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Last Updated December 10, 2003

Secrets of successful IT contractors

If you are thinking of becoming an IT contractor, or already work for a firm that contracts your services, there are several career strategies that you'll need to make the most out of your time and talent. These are the tactics that have served me well over the years through several consulting and contracting companies. Over time, I've re-examined them and passed these lessons along to others, often "corrupting" my fellow IT staffers into becoming successful tech mercenaries. Most have doubled or tripled their salaries and would never consider working full time for anyone again. Here's how to play the game and win!
Home > Career Tools > Contracting
Contracting is a far different world than most people are used to. Moving from company to company, you never really get over the "new job" jitters, even if it is a short term contract. The money is good, and staying employed isn't really difficult as there are usually plenty of jobs to go around. But being really successful at contracting requires a slightly different skill base and mind set than most people realize. Understanding how contracting companies operate, how they value your worth, and how to negotiate the best possible terms will make all the difference between being just another "fish", and being a highly paid, in demand professional. This article is a combination of my experiences in the contracting industry, the experiences of several of my peers, interviews with recruiters, contract sales managers, account representatives, and IT managers who hire contractors. We will look at the pro and cons of contracting, take a critical look at how contracting agencies operate, suggest strategies for increasing your salary potential and negotiating with contracting companies, and offer advice on managing your contracting career. 

Employment vs. Contracting
As an employee of a company, you generally have more benefits, stock options, sick time, education and training, office space, and a structured plan for career advancement. The biggest plus is that you'll have a steady paycheck. From a contractors point of view, full time employees have traded the "illusion" of job security and stability for less money. Full time IT staff often see contractors as "mercenaries" (or worse), who broker themselves to the highest bidder and have few loyalties. Some contractors have earned a reputation as snake oil salesmen who make all sorts of promises and then wreak havoc on the company's network before they eventually get fired. Others are viewed as incompetent vagabonds who need a position where they can moved from company to company, because nobody will hire them full time. To be honest, I've seen enough of both types, but I know enough talented people who break this stereotype as well.

Being an employee isn't all it's cracked up to be either. We live in a Dilbert world where bad management appears to be the norm and company employees (even valuable IT staff) are treated as cattle. I've watched countless companies pressure their people into working mandatory overtime, weekends, holidays, and put off vacations because of some urgent crisis that is always pending because their departments are chronically understaffed. Many of these employees are salary, and are often promised "comp time" to make up for the extra hours, but few actually get it. If they do manage to take it, it is often brought up later in a performance review as a negative attribute. Not working free overtime will obviously impact your productivity, and god forbid if you become labeled as someone who isn't a "team player." Several large Fortune 100 companies actually pit the employees against each other during performance reviews. The top 10% of employees get raises ( a whopping 4%) or get promoted. The bottom 10% get laid off, and the middle gets put on notice. To make the top 10% requires lots of unpaid overtime, never saying no to your boss's unreasonable requests for rush projects, and sometimes even long distance travel on short notice.

Contracting is vastly different. Terms of employment are usually short (3 -18 months), and your hourly pay is higher than many equivalent full time employees. If you don't like where you're working you can simply pack up and leave - you're a contractor and expected to jump from job to job. (Although overdoing it will ruin your reputation). Since companies are paying you by the hour, they almost always ask their full time salaried employees to come in on weekends, work holidays, and stay late. There's no pressure of a pending performance review or a promotion hanging over your head. If you do a good job and act professionally, your contract may be extended and/or you may be offered a full time job with the company. If you're like most contactors, you'll be bored with a company in 12-18 months and be dying to leave for a new job with new challenges. Occasionally you may find yourself out of work for a few weeks, but since you make a higher hourly wage than most full time employees, you should easily be able to save enough cash and see the break as a vacation and/or training time. If you use your "down time" wisely and continued to build your skill set, you can easily increase your salary by 10%-20% a year.

