KickIdle.com Blog

In January, I completed my first 12 months as a independent consultant. Here’s a list of things that I learned, good and bad, over the first year of working independently….

Liability insurance costs. My liability insurance (with limits required by my client) ran over $2300 per year in premiums.
Extra paperwork. Despite having a healthy expectation for the increase in paperwork, it was still more than I anticipated. Tax forms, both federal and state, payroll, insurance audits, invoicing, billing errors, and on and on.
Tax savings. As a normal employee, you can put $15,500 (for 2008) into your 401(k). As a small business owner/operator, I can put $15,500 of my salary AND 20% of the profit of the company into the 401(k). This can add up to a huge number! And that additional contribution from the company is tax deductible, just like your salary deferral.
Fulfillment. I’ve always tried to bring a good attitude to work, but it’s a amazing the extra boost you feel when you wake up in the morning and realize you’re working for yourself. You still have to please your bosses of course. But now your bosses are your clients. And solving problems for them nurtures a positive win-win relationship instead of putting in extra hours for no reward.
Risk Planning. If you don’t already save something for a rainy day, you will get in trouble running your own business. Especially in a consultancy like mine, if you lose a primary client there may be a significant time before you can close another contract. You need to have adequate funds to cover those dry spells.
Banking hassles. As an employee, your employer probably offers you direct deposit. For independent consultants, that’s not as common. When you’re independent, your bills go through the accounts payable department at your client, not the payroll department. One consequence of this difference is that you are much more likely to receive paper checks for payment.
Income delays. Another direct consequence of your pay coming through the accounts payable department is that your checks may not be sent every week. So if your client typically pays on “Net 30″ terms, you won’t be paid until 30 days after you send them an invoice. This is another reason to have good cash flow management skills.

All told, I have really enjoyed the last year. Some of the things mentioned above are negative, but I would still recommend the experience to anyone who is ready to work to achieve success.
Have you already started a small business? What lessons did you learn that I haven’t mentioned?