Editors Note: This issue of the newsletter contains an article by Ken Wallace of Ken Wallace Design out of Chicago. He was answering an oft-repeated news list question of someone who was thinking of becoming an independent. He gave me permission to print his thorough response. Thanks Ken.

Becoming a Consultant by Ken Wallace

In short, there is no quick and easy formula to starting out on your own. Mind you, I've only been working for myself since last June. I am by no means an expert. I learn day-by-day how to market myself, handle finances, manage client relationships, and stay motivated to crawl out of the bed every morning at a reasonable hour (guess which one is the toughest?) :)

I can only convey to you how I am going about "making it" on my own, and maybe you can find some useful nuggets. I think the number one theme should be "Organize your ships before you set out for the New World. "Planning ahead can only help your new endeavor. Everything after this point is based solely on my modest experience.

I was lucky when I left THE COMPANY because I already had a very well rounded network of contacts which were hounding me to do some work for them. These included managers from jobs twice-removed, unsatisfied past clients of THE COMPANY (who mentioned to me that they loved my work but hated talking through my company's middle managers), and others. Instead of doing some sort of moonlighting work, which could jeopardize my full time employer's non-compete contract, I gently persuaded these contacts to wait a couple months for me to serve them when I started out independently.

I also had set up my home office, letterhead, invoicing system, etc, while I was still on the steady paycheck. I took the initiative to pay off some overdue bills, save up a little nest egg, and all-in-all make sure I was financially stable. In my case, I only saved up enough to last me for 2 months without a paycheck, and, although it worked out alright, I wish I had saved a bit more before leaving the mother ship.

I can't imagine starting out on my own with zero client prospects. Unless you have some major angel financing backing your endeavor, a rich relative just bequeathed major amounts of capital in a Suisse Banc account in your name, or your spouse is a multi-millionaire - you just have to be realistic. Think, preferably before you quit your day job, who am I going to work with, what clients am I going to pursue, and which potential clients, if I called them tomorrow, would sign on the dotted line.

I found it necessary, for my own peace of mind, to require my clients pay me a certain amount in advance. I appended the meat of my fee structure below.

Since I am currently a one-man operation, my clients understand that when I agree to begin work on a long-term project of any size, I am actually turning away work in the interim. My clients pay me for the luxury of having my reasonably undivided attention for the duration of our project, and they've told me that paying 30% or 40% is a small price to pay to know that I'm not taking time away from their project to work days at the local McDonalds in order to make ends meet.

At maximum, I juggle three projects simultaneously - perhaps one large project and two small, easy, quick-hit jobs to round out the billing cycle. Any more than that and I feel I am short-changing my clients.

All that said, there are MANY resources out there for aspiring independent consultants.

In my humble opinion, I think the very best online site for finding and attracting work is Guru.com (www.guru.com). It takes about 30 minutes to get your account set up, but it is free and worth your time. They have about a 70/30 split, small/large-scale projects. In addition to the actual available gigs, they have many articles by industry professionals (who are many times smarter than myself), and links to resource sites, legal advice, online guilds, associations and organizations.

Personally, I don't get my jobs through Guru, simply because I am blessed to be working in Chicago, where it seems there are more fish to shoot in the same-sized barrel. One gig has just been "magically" leading to the next, and I haven't had to respond to many RFP's on Guru -knock on wood-, but I keep going back for the free advice and resources. I have also invested in my library.

Of course, I spend about $200 per month in techie-type books and/or graphic design-oriented books, but I've bought many books on small-business management, home office psychology, marketing, self-promotion, and small-business legal advice. Unfortunately, more small business startup books are written for independent graphic designers or freelance writers than for freelance web professionals, yet read them anyway. You will be pleasantly surprised to find out how similar our fields are and how much of the advice applies to web development professionals.

Also, nearly all graphic design industry books (the "Graphic Artists Guild Handbook: Pricing & Ethical Guidelines" I list below, for example) cover web design contracts, legal advice, fee structures, and client relationship methodologies as they relate specifically to Web Developers/Web Designers simply because as a matter of course most graphic designers these days must do a certain amount of web work.

A small sampling of the books I've found most useful would include: (Because this post is already getting too long-winded, I'll refrain from giving you book reviews on each. Using the provided ISBN's, you can look the books up on Amazon.com and read the reviews. Also Amazon lets you read excerpts from many books as well as viewing the Table of Contents.)