Independents vs. Contracting Companies
Typically, contractors work in one of two ways. Some are completely independent and generate their own sales leads, set up their contracts and pay structures, and pay their own benefits. The vast majority work through contracting agencies, which act as middlemen for companies who need flexible staffing. These agencies have a full time sales staff who find lucrative temporary staffing projects and a full time recruiting staff to find qualified IT staff to fill the positions. I've done both, and they each have their pros and cons as well. So lets start with the independent.

Independent contractors are often referred to as "1099" employees. (1099 is the IRS tax form you file if you're self employed.) When you're not working, you're actively looking for work, cold calling companies, networking with other contractors, and always trying to sell yourself and your skill set. The Internet has made things a bit easier for you, but unless you have a specialized skill set and are at the top of your field, it's rare that business is beating your door down. Typically, you bill $100 or more an hour (depending on your skill set), but you always have to track every minute you work. You pay your own health insurance, and there are no paid vacations or sick time. You spend time to invoice your client every week, have to follow up to make sure you get paid, defend your time sheet, and negotiate the fine points of your contract. You also have a higher chance of winding up in court for malpractice, contract disputes, or just trying to collect your fees. Occasionally you make a little extra cash reselling hardware, or subcontracting smaller functions to other independent contractors (i.e. you bill the client $100/hr, but you're paying your subcontractor $60/hr). As you approach the end of your contract, you need to spend your free time finding another contract, or you'll be out of work again for a few weeks. The rewards of being an independent are great, but there are a lot of pitfalls and hassles.

If you like the idea of being a contractor, but you don't want all the hassle for finding work for yourself, billing the clients, providing your own insurance, etc., then working for a consulting or contracting agency as a W2 employee is the way to go. Consulting or Contracting agencies operate a lot like traditional temporary staffing agencies, except that Contract employees provide specific advanced technical and professional skills, are paid more than regular temps, and they tend to have longer assignments. Most agencies will want you work as their employee (during a contract) and may offer paid benefits, vacation time, sick time, and holidays. Typically, a contractor makes 45% (or less) of the agency's billing rate. So if the agency charges a client $45 -$120/hr for an MCSE level candidate with a strong skill set and experience, they may offer to pay you about $25 -$50/hr based on what you negotiate. The agency will have a full time sales staff which will find contract positions, and a full time recruiting staff to fill those jobs. Some offer limited training options, or provide reimbursement if you pass a Microsoft Certified Professional exam. However, in every other respect contract employees are just like regular temps, and traditional contract employment agencies operate just like regular temporary employment agencies. Many companies will tell you that you are an employee (and treat you like one) as long as they have jobs for you. The true test of a company is how they treat you between contract positions, especially if several weeks pass by. Many companies promise that they will pay you during this period (it's called bench time), but few actually pay it. 

Why Hire a Contractor?
Contractors are often brought in to help with large scale migrations, complicated IT projects, to fill positions with high turn over rates (Help Desk and Support), specific hard to find skills (SMS, Exchange, SQL, etc.,), or to fill in for critical employees on sick leave. Companies have also turned to contracting companies to provide temporary to permanent staffing arrangements. A large financial services company based in Cleveland, Ohio has been burned so many times by poor IT hiring practices, that they will only hire contractors in a 6 month temp to permanent trial basis.

How Contracting Companies Operate 
The IT staffing shortages of the late 1990's created such a market for technical employees, that companies began turning to staffing agencies to fill their positions. Making money was easy. There were 5 -15 jobs for every qualified candidate, you simply had to match a candidate to an employer and collect the cash. For a contracting company, the key to being successful is to be able to find several  lucrative contracts with large companies, fill those positions with as many qualified applicants as possible (and at the highest margin possible), and control costs. But it's not all a bed of roses. This market has become very competitive, and technical employees are easier to find. Agencies that were successful between 1997-1999 have gone out of business (or almost out of business) in the past year.

