can take quite a while to get to (3).
Importantly, it also usually grows through a daunting non-linear curve where:
1. [Scary Phase] you don't have enough work in the beginning and don't know how to find it and freak out and look at FTE job listings and think about giving up.
2. [Frustrating Phase] you start accumulating good clients and bad clients and have to learn to avoid new bad ones and shake existing bad ones; you feel like you're always working with the bad ones and are neglecting the good ones.
3. [Lucrative Phase] you're good clients keep coming back with fresh work and you've really gotten the hang of getting new leads without even trying and you have more work than you can handle on your own. And if you have good business instincts, you're earning quite a lot.
Often (but not always), it can take quite a while to get to (3).
That's a hopeful one! It sounds like I could pick up from where I left off and keep growing from there, thanks!
How do you identify a bad client?
They either:
- don’t pay
- don’t pay on time
- want to low ball you on bids
- don’t follow your advice
- get upset when the pain you told them would happen if they ignore your advice, happens
- are verbally abusive or manipulative
- anything else that makes you unhappy working for them
Bottom line my mentor taught me to take work from the troublesome clients but to make sure their rate was sufficiently high so that I was always happy to work for them. They can be jerks but I would smile because I knew I was getting a fat check from them. Experience has shown me however crap loads of cash aren’t always enough.
- don’t pay
- don’t pay on time
- want to low ball you on bids
- don’t follow your advice
- get upset when the pain you told them would happen if they ignore your advice, happens
- are verbally abusive or manipulative
- anything else that makes you unhappy working for them
Bottom line my mentor taught me to take work from the troublesome clients but to make sure their rate was sufficiently high so that I was always happy to work for them. They can be jerks but I would smile because I knew I was getting a fat check from them. Experience has shown me however crap loads of cash aren’t always enough.
In a way, it's personal. Any client that makes you really stressed out and leaves you feeling tempted to avoid their calls and ignore their messages is a bad client for you. With practice, you'll figure out why that is and whether it needs to be that way. Sometimes you can even turn a bad client into a good client by adapting things on your end.
In a broader perspective, a lot of people have trouble with clients that
- don't communicate
- don't listen
- don't learn
- don't respect boundaries
- don't pay
In a broader perspective, a lot of people have trouble with clients that
- don't communicate
- don't listen
- don't learn
- don't respect boundaries
- don't pay
The amount of money you can earn as a contractor depends heavily on your brand. From what I've heard from contractors, their playbook seems to be the following:
1. Work to increase strength of brand to get more leads.
2. When number of leads exceeds capacity, increase prices until number of leads are manageable.
3. Go to step 1.
The hard thing here is of course to increase the strength of your brand. The easiest way to do that is to pidgeonhole yourself into a very narrow area of specialization (SEO, effectively), attend / speak at relevant conferences, write books / articles about it.
1. Work to increase strength of brand to get more leads.
2. When number of leads exceeds capacity, increase prices until number of leads are manageable.
3. Go to step 1.
The hard thing here is of course to increase the strength of your brand. The easiest way to do that is to pidgeonhole yourself into a very narrow area of specialization (SEO, effectively), attend / speak at relevant conferences, write books / articles about it.
This makes sense. #1 feels like building a product/business, which I've tried many times and the marketing part is ALWAYS hard!
I guess iOS, front, and back-end aren't exactly niche, though.
I guess iOS, front, and back-end aren't exactly niche, though.
Many times consultants specialize in certain industries. I know one consultant that charges $200+/hour + expenses for basically energy industry data processing and custom reporting. I imagine that there are a ton of people in banking/finance systems that charge that much or more for their knowledge about the regulations and how some of that data should be processed.
There’s horizontal and vertical specialization. Your “vertical” is your “ideal clients”, and your “horizontal” is your product.
Solve an expensive problem for a niche industry and roll in gold.
Solve an expensive problem for a niche industry and roll in gold.
The upside of being a freelancer / contractor is that you make 100% of the rate you charge. The downside is that you have to take care of all the overheard as well (lead generation, benefits, tools, accounting, etc).
If you're able to charge a high enough rate, then yes you will make more money than you could in most full time positions. But this depends alot on your ability to market yourself and handle the overhead I mentioned.
If you're able to charge a high enough rate, then yes you will make more money than you could in most full time positions. But this depends alot on your ability to market yourself and handle the overhead I mentioned.
