How to Be a Contractor

Four Methods:Business BasicsMarket Your ServicesBe Your Own BossSample Action Plan

More and more people all over the world are working as freelancers and contractors, and more and more companies and organizations are turning to their services instead of hiring new staff. A contractor works independently and is not considered an employee of a company. As an independent contractor, an individual manages his own invoicing, expenses and marketing. Being a contractor gives you a more flexible work schedule, greater autonomy and the potential to work on a diverse range of projects. However, contractors also face challenges, such as trouble finding enough work, lack of employer provided benefits, difficulty collecting payments and greater tax responsibilities. Here's what you need to do to work as a contractor.

Method 1
Business Basics

  1. Image titled Be a Contractor Step 1
    Identify the skills and expertise you can offer. Contractors are hired by companies, educational institutions, non-profit organizations and other entities to perform finite, specific tasks. Figure out what you do well that has value in the marketplace. Professions that typically perform contract work include:
    • Graphic designers
    • Massage therapists
    • Hair stylists
    • Writers and editors
    • Carpenters
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    Decide on your prices. Sometimes you will be negotiating fees with specific clients, but in general you need to figure out what your services are worth and how little or much you need to charge to make a living. Find out what others who offer similar services are charging, and place yourself in that range based on your experience.
    • Use online tools like the NACE and Glassdoor salary calculators to figure out how much contractors in your field typically make.
    • Don't lowball your prices. You can always negotiate lower rates if clients balk, but no one will offer to pay you more than you ask for.
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    Create a contract template. Each client will have different needs. A contract agreement will guarantee that you discuss the most essential information with each client. Include details such as:
    • A description of your services
    • Your fee
    • Payment policy
    • Any information that will legally protect you and ensure the client of your reliability.
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    Develop an invoice. Include your name, address, phone number and email address at the top. Date each invoice and assign an invoice number. Indicate the name and address of the client. Describe the services delivered and your fee. Include instructions about acceptable methods of payment and the payment due date.

Method 2
Market Your Services

  1. Image titled Be a Contractor Step 5
    Establish your brand. Just because you aren't a big company, that doesn't mean you shouldn't have a vivid professional brand. Here are a few points to consider:
    • Decide whether you will use your own name or work under a business name.
    • Don't be afraid to invest in business cards, a logo, uniforms and a sign to put outside your home or business. Make sure all of them are consistently branded.
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    Create a website. Make it clean and professional. Use a logo or imagery that conveys your business or service. Include details about your offering and your prices and try to demonstrate your skills. If you are a designer or a writer, put up samples of your work. Let people know how to contact you.
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    Advertise. Actively marketing your services is vital to get your name out there, and it shows prospective clients that you're available for work. Consider these avenues:
    • Investigate online advertising. This could include setting up social media accounts for your business, sending emails with special offers, or signing up for ads.
    • Pursue print publishing. Buy up space in your local newspaper, or find a trade publication that caters to people in your industry and pursue an ad there.
    • If there are publications or web pages that compare different contractors who offer the same services, make sure to get yourself listed.
    • Describe your services in brochures. You can hire a professional to make them for you, or build them yourself using software like Microsoft Word or Open Office.
    • Consider enlisting the help of a copywriter to highlight your unique skills and strengths.
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    Network with other professionals. The right connections can make all the difference in running your own business.
    • Attend networking events and join organizations. If you work mostly locally, consider joining your city's chamber of commerce.
    • Notify other contractors in your field about your availability—and find out their's. If another contractor is too busy to take on a gig, they might pass the client on to you. Do the same for them, when you can.
    • Partner with those that can send you business leads. For example, if you are a copywriter, connect with graphic designers whose clients may also need marketing copy for their websites.
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    Inform your personal network of your availability. Contact friends, family members and former colleagues to inform them of your services. Ask them to spread the word to potential clients.

Method 3
Be Your Own Boss

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    Develop time management skills. Contractors must structure their own time, which is different from the set schedule of a nine-to-five job. Here's how to start tailoring your time to your tasks:
    • Block out time on your calendar for completion of each task.
    • Allot time for administrative tasks, such as invoicing and marketing.
    • Schedule time off for lunch or a short walk, to avoid working without breaks.
    • If you are charging by the hour, make sure you stay focused when working and try not to multitask.
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    Go to the (home) office. If you do your work from home, it can be tempting to just work in bed all day. Don't do it! You will be more effective and organized if you develop a routine and set aside a room or desk just for work.
    • Make sure your workspace is in a room where you can get away from the bustle and noise of pets and kids. Don't let your work materials spill out onto the kitchen counters or dining table if you can help it.
    • Keep your business documents organized and in one place, like a filing cabinet or, if necessary, a document safe. Back up important files on your computer.
    • Set "office" hours and stick to them. This is important if you want to maintain work-life balance.
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    Know you tax responsibilities. Unlike a salaried job where taxes are deducted from your paycheck, as a contractor you pay self-employment taxes yourself. Understanding your tax liability is important for paying the right amount of tax on time.
    • The IRS requires self-employed individuals to file an annual return and pay estimated taxes quarterly.[1]
    • Save your receipts from business expenses—they're tax deductible. Don't forget to keep them organized, preferably with a regularly-updated spreadsheet. You don't want to be stuck sorting through half-remembered receipts whenever tax time rolls around.
    • You may need to collect sales tax. To do this, register with your state’s department of taxation.[2]
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    Keep track of your earnings and expenses. You will need to do this to accurately file your taxes, but keeping track of your income and expenditures is also key to managing your personal finances and making strategic decisions about your business.
    • Maintain a spreadsheet of all your clients and projects. Review this data occasionally and decide if you should change your prices or find ways to cut expenses.
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    Don't forget your benefits. Most companies do more than just pay their full-time employees: they help them buy medical and dental insurance or save for retirement. If you are self-employed, you will have to take care of these necessities on your own.
    • Organizations like the Freelancer's Union can offer contractors group-negotiated benefits in some states.
    • Having proper insurance is especially important if you work in construction, carpentry or another physical labor profession. If there is an accident, you don't want to go bankrupt.

Sample Action Plan

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Categories: Work World