To understand how you as contractor fit into the big picture, lets look at a typical full service contracting firm and a fictional contract from start to finish. Our fictional staffing office is part of a large nationwide company that has 30 offices across the United States. This local office has 100-150 contractors working for them, with a database of several hundred more resumes on file. Aside from the Office Manager and general staff, there are 5-10 sales managers, and an equal amount of recruiters and account representatives. The sales staff meets with local businesses to sell their staffing service, and finds out if the company requires any temporary technical staff, what skills they're looking for, and what they are willing to pay. Meanwhile, back at the ranch, Recruiters look for qualified personnel, build a resume database, and interview potential candidates. Once a qualified candidate is matched to a job, account representatives act as a liaison between the client and the consultants. In a nutshell, their job is to keep the client happy and contractor happy. If the client doesn't like the you, they'll tell the account rep who will typically either have a friendly chat with you, or pull you from the contract and replace you with somebody else. It also works the other way around. If you don't like the client site, you don't complain to the client. You talk to your account manager, who will try to smooth things out, or get you on another contract.

In this scenario, a large company in the area is planning a Windows 2000 migration from a mixed Novell and Windows NT environment. They want to manage the project themselves, but are looking for several MCSE's with Novell, NT and Windows 2000 experience to function as technical leads and assist with the server migration. They also need several dozen desktop deployment personnel to help deploy new PC's. In all, they will require 60 contract staffers for a 1 year rollout. After making the initial staffing estimates, the company's IT management will meet with several contracting companies and ask them for candidates unless they have a single preferred provider. The company will tell the staffing agency the scope of the project, a range of how much they're willing to pay for the skill sets they're looking for, and when they'll need the contractors. The staffing agency's sales force will go back to their companies and meet with the recruiters and account representatives and find out how many people they have on hand to fill these position. They'll first look at people that already work for them (i.e. coming off of another contract), or someone who has worked for them successfully in the past. Then they'll start cold calling the resume database, and as a last ditch effort, they'll place an ad in the paper or on an online job board. (If you see a tech staffing job posted in these places, the position is tough for the agency to fill, and may have opportunities for salary negotiation.)

In the next few weeks, the contracting agency will set up interviews between their first choice candidates and the client. The agencies recruiters will interview new candidates (recruited form either the resume database or the through ads) who may meet the qualifications, and then forward these candidates to the clients for an interview. If there are several contracting companies trying to staff this project, things get interesting when they compete for qualified contractors to fill the positions. Every agency wants to fill as many positions as possible, while maintaining the highest margins.

As you near the end of your contract term, your agency will let you know if the contract has been extended or not. If not, you'll be given an exit date and the agency will promise that they'll find other work for you. They may ask what you're interested in, and what you want to do next. At this stage, not every one is equal. They'll fill immediate openings as they come up, but the more lucrative high profile jobs go to the start performers. Make sure it's you.

Picking the right contracting agency
When you're first starting out in IT contracting, you may want to ask around and find out as much as you can about the companies in your area. How big are they? What major companies do they deal with? How long have they been around? How much of their business is technical staffing? How much of their business falls into your skill set? After you become used to contracting, you may want to keep good contacts with several local contracting companies and see which ones offer you the best contracts. But you also want to avoid being mislead or burned by a contracting company. Although there are many ethical well-run companies that do temporary IT staffing, the business is so lucrative that several companies have emerged with nothing on their minds but profits. In order to beat out competition, a staffing agency has to be able to provide a client with as many qualified candidates as possible. In order to remain profitable, they need to do this with as little overhead as possible. However, the line between an honest profit and unethical practice is drawn very fine and is often crossed. 