This makes sense, this correlates with what undreren said.
https://news.ycombinator.com/item?id=17868192
https://news.ycombinator.com/item?id=17868192
In my experience, the majority of contracts are offered 100% as a way to avoid having to pay benefits or make any sort of real commitment. The so-called lucrative contracts are the exception.
It's also going to depend on if you find a certain type of repetitive niche where you are just reusing the same speeches or libraries over and over again or where you really are engaged with unique problems.
It's also going to depend on if you find a certain type of repetitive niche where you are just reusing the same speeches or libraries over and over again or where you really are engaged with unique problems.
Clients want contractors so that they don’t need the commitment of an employee. This is a benefit to the Client that the contractor can charge a premium for. Therefore, if the contractor can find enough clients and is able to handle their overhead efficiently, they can make a lot more money than an employee. The downside is that the contractor needs to be willing/interested/effective at marketing and managing overhead.
To me the question is a lot like “what type of company should I work for”. It depends on your skills, interests and values.
To me the question is a lot like “what type of company should I work for”. It depends on your skills, interests and values.
This makes sense, yet it contradicts with https://news.ycombinator.com/item?id=17869727, which argues that there's a trade-off between income and freedom.
But maybe they all fit into some sort of balance between income, self-marketing, and freedom? Oh man, that really makes me want to get into contracting again!
But maybe they all fit into some sort of balance between income, self-marketing, and freedom? Oh man, that really makes me want to get into contracting again!
I don’t think our two comments are mutually exclusive. One could be a contractor only working a few small jobs or off and on. In that case you’d have more freedom but not make as much.
This doesn't directly answer your question, but there is some silliness in the way some large companies hire contractors that typically prevents an individual contractor from making more (including benefits) than an employee. I know somebody who was able to work around this that I'll describe at the end of the post.
Many companies prefer to hire contractors through agencies they trust or professional services companies. Sometimes this is just baked into HR policy so you can't hire an individual contractor even if you want to. I used to work for a services company that charged customers ~$225/hr for US based people with specialized expertise in a certain area. The employees would get less than 50% of that in salary, but it probably came to 50-60% of that if you added in benefits.
Note that "specialized expertise" is really broad and many customers were paying premium rates for very average consultants. The customers that really needed experts cycled through a few average consultants before getting a great one.
I've also been at the other end of this, being the person who was hiring through an agency who charged ~$150/hr and paid their actual contractors much less. Again, the quality of the "experts" on their end varied widely.
At those rates, if you paid an individual directly you could get somebody amazing. But none of these companies were willing to do that and directly hire a great person for 75% of what they were paying a firm to do the same (or worse) work.
I knew one person who found a way around this. He was part of a professional services group and was contracted to a large company for 2+ years (multiple short term contracts) and built a bunch of custom stuff for them. He was literally the only person on earth who understood what he had built. He was also really good, so you couldn't replace him easily. He had some family issues and had to quit from the services company to take care of family.
The large company had no choice but to hire him directly as a contractor and give him a lot of leeway in his work schedule so he could take care of his family. He got a great rate and made that work for multiple years. I think the large company wanted to hire him as an employee, but he had no interest in getting pulled into their day-to-day politics.
Many companies prefer to hire contractors through agencies they trust or professional services companies. Sometimes this is just baked into HR policy so you can't hire an individual contractor even if you want to. I used to work for a services company that charged customers ~$225/hr for US based people with specialized expertise in a certain area. The employees would get less than 50% of that in salary, but it probably came to 50-60% of that if you added in benefits.
Note that "specialized expertise" is really broad and many customers were paying premium rates for very average consultants. The customers that really needed experts cycled through a few average consultants before getting a great one.
I've also been at the other end of this, being the person who was hiring through an agency who charged ~$150/hr and paid their actual contractors much less. Again, the quality of the "experts" on their end varied widely.
At those rates, if you paid an individual directly you could get somebody amazing. But none of these companies were willing to do that and directly hire a great person for 75% of what they were paying a firm to do the same (or worse) work.
I knew one person who found a way around this. He was part of a professional services group and was contracted to a large company for 2+ years (multiple short term contracts) and built a bunch of custom stuff for them. He was literally the only person on earth who understood what he had built. He was also really good, so you couldn't replace him easily. He had some family issues and had to quit from the services company to take care of family.
