[PaulAJ]

Also missing from this are:

* The time you spend managing and supervising, including desk-checking the stuff they send out, because it goes out under your name and you are only as good as your last job.

* IT costs, and office space if they aren't working from home.

* Liability insurance in case they screw up. (Not certain about this: maybe you just trust that your company is a sufficient legal firewall because its only asset is you).

I remember back around 1990 hearing that for my big company employer putting a coder in a seat in front of a computer cost roughly twice their salary. That's still true today.

[cbsmith]

> The time you spend managing and supervising, including desk-checking the stuff they send out, because it goes out under your name and you are only as good as your last job.

The article effectively references this when it starts talking about having to pay for a full-time manager once you have five employees. If you've added only one employee, this is largely a cost that is paid proportional to their billable hours, and you only need to be slightly more diligent than your client, so it's not much of a loss.

> IT costs, and office space if they aren't working from home.

For a small-scale consulting business, usually they're working remote or on-site, so you don't necessarily bear any office space costs. There is, invariably, some IT costs that you bear yourself, but you already have those when you're operating on your own, and the additional cost for your first employee is all but trivial compared to the billables you should be adding.

> Liability insurance in case they screw up. (Not certain about this: maybe you just trust that your company is a sufficient legal firewall because its only asset is you).

More often than not, customers want you to have liability insurance because you don't have a lot of assets they can grab in the event sue you, so the better your legal firewall, the more likely you'll have to pay for liability insurance. Still, it's a 1% cost, so not a big factor.

> I remember back around 1990 hearing that for my big company employer putting a coder in a seat in front of a computer cost roughly twice their salary. That's still true today.

That's what the article says. It actually argues that with consulting businesses, it's more like triple their salary.

[jenadine]

And then there is the risk that a customer don't pay for a reason or another and you need to take the loss.

[claytonjy]

And even if they do pay, larger companies often insist on net-60 or even net-90...so you have to wait potentially months after delivering work to get paid. For a small or new shop that alone can put you on the ropes, especially since the companies most likely to do this are likely to be large enough and pay well enough to be the bulk of your inflow.

[oceanplexian]

There are solutions for literally all these problems, you can find banking relationships where they’ll lend on your outstanding invoices, you pass on interest to the client, and everyone gets paid.

I feel compelled to comment because there are all these people who act like running your own business is some impossible task. it really isn’t. The vast majority of business owners aren’t super geniuses, my 60-year-old mother does it, has no formal education and couldn’t write “hello world” if her life depended on it.

[cbsmith]

I couldn't agree with you more.

The reality is that owning a business is effectively monetizing your creditworthiness (not unlike being a landlord), which is a pretty easy way to make a living, assuming you start out with a decent supply of capital/creditworthiness.

[jokethrowaway]

I don't think the problem for tech people is in thinking it's too hard.

I think it's trading working on what they like vs doing admin / sales / marketing.

That said, I wish everybody were a contractor and employees wouldn't exist. (Good) Contractors are accountable exactly to what they are paid for (no more and no less). Employees are accountable to drinking coffee and it's a damn pain working around them to try to get something done.

The only exception is people with equities working in startups and dreaming big.

[cbsmith]

> I think it's trading working on what they like vs doing admin / sales / marketing.

That's certainly one of many good reasons not to run your own consulting business. That said, it's entirely possible to hire/outsource support to do much, if not all, of the admin/sales/marketing work.

> (Good) Contractors are accountable exactly to what they are paid for (no more and no less). Employees are accountable to drinking coffee and it's a damn pain working around them to try to get something done.

In my experience, productivity tends to depend more on the "good", than on the contractor/employee dimension, and a non-trivial part of the "good" stems from how well they are being managed by the business... which yeah, a huge part of being good at managing either contractors or employees is about accountability. Sometimes you get better employees or contractors than you deserve, and that can imbue the contractor/employee characteristic with more causal significance than it deserves, but by and large, you don't.

[x0x0]

The article, and much of the commentary here, said exactly the opposite.

It's not that it's too hard; it's consulting businesses aren't very profitable, don't scale well past 1 person, and if you scale, fill the owner's life with way less enjoyable work.

[cbsmith]

That's pretty simple to manage though. If you're going with say... 2/10 net 60, you charge them at a 3% higher rate. Clients might perceive this as charging interest, which it is, and they'll be perfectly happy with it. If you have cash flow issues, you borrow to cover the float —net 60 billables to large companies tend to make you not a credit risk; even with high interest rates of today, you'll come out net ahead.

[iancmceachern]

This happened to me and I was able to collect after 6 years, I finally got the crook to pay me this year.

[davedx]

About liability insurance: yes, often bigger clients insist on this. It’s not a huge cost though

[greggsy]

It’s only 1% of my gross income (before tax) as a freelancer. I’ve never seen or heard of it being exercised in my sector (management consulting / cyber), but to be honest it’s a small price for peace of mind in case things do go pear shaped.

[SoftTalker]

Is that liability, or also Errors and Omissions?

[cbsmith]

IIRC, Errors & Omissions insurance is often called "professional liability insurance".

[iancmceachern]

Exactly, many businesses require this anyway, like if you lease an office.

[iancmceachern]

All this is true.

In the case of the Consulting company I worked for before starting my own, they expect you to get the above stuff done above and beyond your 40 hours of billable work.

[01100011]

Definitely not the norm at the places I've worked. I would even bill for some downtime if the customer was blocking me from getting work done and the contract expected me to work full-time as it was preventing me from taking on other work.

No complaints in over 15 years. Just be good. Keep your customer happy and get stuff done on time and on budget and these sort of things just work themselves out. Much of it relies on setting clear expectations and goals up front.

[iancmceachern]

Great advice.

The firm I was referring to above was sold to a private equity firm and they lost all their good, longstanding talent in the process, myself included.

Take care of your good employees and the rest follows. There is a King of the Hill episode about it. Mr Strickland calls Hank his "golden goose".

[cbsmith]

It depends on the nature of the contract. Certainly that is the norm, partly because the IRS tends to like it that way; but I've seen contracts that explicitly paid for dedicated managers, included IT costs and office space, and even ones that covered liability (usually when your a subcontractor and the contractor with the MSA requires liability insurance so they can sue you if things go sideways).

[iancmceachern]

Me too. I tend to hide that stuff in my overhead so that my proposals and clean. I just bill my time, materials straight through. No more complicated than that.

Then I handle it all on the backend, you just need to make sure you are bidding enough time to get it all done. The client doesn't usually want more granularity, then they feel obliged to review it. Just get the work done, charge them what you agreed to charge them, and be jovial as you do it.

[cbsmith]

> The client doesn't usually want more granularity, then they feel obliged to review it.

It really doesn't make sense for them to review it anyway. As a general rule in the consulting business, if you don't pay for it with expenses or in the rate, you'll pay for it in the billable hours. A successful consultant will necessarily make sure all their costs are covered, with room for profit... and you want the consultants you hire to be successful.