Some things to watch out for:
Agency Office Staff who are not tech savvy...
In my experience, the majority of agency office staff were hired for their sales and people skills, and little emphasis is placed on building a knowledge of what's required to complete a project. You may discover that the project description and job requirements that the agency recruiter gave you doesn't match what the client tells you in the meeting. This is not only embarrassing, but a big waste of time. Staffing agencies need to know what they are selling (you) and what the customer requirements are. Imagine a car parts store where none of the people behind the counter knew anything about cars. Knowing a few industry terms and some buzzwords doesn't cut it. 
Presenting anyone with a pulse...
Since staffing agencies only get paid when they have someone working in a contract, they will often throw any candidate (qualified or not) at a client as a temporary measure. If the candidate makes it through the client interview, the client actually shares some of the responsibility for the mistake and will be less likely to hold the staffing company responsible (unless this becomes a pattern). This is a gamble on the agency's part, but the odds are with them. If by some stroke of luck, the contractor works out, the agency has lost nothing. If the contractor is unqualified, it will often take weeks for the client to figure it out and this buys the recruiter time to fill the position with another candidate. The important thing is that during this time, the client is being billed and the agency is still making a profit.
Lack of Background checks...
Many staffing agencies don't even bother to do rudimentary background checks to verify employment, check certifications, college degrees, criminal history, etc. All this takes time and money, which eat into the bottom line. After all, this is a temporary position and it's only for a few months. I've known people who have had 2 resumes. One padded resume for contracting companies who never do background checks, and another "clean" resume for permanent positions, temp to hire jobs, or for the few companies who do check.
You're an employee, until you're not...
This turns into a shell game quickly. Staffing agencies need to maintain a loyal cadre of contractors that they can re-deploy contract after contract. To keep you from bouncing between agencies, many offer medical benefits, training incentives, and some vacation time. Often there are loopholes that you only find out about the hard way. For example, you may be told in the interview that you're eligible for vacation after a year of service. What they really mean is that a "year of service" is a single continuous 12 month contract from a single vendor. You many also find that training is not classroom based, and is often just access to a poorly stocked technical library, or computer based training. (Not all bad, but hardly career vaulting.) Find out what the fine print is before considering a benefit as part of your salary.

Aggressive non-compete agreements...
A questionable tactic that has surfaced and become more common over the past several years is to have employees as well as consultants sign a non-compete agreement. A legitimate non-compete would simply keep you from seeking full time employment from the client that you're being contracted to. Most agencies have a procedure for temp to hire positions, and simply want you to follow their rules. If the client likes you and hires you, the client must pay the agency a headhunters fee, or finders fee. To prevent you from making a backdoor deal with the client, the legitimate non-compete may stipulate that you cannot work for the client directly for 6-12 months after you leave as a contractor. This type of non-compete agreement is the industry standard, and reasonable. The non-compete you must watch out for is the one that prohibits you from working for anyone in an IT position within a certain mile radius (often 50-100 miles) for a specified length of time. If you work in a "right to work" State (like Ohio), many of these agreements won't even hold up in court, but are used as a pressure tactic by companies to keep you on a leash. Any company that asks you to sign this type of non-compete is really just showing you how little they think of you. Refuse to sign, and go work for someone else. Warning: Companies have started to spring restrictive non compete agreements on employees on their first day of work instead of during the pre-employment screening. Since you've already left your other job (or turned down other assignments), they figure your more likely to sign than simply walk out. Be sure to ask about a non-compete agreement before you accept the job offer. If one exists, demand to see it before you commit to anything else.

Beware of mandatory training time that you must pay for...
There are several large companies (not just tech staffing companies), that use a tactic of sending all of their new employees to "free" and mandatory training when they first sign on with a company. The training is really just a company orientation and rehash of basic computer skills that you already know, and is generally worthless to you. However, if you should happen to leave the company before a specified time, you would have to pay for part of this "free" training. In the example I've seen, the company stated that the training was worth $3,000 (doubtful), and you were required to stay 3 years. If you left before 3 years, you would have to pay $1,000 for every year left on your employment agreement. Be careful what you sign and agree to. Companies have a legitimate reason for asking you to stick around when they provide a training investment. But be sure you know the real value of the training before you sign up.
The truth about bench time...
Bench Time is a promise many contracting companies promise to keep you from jumping ship and getting nervous at the end of your contract. "Bench Time" is a promise from the contracting agency that you will still receive pay if you are unemployed between contracts. After all, it's the agency's job to find work for you, right? The reality is much different. Only the most valuable contractors will ever see bench time, and some agencies require that you use up all of your vacation time first before they'll pay bench time. Others won't pay your full hourly rate, but give you the Federal minimum wage, or place you in short term contracts (1 week at a time) at half of your usual rate. If your company promises "bench time", ask around quietly to see how many contractors have actually received it.