The large company had no choice but to hire him directly as a contractor and give him a lot of leeway in his work schedule so he could take care of his family. He got a great rate and made that work for multiple years. I think the large company wanted to hire him as an employee, but he had no interest in getting pulled into their day-to-day politics.
For those wondering why HR prefers to pay more for contractors through agencies, the biggest reason is so that they limit the risk of a contractor being labeled retroactively as an employee. The other reason is consolidation. It's one set of paperwork to do instead of 50.
> He was literally the only person on earth who understood what he had built.
This is often not a good sign, i.e. if the code is so messy no one can understand it. But if it's so technically challenging only him can understand, then that's a great position to be in!
I guess the tldr of your story is to stay away from these big companies and to work directly for your clients?
This is often not a good sign, i.e. if the code is so messy no one can understand it. But if it's so technically challenging only him can understand, then that's a great position to be in!
I guess the tldr of your story is to stay away from these big companies and to work directly for your clients?
>This is often not a good sign, i.e. if the code is so messy no one can understand it. But if it's so technically challenging only him can understand, then that's a great position to be in!
What he built required specialized knowledge of a GUI driven product that had a very convoluted C# SDK for developing custom add-ons. So it was less about messy code and more about there being very few people who could understand all 4 aspects (The product, C#, the SDK, and how the SDK related to the GUI).
>I guess the tldr of your story is to stay away from these big companies and to work directly for your clients?
Yes and No. Sometimes to get paid well as a contractor you need to find other ways to get gigs than finding standard contract recruitment that comes through LinkedIn. In the case of the person I knew, he had basically created an add-on product and was charging hourly for services to maintain and add features.
What he built required specialized knowledge of a GUI driven product that had a very convoluted C# SDK for developing custom add-ons. So it was less about messy code and more about there being very few people who could understand all 4 aspects (The product, C#, the SDK, and how the SDK related to the GUI).
>I guess the tldr of your story is to stay away from these big companies and to work directly for your clients?
Yes and No. Sometimes to get paid well as a contractor you need to find other ways to get gigs than finding standard contract recruitment that comes through LinkedIn. In the case of the person I knew, he had basically created an add-on product and was charging hourly for services to maintain and add features.
You are looking at it the wrong way. What you lose in income, you gain in flexibility and self-reliance. If you get very good at it (deep specialization or a knack for finding contracts) it may equalize in income but that should not be the point.
Just as working for a startup shouldn't be driven by dreams of riches.
Just as working for a startup shouldn't be driven by dreams of riches.
Right, trade-offs! Thanks for the mindset shift!
you might consider keeping your FT job, and as a side-hustle, subcontracting those "thousands of contract work offers" with third-world professionals acting as an agency.
> subcontracting those "thousands of contract work offers" with third-world professionals acting as an agency
Aka the easiest way to ruin your brand and deliver shit work. If the clients wanted work done by "third-world professionals" they would hire them directly; the reason they're contacting you instead is because you have some credentials, references, etc that the third-world guys don't have; now do you wanna bet all of that on unvetted third-world freelancers?
Aka the easiest way to ruin your brand and deliver shit work. If the clients wanted work done by "third-world professionals" they would hire them directly; the reason they're contacting you instead is because you have some credentials, references, etc that the third-world guys don't have; now do you wanna bet all of that on unvetted third-world freelancers?
Oh thanks for adding that, totally agreed.
I initially misunderstood the suggestion as taking those contract as side gigs.
I initially misunderstood the suggestion as taking those contract as side gigs.
It sounds rational and lucrative, but I work for myself outside of my FT job. I've got a few projects I'm trying to launch.
* http://niche.fm (on hold after an ugly launch https://www.indiehackers.com/forum/ask-ih-no-traction-post-l...)
* http://yoga.now.sh (WIP, about to launch this guy. The actual domain is http://specs.yoga, but I've got staging and prod reversed)
* http://niche.fm (on hold after an ugly launch https://www.indiehackers.com/forum/ask-ih-no-traction-post-l...)
* http://yoga.now.sh (WIP, about to launch this guy. The actual domain is http://specs.yoga, but I've got staging and prod reversed)
As a FT employee now, I keep getting thousands of contract work offers, but these don't seem attractive from my previous experience.
Is there any of you out here able to consistently get contract work, which in the long term earn you as much or more than as a FT employee?
(in the context of software development, mobile/front-end/back-end)