Seeking Advice Getting Started in Freelancing

[AK]

My Fellow Mustachians,

I am currently employed as a Salesforce Technical Consultant at an Independent Software Vendor (ISV). I've been here 5 years doing primarily Salesforce development on our AppExchange product and tech consulting. One of my lifelong ambitions is to start my own company. I'm in the very early stages of starting a Salesforce consultancy and am seeking your advice on the following:

1) How do you get clients? Do you apply to job postings to get work? Do you talk to recruiters to get work? Where do you usually find the most success getting clients?

A couple months ago I started a blog sharing various Salesforce posts and then posting about them on LinkedIn and Twitter. I'm doing this to build my brand and demonstrate my expertise so when I start marketing and advertising for clients, they'll have something to reference to see how I can bring value to them. To get clients initially, I will network in various ways and reach out to my current contacts to see what work they may have. I don't plan on seeking out my current employer's clients because they have small budgets and I don't want to take business away from them.

2) What pricing strategies do you use? From the resources I've seen and from local contacts, they advocate to use fixed-bid or value-pricing whenever possible over billing hourly. At my employer, we use fixed and Time & Material (T&M) pricing for projects for various reasons but I'd like to get your thoughts on this.

3) My boss and I have an excellent relationship. My boss knows that I plan on starting my own company and I've told him I plan on doing it this year. He asked if I'd consider staying on in a consulting capacity and I said yes but not with you being my sole client. I'm thinking I'd allocate 16-24 hours per week to them so there's capacity for other clients. What do you think of that? How many of you had your first client be your former employer?

4) How do you determine your Minimum Billable Rate? Currently, I've calculated mine as
     (Total Current Employer Compensation + Self Employment Tax % + $20/Hr Profit Buffer) / 2080 hours. A colleague said I should use 1500 hours instead of 2000 because one usually only bills 30-32 per week instead of 40 for various reasons.

5) My plan is to start the Salesforce Consultancy full-time and quit my day job instead of doing side-work to establish the client base and then quitting. We have sufficient financial reserves for a few years if need be so I'd like to dedicate all my professional time towards this effort instead of splitting it across my day job and side biz. Has anyone else done this? If so, any regrets?

6) I will be a one-man shop. How would you incorporate? I'm thinking an S-Corp over an LLC. I plan on speaking to an accountant and attorney to get advice but would like to hear your thoughts on this.

7) I tried searching for Freelance in the forum search but it kept erroring. I then tried google searching only the forums but didn't find any worthwhile threads based on the keywords used. What other resources here and elsewhere would you recommend to learn about freelancing and starting a Salesforce consultancy?

8) What other advice do you have?

Thanks in advance,
AK

[basd]

Hey AK,

fellow freelance consultant in IT here. Not in the same field (I'm in software testing and more specifically in test automation), and I'm based in The Netherlands as opposed to the US so not all may apply. Also, I'm going to cherry-pick on your questions. Hopefully there's still something useful in it for you.

1) At the moment, mostly through freelance job marketplaces. Also, I have built up a decent relationship with a couple of recruiters I actually like (there's a lot of rubbish to weed through though). My current gig I obtained via the same agency that delivered my previous project. They're decent, so I decided to continue working via them. Not a lot of companies here hire directly, unfortunately.

2) Mostly billing-by-the-hour. This is something I am looking at moving away from, but it requires adaptation of your value proposal. A lot of clients are just looking for an extra pair of hands that fill a seat for 40 hours a week. Those are not the kind of projects I'd ultimately like to do, so I've started to shift towards value-based consultancy, training, writing and speaking gigs. This will be a time-consuming process though, but some cool projects have already come my way, so I must be doing something right.

3) My first freelancing gig was a continuance of the project I did through my former employer. In exchange for a part of my fee they asked me to continue and wrap up the project, an offer I gladly accepted. It helped that they didn't have anyone available with the knowledge and experience required to step into it.

5) I made that switch but there really wasn't any other option. Also, since I knew I had a project it wasn't hard at all. Plus, the market in my niche is good, you'd be hard pressed NOT to be fully booked at the moment.

7) Definitely check out the Freelance Transformation podcast. Lots of great tips there.

8) Do it. Now. You'll never look back.

If there's anything else you'd like to know, please fire away!

[AK]

Basd,

Thanks for the wonderful feedback. Have some follow-up questions:

1) At the moment, mostly through freelance job marketplaces. Also, I have built up a decent relationship with a couple of recruiters I actually like (there's a lot of rubbish to weed through though). My current gig I obtained via the same agency that delivered my previous project. They're decent, so I decided to continue working via them. Not a lot of companies here hire directly, unfortunately.

How does the payment structure usually work with contractors in a consulting company capacity? I know the client pays them a "commission" usually a percentage of the agreed upon salary and then the recruiting agency pays you. With a company, does the agency pay the company directly or is it still on a W2 basis, which I do not want to do?

3) My first freelancing gig was a continuance of the project I did through my former employer. In exchange for a part of my fee they asked me to continue and wrap up the project, an offer I gladly accepted. It helped that they didn't have anyone available with the knowledge and experience required to step into it.

I have a similar opportunity where I'm the only individual that can handle a project currently in-progress. My dilemma is that I don't want to dedicate all my time to that project which is what it'll probably take. I'd like to work part-time say 16 hours a week for my current employer while getting other clients. Any thoughts on different pricing options to offer them for my services?

[BlueHouse]

4) How do you determine your Minimum Billable Rate? Currently, I've calculated mine as
     (Total Current Employer Compensation + Self Employment Tax % + $20/Hr Profit Buffer) / 2080 hours. A colleague said I should use 1500 hours instead of 2000 because one usually only bills 30-32 per week instead of 40 for various reasons.

I use a base of 1100 hours because
a) I give myself a good number of vacation days, even though I never use them.
b) I calculated 20% of my time will be administrative issues, billing, paperwork, running errands; 10% would be marketing, networking, and website management; and 10% would be other non-billable work, including training, continuing Ed, keeping certifications up to date, etc.  So if only 60% of my working time is billable, I had to factor that into the rate. 

That's actually just one of the ways that I justify my billing rate.  Don't underestimate yourself!

[KMMK]

Posting to follow

[basd]

How does the payment structure usually work with contractors in a consulting company capacity? I know the client pays them a "commission" usually a percentage of the agreed upon salary and then the recruiting agency pays you. With a company, does the agency pay the company directly or is it still on a W2 basis, which I do not want to do?

The recuiting agency (the 'middle man' so to say) takes a percentage of my hourly rate. Or rather, I tell the recruiter my desired rate and he'll do the negotiation with the client to see if it fits for all parties involved. The cut for the recruiter is usually around 10%, no matter whether it's a one month or a two year project. No idea on the W2 structure as I'm not in the US.

I have a similar opportunity where I'm the only individual that can handle a project currently in-progress. My dilemma is that I don't want to dedicate all my time to that project which is what it'll probably take. I'd like to work part-time say 16 hours a week for my current employer while getting other clients. Any thoughts on different pricing options to offer them for my services?

I've been thinking about this a lot lately as this is the way I would like to sell my services in the future as well. Unfortunately a lot of clients are used to having someone warm a seat for 32-40 hours a week, on site. It depends on the type of role and project you're taking on as well. I'd love to be able to sell my services based on a monthly retainer (guaranteed income) that includes x hours of service for new development / maintenance / consulting / meetings / making coffee ... All work above that would be billed separately. Again, this isn't something most clients (especially not the bigger ones like governments and banks) are used to or willing to adhere to.