The Bottom Line:
The other key thing to keep in mind is that the contracting agency is paid for results, so they only pay their own people for results. Sales managers often make a small base salary plus a commission based on the value of the contracts they bring in. Recruiters are also paid a commission for people that are actually hired and placed into a contract. An account representative's pay may be based on how many contractors she oversees, and how long they stay on the job. The office manager makes a fairly large commission based on everyone's performance. The only non-commissioned people in the company is the secretary, janitor, and you. This impacts you because you are the product they're selling.  When they look at you and your resume, they're thinking bonuses and commissions and probably see little dollar signs floating over your heads. The better your skill set, the more you'll be pampered. You'll get invited to expensive lunches, they'll laugh at all your jokes, and tell you anything you want to hear. The only other people that drool this much when they're talking to you are life insurance and used car salesmen. Always keep in mind that you are the product. They need you as much as you need them. Or do they?

Where do you fit in?
Knowing what you're worth is the first step in negotiating a better life for yourself. In my experience, most candidates will fit somewhere into or in-between the following categories:

Level 5 
You are the elite candidate. You have a strong skill set backed up with multiple industry certifications, proven track record and 3-10 years of experience, good references, good personal skills, and you can ace any interview. Ideally, you've done this same type of project before and can bring the lessons learned with you and help the project avoid costly pitfalls and stumbling blocks. 
Level 4 9% You have a strong skill set, with +3 years of experience, MCSE certification, but either have limited experience for this particular project, or there is a slight gap in your skill set. You've worked as a Technical Lead on several successful projects, and have a lot of potential.
Level 3 20% You have an average skill set and experience. You're competent, experienced, and professional. You have some industry certification, or have completed your MCSE, but little high level experience. Your resume contains a good mix of projects with various operating systems, but lacks focus and specialized skills. Smart candidates build skills in complimentary areas like SQL server administration, Exchange, SMS, IIS, etc., Scripting and programming skills are a plus as well.
Level 2 35% You've bounced around in several low level tech jobs for the past 2-3 years, and have begun taking certification exams. You interview well, have strong interpersonal skills, and have Level 2 desktop support experience or small limited server administration roles.
Level 1
Everybody has to start somewhere, and every company needs a help desk. You are new to IT and looking for an entry level position. You may have completed some industry certification, or you are young and think of your previous job of selling PC's at a retailer as "IT experience." These jobs require good technical skills, but so many people meet the basic qualifications that they're easy to fill. People who rise to the top of this category don't want to stay there, and are anxious to move to Level 2.

These categories are informal, and based on my own observations and interviews with others. You may agree or disagree with these categories, they are presented only as an example. The important consideration to keep in mind is that agencies hire and base salaries on a similar informal scale, so you need to examine and understand where you fit into it.

When looking at these categories and estimates of the overall labor pool, keep in mind that there are contract positions available for all of them. Your position in this pecking order has a lot to do with how valuable you are to a consulting firm. The more people in your general category, the less leverage you have.

Level 1 and 2 technicians comprise 70% of the labor pool for temporary IT staffing. To most companies you're a "dime a dozen", although you'll never hear them say it. You are potential billable time, regardless of your skill set. Your ability to negotiate a salary is slim as there are 69 other resumes in the desk drawer that have similar skill set to yours. What makes yours stand out?

Level 3 technicians were gold a few years ago, when this category was a lot closer to 10%. Now there are too many paper MCSE's with little or no experience. And although companies are still outsourcing help desks, they've cut back on outsourcing server administration and prefer that their administrators are all full time employees. This is the time to carefully build your skill set and resume. Focus on increasing your marketability and street worth.

Level 4 technicians are in the top 10%. They're competent, rising young stars who maintain their skills and have chosen their projects wisely. The pay is top rate, you work in challenging projects and you always have several job offers waiting for you. Keep your technical skills sharp and your negotiating skills sharper. This is the class of technicians who see the widest salary range of all, and it's all on your shoulders to figure out how much you're really worth. 

