Consultant s Corner
Why Are You Still Single?
Growing Your Business: From Consultant to Employer
By Auri Rahimzadeh
The time will come when you either have too much work to handle by yourself, or you want to expand your business to address more opportunities. The trouble with many software developers, especially good ones, is they have difficulty delegating work they can probably do better themselves. The conscious decision to go from one to two or more employees is the single most difficult decision a contractor makes, and is one reason so many contractors never expand their businesses.
The problem with staying single is that the money generally stops flowing when you re not working. As my grandfather Alvin Goodman once said, If you re not in business to make money, then why are you in business? The only way to make more money than you can at your maximum capacity is to expand your capacity and use it. Having someone else working while you re out getting more business, or at least helping you stave off burnout when working multiple projects, is a godsend. But how do you get past the delegation issue? I mean, you re a genius developer, right? Nobody could write code as well as you!
The Easy Way: Interns
The easiest way to start expanding is to hire an intern. This is basically an inexpensive, low-risk method of getting a good resource that s willing to learn. Many local colleges will have I.T. or engineering job fairs where you may find a dozen candidates or more, only one of which may be a good fit for you. A young intern who is excited about technology and learning from a veteran is a perfect fit they ll work hard and for a lot less money than a contractor. Every intern I ve brought in has made huge inroads in their skill set, and they are now working on important projects and are incredibly productive. Keep your interns learning and motivated and you ll find you have trustworthy and capable junior and senior developers in short order.
The Expensive, but Occasionally Necessary Way: Contractors
Sometimes you need veterans, or at least capacity and fast. The problem is, how do you get that capacity, and how do you pay for it? Contracting firms with highly qualified personnel available at hourly rates are actually a good place to start. They ve already vetted their people through a filtering process, and you make the final decision. Plus, you can work out payment terms so you can pay them Net 45 instead of Net 30, so long as you can obviously afford it. This is what I had to do when I was handed a government contract; that is, ramp up quickly and make sure you can pay!
The nice thing about contractors is you can scale your resources up and down based on your needs, but without any employee overhead encumbrance. Contractors are true pass-through cost. However, you need to make sure that your hourly rates cover those contractors, keeping some for your company. Hey, you re not in business for handouts; you brought those people in to get the project done and make money. If you re hiring contractors and not making anything off them, you re paying too much. There are exceptions to this rule, of course, especially with specialists. However, the cost for the occasional expensive resource should be readily absorbed by the money coming in from other resources on your team.
Hiring Full-time Employees
Maybe you want to skip the intern and contractor steps and go straight to hiring. I d recommend against this, as there s a lot of responsibility involved in bringing on an actual employee. You can hire people as contractors instead of through the aforementioned firms, and then it s just a check you write. With employees, you have a lot more responsibility and risk, which varies state by state and has federal implications. I ll cover hiring full-time employees in more depth in a future article; I m purposefully leaving it out of this one to stress how dangerous it is to do a W-2 hire as your first expansion step.
About Hiring Friends
Your first thoughts may be to hire your friends or former co-workers. Be careful with taking this approach. You have to separate business and personal roles when you hire your acquaintances to do work, and you may not like having to fire one who isn t producing. If you re hiring former co-workers, get a feel for their work quality and work style first, and make sure you don t have any non-compete clauses in any employment contracts you ve signed.
Make Sure You Have Contractor and Employee Agreements
It doesn t matter how much you trust somebody they should sign an agreement before working for you. Whether it s an employee or a contractor, you need to outline your relationship with them. First and foremost, you want to make it clear the work anyone does for you belongs to you. This is achieved using either an Employment and Inventions Agreement or an Independent Contractor Agreement.
Don t Grow Too Fast
It s easy to expand if you re flush with cash. If you hit a dry spell, however, you don t want all your money going into payroll. Therefore, make sure you only expand as necessary. It sounds obvious, but how many companies have you seen expand themselves into oblivion? Letting people go is a very difficult task, even when the reasons for letting them go are clear.
It is inevitable that your role will change as your company grows. While your developers are writing code, you ll be spending more time managing them, getting new business, and running the business. While there likely isn t going to be a sea change with one or two people working for you, the company will grow itself as you find more projects to deliver. This is a good thing. As your company grows, so will you as a business owner and manager, and, hopefully, you ll find your team and your company growing and producing as a whole.
Not Growing Is Always an Option!
Just because you can grow doesn t mean you should. Many of my friends are contractors and they ve stayed one-man shops. Either they have the usual delegation/trust issues, or they simply feel comfortable where they are. Hey, if you get a great contract, and you re bringing in $180K a year in your home territory, why change things? Remember, if you expand, you ll have the added responsibilities of being a manager, and that s a difficult role for some people. Of course, not expanding usually means your revenue stays stagnant, or even less predictable.
Running a business entails a certain amount of risk, but that risk definitely has its rewards. Your risk grows as your company expands and matures, but so again do the rewards. You have to do a lot to mitigate risk, such as incorporating, managing your legal duties, insuring your business, and controlling your finances and bookkeeping. I ll be covering these details and more in my next column.
I m excited about this series, and I want to make sure I m addressing your needs. If there s a topic you would like me to cover, or you simply have questions, please don t hesitate to e-mail me at [email protected].
Auri Rahimzadeh is President and Senior Engineer at TAG (The Auri Group, LLC, http://www.aurigroup.com), a Microsoft Gold Certified Partner based in Indianapolis, IN. Rahimzadeh has authored three books, including Hacking the PSP and Geek My Ride. He has been technical editor on Wrox and Wiley titles, and has written a number of technical articles ranging from .NET development to consumer electronics. Auri started his technology career working for Steve Wozniak, co-founder of Apple Computer, and enjoys writing and teaching others about all sorts of technology.