The series of posts is great stuff so far. I've long been curious about freelancing, both in considering it for myself during certain phases of my career and in wanting to hire independent folks in the near future.
I've so many questions I'd love to ask an experienced freelancer:
- Who actually writes the contracts, you or the buyer?
- What does a sample contract look like?
- Do you use a résumé or something more like a sell sheet when approaching buyers?
"Send me your standard contract or the company I consult through has an MSA and we'll attach my mini-proposal as a SOW."
sample contract
Varies widely based on your locality. In Japan it's literally shorter than this post is. In the US most of the ones I've seen are 2~3 pages long and most explicit about IP assignment, for the obvious reason.
resume
I'm sufficiently well-known to decisionmakers at my clients that the conversation is generally more about what I can do for them than where I went to school or what the exact name of my previous employers were.
city
I live in Ogaki but work across Japan, the US, and (very occasionally) Europe.
big biz vs. startups
Software companies with $10 to $50 million in revenue is sort of the sweet spot for me: ability to pay like megacorps, agility/relative-lack-of-process-BS akin to startups.
on-site or remote
First engagements are probably 90% on-site, existing relationships closer to 50/50.
(1) You should have a standard contracting agreement (your MSA or "master") and a template statement of work (SOW). You'll tend to negotiate the master and you'll tend to keep technical details out of it; the SOW will be very simple and will list the work you're doing, the price, and (if you're a developer) the acceptance criteria for your project. You'll pay a lawyer to eyeball these at some point, but lots of people use boilerplate contracts they pull off the Internet. Each client will have one master and potentially many SOWs.
(1a) With that said, when the the client pushes back on using your MSA (2 out of 3 bigcos will), bite the bullet and use theirs, because you will rarely win that fight. You need a lawyer to review these.
(1b) You're not negotiating or reviewing contracts until you have the "verbal" commit that you won the gig. It's called a "verbal" because the "written" is the contract negotiation, which you wouldn't waste the money on unless you won the gig, so you need a verbal.
(2) Grab one off the Internet. Generally, for your benefit, the master will specify a term, a venue (disputes resolved in your state), compensation terms (net-30, etc) though note that the master will usually refer to a SOW for the actual price, and limits to your liability. For the benefit of the client, the contract will make it crystal clear that you are 1000% a contractor and not not not a full time employee I say it again not, assign all intellectual property generated during the engagement to the client, and possibly require you to maintain professional liability insurance.
(3) You write a proposal. The proposal usually has bios at the end of it. A bio is like a less formal version of a resume.
(4) Chicago, NYC, and San Francisco, plus all over the country.
I just want to emphasize, for the benefit of anyone new to contract work, that even a reasonably well drafted contract you find on-line is probably only worth starting with if it was designed with your particular jurisdiction in mind. The rules on tax, employment status, liability, intellectual property and many other factors vary widely from place to place.
For example, Thomas mentioned being clear that you are not a full-time employee. That's a very important point, but here in the UK, merely saying "I am a freelance contractor and not an employee" in your contract will be worth about the paper it's printed on if HMRC start investigating whether you are caught by IR35. There are all kinds of rules and precedents that will override such a statement, and paying for 15 minutes with an accountant or lawyer who knows them could save you thousands of pounds and avoid the stress and inconvenience of a lengthy tax investigation.
The number of things that protect the contractor in a standard consulting agreement are small relative to the number of things that protect the client; for instance, the "contractor status" clauses in the contract don't do much for the consultant, but they protect the client from frivolous claims that the consultant was actually an employee entitled to overtime and tax payments.
It is very important that clients use a carefully reviewed consulting contract for reasons like this.
It is pretty important that consultants get client paper reviewed before they sign it; we've seen some scary things in client MSAs.
It is probably not all that important that consultants optimize their starting-point MSAs, at least in the US.
The number of things that protect the contractor in a standard consulting agreement are small relative to the number of things that protect the client; for instance, the "contractor status" clauses in the contract don't do much for the consultant, but they protect the client from frivolous claims that the consultant was actually an employee entitled to overtime and tax payments.
Ah, but this is exactly what I'm talking about with regional differences. Here in England, getting the contractual terms that affect employment status correct is extremely important for the contractor/consultant as well, and "terms that affect status" can potentially include almost anything depending on context.
If you don't, and consequently HMRC decide that you are a disguised employee under the IR35 rules, then you can be stung by the worst of both worlds: none of the perks of being an employee but all of the tax liability. To add insult to injury, your client is likely to get dinged for employer's NI as well at that point, so I suppose in that sense you're right that these terms are partly there to protect the client as well.
In case you're not aware, IR35 is a controversial set of rules that in principle stops people who really are working as employees from dodging certain taxes by claiming to be freelance contractors instead. The trouble is, the rules are notoriously vague and significant numbers of people who really are working as freelancers in a meaningful way also potentially fall within their scope. The Professional Contractors Group, which now has many thousands of members, was originally founded just to oppose that particular set of rules. These days, successful IR35 cases seem to be about as rare as unicorns, but that's partly because every legitimate freelancer with half a brain does take advice on how to structure their agreements to make their status as clear as possible.