The top 1% of candidates are well known in the IT community. They have a highly specialized skill set that is broad enough to make sure they're always employed. Large scale server and desktop migrations, data integration projects, security specialists, web architects, high end developers, etc., They are considered experts at one particular part of the IT puzzle and nobody can do it like they can. They can command top pay if they are willing to travel, and they often work as independent contractors. Many wind up creating their own consulting companies.

Negotiating your salary
Very few people realize that almost everything is negotiable, especially salary. To put it another way, "It is an employer's responsibility to get the best talent it can for as cheap as it can. It is your responsibility to get paid as much as possible." Salary ranges are rarely hard and fast rules in the new economy. These ranges are based on the type of work required, your geographical location, and the availability of qualified candidates. (The law of supply and demand are always at work.) Most people underestimate their worth, so companies have stopped printing salary ranges upfront, and will simply ask you what you're looking for. If it's lower than their expectation, they'll meet it. You're happy because you think you got what you wanted, and they're happy because you've underbid your own salary.

When you're working with a consulting company, you'll negotiate your salary with them, not the client. Most seasoned contractors already have a pretty good idea of what they're worth. They will let an agency know up front what kind of work they are looking for, as well as how much they expect to get paid. Always give this figure as a range, such as $40-$45/hr. Leave a little wiggle room, and never tell them what your absolute minimum is.

Typically, your agency will give you a rate before you start the interview. Never agree to it up front. Tell them it sounds interesting, and you would consider the position if you liked the company. Always be friendly and upbeat during this phase. Sound excited about the job prospect, and rant about what a great opportunity it would be. If the salary range is close to what you would like, but think you're worth a little more, be careful how you express this. You want to get to the interview. The agency will arrange a face to face meeting with the client. If you did well in the interview, the agency will call you within a day to let you know that you got the job. Sound excited about the job, and then ask the agency about the salary. Tell them you have to think about it. Call them back the next day, and say that you really liked the company and the contract, but...<insert excuse here> Keep in mind is that $1 an hour will equal $2000 a year (based on a 40 hour work week), so act carefully. If your skills are good and your reputation is excellent, the agency will almost always cave. Remember that they only get paid if they actually place you, and now they have time and energy invested in you, they have something to lose if they walk away. Remember that the agency staff works on commission, and if you're this close to being placed they can almost smell the cash. Giving you an extra buck or two to simply close the deal and start billing is not a big issue. They'll need to get approval from the office manager, and then they'll call you back with a counter offer. Be aware that this strategy can backfire if your agency has a lot of people in their database who have your skill set, or if you pull this too often with the same agency. 

If you are negotiating for more than $5 - $10/hr above the range quoted by the agency, be prepared to wait a little bit. Usually, they will meet with the client and let them know that you are interested, but your salary requirements exceed the range offered. If you are good enough, the client will make up the difference in salary range. Remember that the client is playing the same game with the contracting agency that the agency is playing with you. They're trying to get the most qualified talent they can for the lowest price. But if your technical skills are in demand, and not too many people can match your qualifications, there is almost always room for a little negotiation.

How much cut is fair?
Industry standard cuts are 45% to 65% of the billing rate, but they can be higher if you don't know what you're worth. This means that the agency's cut is usually as much as they are paying you, if not more. When you're negotiating for a higher wage, don't be surprised to hear the agency deny these figures and claim that they are already giving you the best deal and barely making a profit. This may be true for lower paying entry level positions with smaller margins, but for higher paying jobs the recruiter's commission is often based on the difference between the billing amount and the what they are paying you. This "motivates" the recruiter to increase the spread by billing the client as much as possible, while paying you as little as you'll accept. 

When negotiating with a contracting agency, keep this information to yourself and never take an adversarial posture with the agency. Appear eager, cooperative, and willing to negotiate. If they know you're always trying to cut into their margins on every contract, you'll be the last person they call to fill a position. You may still get a few contracts here and there, but in the long run you're considered unprofitable. Your goal should be to negotiate their margin to 35%-40%, if you've done business with them before and they don't have recruiting costs (which can be as high as 20% of the billing rate). Keep in mind that if they are paying you benefits, you should assume their costs have increased by $10/hr.

