How I started my own business
In a previous post, I told how I started consulting. Or more correctly, I was thrown out of the full-time employment nest and left to fend for myself. I had done a year or so of staff-aug consulting as a W2 (hourly) employee of a consulting shop.
Let’s talk about staff-aug
Staff-aug is short for staff augmentation. You work with a company that has full-time development staff and their own ideas about developing software. You show up at their worksite, work with their team and their processes. You’re paid by the hour. You’re a pseudo employee (not that there’s anything wrong with that).
Let’s talk about consulting firms
Software development skills are in high demand. Even in the midst of the 2009 downturn, I was able to find work, even with outdated skills. Skilled developers are hard to find. Companies who develop software know this.
On the other side, it’s also hard for developers to find companies that need development help. Fortunately, there is a massive industry dedicated to bringing devs and companies together. These are consulting firms. Head shops. Whatever what you want to call them. They have teams of people pounding the pavement trying to meet hiring managers who need development help. They also have teams of people pounding the pavement to meet devs like you. Is this a match made in heaven?
The first level of software consulting.
If you’re looking to start software consulting, working through consulting firms is the easiest path. You get 3-6 months of steady work at a premium rate (compared to your FTE salary). The work is similar to what you’re already used to doing. When your gig is finished, there are people pounding the pavement to find you another one. It’s an easy process to meet the consulting firm’s recruiters, their entire job consists of meeting devs like you. Some devs work like this for decades.
But there’s a catch.
The head shops take a large cut of the value you provide. Some companies take over 50% of the fees billed to the client you’re working for.
Let’s talk about W2
As a W2 employee, you’re paid by the hour as an employee of the consulting firm who placed you. But the consulting firm doesn’t provide any benefits like health insurance.
No benefits? What if I need to see a doctor?
Hold on. We’ll get to that in a bit. But the short answer is to not worry about it. You can buy health insurance. And your full-time employer isn’t providing as much help to pay your premiums as you think.
Time to level up
The head shops work hard to connect devs and companies. If you do that work yourself, you can get a bigger share of the value you provide. I didn’t have any other work lined up from my network. But I could start my own company.
How I formed my own company
On June 13, 2010, I went down to the State offices in St Paul, filled out some paperwork and wrote out a check for $220. Just like that, I had own company, Sharp Five Software. From there I was able to register Sharp Five Software with the U.S. government and open a corporate bank account. The bank account is crucial. It’s important to have separate finances from your personal life. But more on that somewhere down the road.
The whole process took 1/2 a day. I was a business owner.
I was still looking for staff-aug work. But I could now work out arrangements directly with the companies.
The downside of staff-aug
When you’re working through the consulting firms. You’re stuck with their process. The entire industry is set around placing devs for 3-6 months at a time, for 40 hours a week. Deviation from this is difficult. If you want to work part-time or have flexible hours, you’re going to have a bad time. Another downside is there is a set rate for your skill-set and experience. There isn’t much you can do to distinguish yourself. If you provide more value than the average developer and want to translate that to a higher rate, you’re going to have a bad time. You are a commodity.
That sounds terrible
It’s true. But that’s all I knew. So I took my first gig (as an independent consultant) through a consulting firm. A small company needed help getting some features built for their schedule estimation app. The owner contacted a consulting firm who had done a similar project in the past. That firm didn’t have .NET expertise. They contacted another company who specialized in .NET development. The .NET company contacted me. My company made an arrangement to have its sole employee (me) do work through the .NET company who was a pass-through to the main consulting firm who handled the relationship with the end client.
Sound convoluted? Yep.
Was there now two companies taking their cut from the value my work provided? Yep.
But I was an independent consultant, running my own business, and loving it.
In the meantime, I was pounding the pavement meeting people in the local tech industry. I was also working hard to level-up my skill-set. Remember, skills get you in the door.
That work was starting to pay off
So how do your find your own clients?
Next post we’ll show how I began making connections through the people i was meeting. I was beginning to work directly with the companies that needed my help, and not have consulting firms taking a big chunk of my rate.