We show you how to bcome rich contractors.
Unlike most business, contractors let too much money get through the cracks. If they filled in those cracks then they would be a lot, lot better off. Rich contractors are few and far between.
Contractors spend a lot of mental effort and time making sure that they get the best rate that they can. So they should.
However, that can sometimes be counterproductive.
What’s the point of having the best rate of all the contractors at a company if you’re the one to go at renewal time.
Full Time Rich Contractors
No, the most crucial thing for a contractor is to be in work all of the time. He or she should do nothing jeopardise that.
However, once that is taken on board, as the major factor in making a contractor wealthy, you can then judge whether you should try for contract rate rises as well.
Too many contractors ignore the fact that when their contract ends, they’re going to damn well need another contract straight away.
In fact, sometimes the pressures of work mean that they don’t have enough time to look for a new contract for themselves.
The work seems so important at the time. A month after you leave the company it seems less important.
In a year’s time you will be struggling to remember exactly what you did there. In three years time you may even have forgotten the name of the Project that you worked on.
To be successful contractors the most important thing for contractors is to have no gaps in their annual work.
This is the money that falls between the cracks. It’s the reason so many contractors don’t ever really manage to get out.
Example of One Who Is Not one of Rich Contractors
Let’s look at someone who has three 3-month contracts during the year. At the end of each contract he takes a month to find another one.
Also, he is not fully working for the other 9 months of the year either as there is Christmas, days sick, bank holidays, summer and winter holidays, doctor and dentist visits etc.
They reckon that contractors only work around 45 weeks a year even when supposedly working full time.
Let’s say then, that during the months he is working that the contractor will have 25 days, or 5 weeks, off.
That means that the contractor is working for only 34 weeks of the year in total (39 weeks for 9 months – 5 weeks). He or she will not become one of the rich contractors that way.
Money Loss for Contractor
Let’s say that the IT contractor is earning 2 grand a week. When contractors work out how much they are likely to make they tend to multiply the weekly figure by 50.
That would give him 100K in this case.
Well this guy is working pretty fully throughout the year, he thinks, except for a few weeks between contracts.
However, his real income is only 68K.
If he had been working for 45 weeks of the year it would have been 90K.
And he thought he’d been working most of the year, except for the short breaks between contracts.
And the thing about the extra 22K that’s gone is that all of it, except for tax, is free money.
Extra Money to Make Rich Contractors
If someone has expenses of 45K a year, then when earning 68K a year, he doesn’t have so much left after the tax comes out.
Perhaps he might have 5K to 10K left. That’s not going to make him one of the rich contractors quickly after a year spent mostly working.
However, if he had that extra 22K, he might be able to keep 15K of that and would have 20K to 25K left over to use for investment purposes, which is quite a difference. He could become one of the rich contractors then eventually.
So what can the contractor do to stop this leakage?
1. Rich Contractors Put Themselves First
Remember at all times that the client’s business is most important to the client, but that your business is most important to you.
Therefore, don’t let the client’s important project get in the way of you looking for a new contract whilst you are still working for the client.
Too many contractors let the time slip away here and suddenly find that they are out of the door with no income coming in and no real prospects.
They will suddenly have to put a lot of hard work into getting a contract. This is hard work that they should have done while they were still in work
2. Rich Contractors Don’t Overcharge
I was always a very good negotiator as a contractor. I remember one boss telling my agent to give me a 6-month contract rather than the standard 3-month one that everybody else had, as he didn’t want to go through that (my contract re-negotiation) again in 3 months time.
If I remember correctly, I got a rise of nearly 30% – taken from both the client and the agency.
At most places I was usually near the top of the league of contractor pay rates.
That was good!
And that was also bad!
So often, when they are looking to cut back on contractors, say in the 2nd phase of a project, they simply look at the most expensive ones and lop them off.
That, too often, was me!
No Match for Other Contractors
The extra few quid that I was able to earn on a project was no match for what I would lose when I was out of work for a few weeks.
And I’m afraid that I was one of those contractors who got too distracted by project work to look for a new contract for himself.
The secret is not to overcharge unless you are red hot at your job and clearly better than the others. If. like most of us, you are just about the same standard as the rest, then don’t be slightly more expensive.
Make sure that you try and cut your agent’s margins, but don’t be expensive to the client.
Find out, if you can, what everybody else is on, and try to stay close to that.
Let me put to you a puzzle.
A Project Manager has been told that now that they are in the 2nd phase of a project not so many contractors will be needed, and, as they have already run over project budget, they need to make some cost savings as well – without endangering the project.
The contractors are all quite good but are not so different in standard. Now here are the costs to the company of their 7 contractors:-
What to Do – Project Manager Problem
If the Project manager has been told that he needs to get rid of two contractors, but that the Project budget is also over, what should he do?
He should pick the 5 best contractors, of course, as the price is not so different, and that will boost his productivity.
So, which ones would he pick to stay and which would go?
I would reckon that the two on £1,950 are pretty good bets to stay.
I would also bet that the one on £2,200 would be a pretty good bet to go.
Expensive Contractor Gone
The expensive contractors is just about to go from being 200 quid a week better off than the rest to 2,000 quid a week worse off than the rest of them.
That’s 10 weeks’ worth of 200 quids!
So, the lesson of the story is, if you want to be one of the rich contractors, either be much better than the others or stay competitive as regards your price?
In the above circumstance where the contractors knew that only some of them would be kept, it would have been worthwhile the guy getting the most offering to take a 10% cut to stay in work.
Rich contractors make it their main priority to stay in work.
Rich contractors can do this by first not pricing themselves out of a job, and secondly by having the discipline to put themsleves first and really make sure you have a new contract to go to when you finish your previous contracts.
I consistently failed on both counts.
I hope you take my lesson and do better!
If you do then you can join the rich contractors.