Getting to the Top
So how do you get to the top 10% where you can negotiate a high salary as well as pick and choose your contracts? Like anything else, it takes hard work and street smarts. Here's my list of caveats.

Remember who you are working for
In the contracting business, you are always working for yourself, even if you're going through a contracting agency. The agency is there to find work for you, and ease the hassles you would have to face if you went 1099. In exchange, they take a cut of your contracted wage. If your agency isn't being honest and fair with you, start shopping around for another one.
Think like an independent contractor, even if you're not
Contract labor is expendable in the eyes of many companies, including the staffing agency that you work for. Even if you've been with the agency for a while as a W2 employee, never count on them completely to find work for you and pay your benefits between contract assignments. When starting with an agency that pays benefits, find out how long it takes for the benefits to kick in, and how soon they expire if you leave (or are between assignments). If you frequently work short term contracts and jump between agencies, you may be better off providing your own health insurance. As you approach the end of an assignment, find out from your agency if they have another contract lined up for you. If they don't have an interview scheduled for you in the first week that you're off an assignment, quietly update your resume and start sending it to other staffing agencies. Be upfront with the other agencies, and tell them you're working for XYX consulting but you've come off contract and you want to see what their company has to offer. If you like the company your contracting with, always try to give them the first opportunity to find work for you. But you should always keep your options open if they can't. 
Never stop building your skill set
Regardless of whether your contracting independently, or going through an agency, you are the product being sold. Or rather, your skill set and what you can do. Technology moves quickly, and you need to keep your skills up to date or your career will stall and stagnate. Take responsibility for your own training. Set aside a budget for books and read a new technical book every month. Build a small server lab at home and work with the latest products. Keep your certifications current. Every skill you learn makes you more marketable and valuable, but focus on skills that complement each other. Choose your core competency and work outward from there, mastering related skill sets. 
Network with your peers
To be a successful contractor, you need to make as many friends as possible. The IT community is relatively small and you'll need those favors and insider contacts to get you into the best contracts. Strive to be on good terms with as many people as possible, and go through your phone list every 90 days and call old tech friends. At the very least, just sending out a short personal e-mail every 30 -60 days can keep you in the loop and lead to lucrative unadvertised job opportunities. That Level 2 tech you worked with 3 years ago may have been promoted to a management position at a large company with huge IT requirements. By simply staying in touch, you'll have the inside track to any contract opportunities, and you'll also have a huge advantage when discussing your salary. Keep in mind that it's not always what you know that's important, but who you know.
Be willing to travel
If you're single and always wanted to see the country, positions that require travel can be very lucrative. There is an art to traveling comfortably and living on the road, but if you can muster it, companies pay a premium for your mobile skills. In addition to your salary, you may qualify for a tax exempt hourly per diem that covers your living expenses while your traveling. In addition, you'll get paid for all travel time while you're sitting comfortably on the airplane. $120 -$200 an hour is not unheard of for traveling consultants who have the right skill sets.
Choose your contracts carefully
Be careful what your resume says about you. If your job history jumps around from skill to skill, you may be of no use to anyone. Don't take just any job. Choose a direction for your career and pick contracts accordingly. If you want to be a deployment and migration specialist, seek out the companies who are upgrading their infrastructure. Tell contracting companies that is what you're looking for, and try to work for large companies that are well known and respected. By the time you've finished 3 high profile large scale migrations, you'll be in demand and moving up the ladder quickly.
Keep your own bench fund
As a contractor, you will probably make more money than a full time company employee per hour, but if you count time off during the year, it may all work out the same. Don't count on your company to give you "Bench Time" - fund it yourself. Try to set aside 3 to 6 months salary, even if you never need it. This shields you against economic downturns and unemployment, but also allows you to negotiate your contracts and salary from a position of strength and "wait" for the right contract to come along. Over time, this strategy will pay for itself. Smart contractors use their down time to update their skills and certifications.
Know what you're worth