Not that any of this negates your other point that you should certainly have any agreement proposed by a client properly reviewed, of course. I'm just trying to point out that even the most basic assumptions about who different clauses are there for don't necessarily hold from one jurisdiction to another. That might be obvious to you and me, but to someone reading this discussion who's thinking of going freelance for the first time, everything is a learning curve.
(Mildly offtopic, but replying to my own thread, so TIOLI.)
Just reading this makes me wonder how any person on this planet ever manages to successfully exchange work for pay. How did we get to a place where governments go on and on about "creating jobs" but it takes a double major in law and finance to legally work anywhere anymore?
That's a totally fair point. As soon as you're operating as a business and not an employee, you're typically subject to most/all of the same regulations and lack of personal/employee safeguards as any other business, even if you're just a one-man operation. You can risk setting out without knowing the number of a good lawyer and a good accountant, but personally I'd never advise anyone to do that.
The one positive thing I will say on this point is that once you've been through the major formalities the first time (setting up a legal company entity, getting your first contract written and signed, filing a year's worth of whatever tax records you need in your area, any other annual paperwork like the Companies House filing in the UK), it's usually not as bad as it sounds. The first year or so is quite a learning curve, but as long as you're reasonably organised, habitually keep accurate records, and are willing to pay for a modest amount of professional help from people whose job is to stay up-to-date on technicalities and recent changes so you don't have to, the overheads are rarely more than a half-day a month, at least here in the UK. It requires diligence, but not a PhD in rocket science.
I cannot speak for the UK (I've never done business there) but becoming a freelancer in the US is very easy. You can incorporate effectively online for a few hundred dollars, and in your first year, if you don't have the revenue to justify an accountant, you can do all the tax prep you'll need online. Again, in the US, most of the stuff in consulting agreements protects the client, not the consultant.
* I have a standard MSA that each client signs. Each project gets a separate statement of work.
* If you have subs, include provisions that your clients won't hire them behind your back. Make sure that it's clear that they own the IP once they're paid in full. Payment terms.
* I haven't had a resume in years, my sales strategy: referral or chance meeting (business mixer, etc.) -> conversation -> contract.
* Chesapeake, VA. A bedroom community with virtually no technology scene.
* I used to do work for a lot of funded startups out of SF/NY. I now only work for profitable small businesses (I need to be sure that the work I do will end up making the client more money than they spent.)
Who actually writes the contracts, you or the buyer? What does a sample contract look like?
I joined a professional group that provides a variety of useful services, including starting points for common legal documents written by actual lawyers with actually informed notes about using them. So far I've not had a problem getting any clients to sign some usually simple variation of one of those documents. No-one has ever offered me a contract they'd written themselves; that sort of thing usually happens on larger scale projects than individual freelance/consultancy work.
Do you use a résumé or something more like a sell sheet when approaching buyers?
Ideally, neither. The best leads often come word-of-mouth via friends/colleagues in the early days, and then via referrals from former clients later as you build up a track record.
In what city are you working?
I'm based in Cambridge, UK. Some clients are too, others are further away, but all UK-based in my case.
Big biz vs. startups?
Ideally neither, if you're just starting out and going into freelancing alone.
Big biz is full of overheads and is notoriously bad at paying on time, and you won't be in a position to take advantage of the other side where big biz has big budgets available if you get to the right people and present what you offer in the right way. Your mileage may vary, but realistically it probably won't for quite a long time, unless you have some really compelling advantage that most people don't before you turn freelance.
Startups have the opposite problem. There is a much higher risk than average of working with people who lack professional experience and have wildly unrealistic expectations, who have relatively little budget to spend and therefore penny pinch at every opportunity, or who want you to put in the same kid of effort as they do when they own the business and you're just a freelancer who can be dumped in the time it takes to write a letter.
Obviously those are stereotypes, but if I were you, I would aim for the safer middle ground until you've learned how the game works. There are plenty of small/mid-size businesses who are established enough to have sensible money available but not big enough to have dedicated in-house people for everything. If you can get a few decent clients like that and do good work for them, you have a fair chance of repeat business and/or referrals that brings some financial security. If you keep your ear to the ground, you'll also start to figure out where you can really contribute something valuable, which in turn you'll be able to charge for at rates they consider fair even if they're way above what you thought you were "worth" because you took your old salary and multiplied it by 2.
What is your on-site vs. remote work ratio?
I work exclusively at my own facilities day to day, though I'm happy to make visit clients for meetings, presentations, on-site testing, or other useful activities that work better if everyone's in the same place.
This has a number of major advantages, including not getting dragged into areas outside my role or, heaven forbid, the politics in your client's organisation. Another big advantage is being able to take on multiple projects concurrently, which can be very useful if they are useful projects but no one project consistently provides the equivalent of full-time work. And of course, you get complete freedom in choosing how to set up your working environment, tools, usually working hours, and so on, which is a huge win for work/life balance and was my #1 reason for going freelance originally.
I've so many questions I'd love to ask an experienced freelancer:
- Who actually writes the contracts, you or the buyer?
- What does a sample contract look like?
- Do you use a résumé or something more like a sell sheet when approaching buyers?
- In what city are you working?
- Big biz vs. startups?
- What is your on-site vs. remote work ratio?