If you’re a contractor, odds are you’re feeling pretty good about the market right now. Business is booming and there’s plenty of work to go around.

Kiwi Bank predicts that for 2022 there will be a net brain drain out of New Zealand of 20’000 professionals

“Immigration reversal: Kiwibank expects net 20,000 people will leave NZ this year”,

Stuff News, 28 March 2022.

Future looks rosy for contractors.

But beware – don’t price yourself out of the market by overcharging for your services. This market always swings from one side to another. Add to that the elections in 2023, when government departments and other organisations wait for the outcome before committing money to new projects.

There are many benefits to working as a contractor — it can pay better than doing a similar salaried job and be more flexible.

Being a contractor means you:

• Are self-employed
• Choose what work you do
• Choose how — and sometimes where — to do your work
• Are responsible for paying your tax.

Here’s what you need to know to stay competitive.

DON’T BE TOO GREEDY ABOUT RATES

As a contractor, you need to be aware of your value in the marketplace. Businesses are always looking for ways to save money, so if you’re charging too much, they’ll simply go with someone else.

It’s important you set a realistic hourly rate for your contract work. It needs to cover all your expenses and hidden costs, e.g., sick leave and public holidays. If you set your rate too high, it could put off future clients. Setting it too low could leave you out of pocket and struggling to make ends meet.

To find out what you should charge, start by doing some research.

To find out what the going rate is, talk to other contractors in your field, look at job adverts or use an online salary benchmarking tool.

Look at similar positions in your area and see what the going rate is. You can also ask other contractors what they’re charging.

At Surge Consulting, we can advise our contractors to find a realistic contract rate.

Once you know what the going rate is, add a margin to cover your overheads and make a profit.

Don’t forget to factor in sick days and leave days in your calculations.

Remember, as a contractor, you’re running a business. So, charge enough to cover all your costs and make a reasonable profit.

If you don’t feel comfortable discussing money with potential clients, get help from an experienced person, e.g., one of the Surge Practice Leads, can help you with these tough conversations.

Once you know what you should charge, it’s time to pitch your services. But remember – don’t get too caught up in the numbers. Businesses are looking for quality, not just a low-price tag.

An organisation wants value for value, i.e. they will pay you for value delivered. So the more value you ask for, the more value you need to deliver.

It is like buying a car. An entry level car sells for a couple of thousand dollars versus buying a high-end car for many more thousands of dollars. Which one are you going to expect to give you more features and luxury value?

UNDERSTAND YOUR WORTH AND PRICE YOURSELF ACCORDINGLY

When looking at other contractors, also remember to consider the value they offer in relation to you.

If they have a strong portfolio and client base, they may charge more. If they’re new to the scene, or only take on minor jobs, their rates will probably be lower.

Another consideration to consider for the value you offer is your experience. The more experienced contractors are going to ask for more. However, that also depends on what the client needs in terms of experience. If they don’t need a person with 10 years’ experience, then they are most likely not going to pay the rate of a person with 10 years’ experience.

You also need to consider the skills you have. If your skills are in plentiful supply, e.g., process modelling, then you going to be operating in a competitive market. The more demand there is for your skill set and the lower the supply, the more you can ask.

Might be worthwhile doing a skills inventory assessment and see if there is some up skilling is needed. The Surge Practice leads can help with these assessments and guide you in your career development to be more marketable.

Of course, there are always exceptions to this rule, so use your best judgement when deciding what you should charge. It’s important to stay realistic about your worth and the market conditions.

The key is to find a happy medium that works for both you and your clients.

BUILD YOUR PORTFOLIO TO BUILD VALUE

Creating a great portfolio can be the key to success for any contractor. It is essential to have a collection of your best work that you can show to potential clients.

It is also important to keep your portfolio up to date with your latest projects. A strong portfolio will help you build a strong client base, which is essential for ensuring future work. When clients can see what you have done in the past, it helps them to understand what you are capable of and builds trust in your abilities.

Think about building varied types of work in your portfolio to show your capability under different conditions. Often a client is going to pull you into different areas to get maximum value out of the rate they are paying you.

Therefore, having a mix of work that demonstrates your skills in different conditions, it’s going to make you a more attractive contractor.

One way to show variety in your portfolio is by featuring projects that required distinct skill sets. For example, you could include a project that required Agile, Mobile apps, Web application, or a pure business-related project.

Of course, this all takes time and effort, but it is worth it in the end! So, keep plugging away and don’t give up. Your success as a contractor depends on it!

MONITOR THE MARKET

Consider market conditions. The boom in contract rates can’t last forever. Supply and demand drive the rates. When there is short supply, the rates will go up. Same for when the demand is high. However, when that normalises, and supply and demand are more balanced, then the rates will come down as employers have a choice.

Therefore, you want to be monitoring the market and being proactive in your reaction to the market.

Rather, use the boom market to develop connections, experience, your portfolio, and loyal clients. So they keep coming back to you as a contractor of choice when the supply outstrips the demand.

SOME OTHER MARKET FACTORS TO KEEP YOUR EYE ON:

Upcoming events and how these may affect the market supply e.g., COVID decreased the supply, but elections might also decrease the demand as organisations wait to see who will be in government.

State of the economy and business confidence will give you a sign if business is going to launch new projects.

The levels of unemployment and restructuring in your sector will give you an indication if organisations are going to be looking for contractors. If many organisations are downsizing, then the chances of them hiring contractors are going to drop.

Of course, this means that you are going to need to be flexible in your rates too. The question is, would you rather be unemployed and ask for $250/hour or employed and earning $100 when the market is flat?

So, there you have it. A few thoughts on what to consider when you are a contractor in today’s market.

The market is always fluctuating, so it’s important to stay mindful of what the market is doing and be prepared to adjust your rates. Remember, you don’t want to price yourself out of a job or become unemployed. Keep learning and honing your skills; that way you can stay ahead of the competition. If you’re considering making a move into business analysis contracting, get in touch – we may have just the right opportunity for you!

Looking for a contracting role and want to know more about the Surge model then contact me using the QR code below.