- Harvard Business Review on Entrepreneurship by The Harvard Business School Press, ISBN: 0875849105

- Graphic Artists Guild Handbook: Pricing & Ethical Guidelines by The Graphic Artists Guild Press, ISBN: 0932102115

- Too Lazy to Work, Too Nervous to Steal: How to Have a Great Life as a Freelancer by John Clausen, ISBN: 089879997X

- Your Perfect Home-Based Studio by Poppy Evans, ISBN: 1581801327

- Business and Legal Forms for Graphic Designers by Tad Crawford, et. al., ISBN: 158115030X

- The Creative Priority: Putting Innovation to Work in Your Business by Jerry Hirshberg, founder and president Nissan Design Internat'l ISBN: 0887309607

- The Graphic Designers Guide to Pricing, Estimating, and Budgeting by T.S. Williams, ISBN: 1581150989

- AIGA: Professional Practices in Graphic Design by American Institute of Graphic Arts, ISBN: 1880559897

- Becoming a Graphic Designer (starting around p.196 on Freelancing) by Steven Heller, et. al., ISBN: 0471292990

- Managing Software Requirements: A Unified Approach by Leffingwell & Widrig, ISBN: 0201615932

- The Fifth Discipline: The Art & Practice of the Learning Organization by Peter M. Senge, ISBN:0385260954

- The 22 Immutable Laws of Marketing by Al Ries & Jack Trout, ISBN: 0887306667

The above books, whether the title implies it or not, are extremely helpful in managing my emerging small business for varying reasons. I have read each cover-to-cover, yet I also keep each close to my desk in case I need to reference something.

What to Charge? This varies, quite honestly, depending on your experience, your area, and your clientele.

Well, for starters you obviously need to think about your overhead. Your rent, computer maintenance costs, paper for the printer, power bills, FOOD, credit cards, etc. Taking into account your overhead will help you arrive at a standard hourly rate. This is commonly anywhere from $20/hour to $150+/hour. I'll just say I fall comfortably in the middle of that range. ;)

Next, think about who your clients are, as well. Non-profits and educational institutions can't pay as much as old-economy, blue-chip companies, startup manufacturing firms can't pay as much as Nike. Be reasonable, keeping an eye on your bottom line and on your future relationship potential with each client. 10 huge, long-term jobs at a lower-than-normal rate might just be worth choosing over one small, premium-paying job with no hope for future work because you are building a sustainable relationship.

The following excerpted from: "11/20/01 [jobs/consult] What are some common payment schedules?"

I use the following as a guide for my freelancing, although I do modify things for certain clients:

Tier 4 Projects (Small, up to $2,000) - Total Payment Due upon delivery.** (negotiable)

Tier 3 Projects ($2,001-$10,000) - 30% of total cost due before work begins.* - 30% due on project delivery deadline** - 40% due Net 15 after completion***

Tier 2 Projects ($10,001-$20,000) - 30% of total cost due before work begins.* - 40% due on project delivery deadline** - 30% due Net 15 after completion*** (Net 30 negotiable)

Tier 1 Projects ($20,001+) - 40% of total cost due before work begins.* - 30% due on project delivery deadline** - 30% due Net 30 after completion***

* This is a deposit. This verifies the clients resolve to pay for the work completed, so that the developer is never just working on a handshake or just good faith.

** In the case of a delivered project, the work is demonstrated to the client to be finished. The client does not own or have license to use the work until this payment is received. In the case of a major milestone or mock-up in place of a delivery, this payment needs to be received before revisions, alterations or other phases are begun.

*** This payment is designed to give leverage to the client in the event of any quality-related issues, as well as to allow budget flexibility for the client.

As you can see, as projects get larger, the financial risk is shifted increasingly toward the client and away from the contractor (me). The 40% chunk shifts closer to the contractor to offset the risk, as the higher priced projects usually mean that the contractor is turning away other work for an increasingly significant amount of time.

Also, higher priced jobs are higher profile budget items on the client's end, so these projects are more likely to encounter problems. If the project is cancelled due to internal client forces, or the client cannot pay when it is finally delivered (or any number of reasons outside my control), the contractor has already been compensated for the increased risk.

End excerpt

Well, since my life as an independent contractor is still unfolding, this is about all the advice I feel comfortable giving in this forum. I look forward to hearing other opinions!!

Best wishes!
Ken