Be honest with yourself. What are your skills and how much are they worth. Read salary surveys. Find out (quietly) what your peers are getting paid. Almost all companies will tell you that they will fire you for discussing salary with another contractor because they don't want people comparing notes.  Keep your research low key, and never tell your company you found out what somebody else is getting paid. It may also be helpful to find out how much your company is billing for your services (never ask the client!) A contacting company once billed me out at $86/hr while paying me $27.00/hr. I kept the information to myself until the contract came up for renewal and then successfully negotiated for a higher salary.
Develop your interview skills
Full time employees of a company may interview for a job once every 3 to 5 years. Contractors may have 15 -30 interviews in a year. Along with mastering your technical skills, you must also hone your interviewing skills. Read plenty of books on the subject and really strive to ace every interview. This puts you in the drivers seat. If the client liked your resume, and really liked you during the interview, it may open a lot of room for salary negotiation.
Learn professional negotiating skills
Almost everyone thinks they are a good negotiator, but you would be surprised at what you don't know. Negotiating is an art and learning even a few basics can give you a big advantage in both your personal and professional life. Start with a well known book or audio cassette program to learn the basics, and move up from there. If you get the opportunity, take a workshop on negotiating tactics that includes practice exercises and scenarios. 
Be prepared to walk away
Saying no to a contract in order to force client who really likes you to cough up more money is a technique you should only use sparingly. Doing it too often can ruin your reputation. Never admit that you're holding out for more money, simply state that you have another offer from another company for X dollars more.
Obviously, it helps if you really do have another job lined up. On one occasion, I really did have another higher paying job lined up and had to turn down a job offer. I not only received repeated counter offers for more money, but they finally threw in a complimentary Gym membership and free baseball tickets as well.
Don't price yourself out of the market
So you think you're worth $100 an hour? You may have found a few contracts where the clients were willing to pay that much. But now the market has changed and there are either more people capable of doing the job you do for less money, or the demand has dried up. But you've told all of the contracting companies "don't call me unless it's for at least $100 an hour." After all, you've got to pay off the Viper. Bad move. Never set a minimum salary in stone unless you are absolutely sure the market can bear it. Be flexible as the market changes. Remember that the laws of supply and demand are always at work.
Always under promise and over deliver
There is a time to be confident and sure footed about your skills. But being over confident and stretching your real abilities in the interview will almost always come back to haunt you. Be honest with the client. If you haven't done this type of project before, let them know why you think you can get the job done anyway. Never oversell yourself just because you can. The IT community is small. Word will get around about you. By over delivering on your promises, you'll have everyone believing you are exceptional  The word will get around soon enough, and the raises will follow. 
Never burn your bridges
We all come across contracts and employers that really disappointed us (or worse.) You came in expecting this great opportunity, but found that your hands were tied by incompetent management, poor equipment, lack of support, etc., Sooner or later the blame game starts. (Get used to it - it's part of being a contractor.) The in house management and staff will almost never take responsibility for their mistakes, so when the finger pointing starts, you're left holding the bag. Resist the urge to lash back and tell them what you think of their company. Be professional, and strive to leave on good terms. Not because it's polite - but because it may cost you a lot of money if you're not. And you may never even know how much. IT communities are small, and managers and staffers move from company to company. After contracting a few years in the same town, you have much less than six degrees of separation away from most of your peers. Having a poor reputation in this environment can cost you plenty in lost jobs and other opportunities. Remember who you work for.

How far do you want to go?
Now that we've outlined the basics, the only thing left for you to decide is how to define your measure of success. Being an elite contractor is a lot of work, and requires a lot of your free time to stay up to date with new technology. Not everyone wants to keep re-training all of the time. Not everyone can travel. Not everyone is a workaholic. Not everyone can make $200 an hour. Decide for yourself how much time and effort you're willing to put into your career, what salary you want, and how much of your free time you're willing to give up. A common strategy is to work and train as much as possible for 2 years, and then take 6 months off. Avoid burnout by scheduling downtime, and strive for a balance. Before I started working in IT, I spent 10 years working full time as a Paramedic. In all that time, I never met anyone who was on their death bed and said "I wish I would have spent more time at the office." Work to live. Don't live to work.


Bernie Klinder
Senior Editor,

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