3 factors to consider before starting up as an IT Contractor

The transition from permanent employee to full time freelancer is filled with questions. Are you ready to make the leap? Can you succeed financially as a contractor? Will you be able to find work?

There are many aspects to factor in when it comes to changing your job - and contracting is no different. It may seem like a move into the unknown as the legislation and practicalities of contracting can seem confusing at first glance.

As someone who has recently made the move, it’s not as daunting as it seems. You just need to factor in some key considerations when you set up as an IT contractor:

1. Do a skills check

As an IT contractor, your skill set is your life line. Before you hand in your resignation, check the contractor job boards to ensure your skills are in demand within the marketplace.

Demand for time-honoured technologies such as .NET and Java remains high but also keep your finger on the pulse with new coding languages. IT contractors with a knowledge of Apple’s new programming language Swift, for example, are popular as mobile development has become one of the hottest contractor skills to have during 2015.

Spotless syntax does not guarantee a contract though. Make sure you research popular industries within the IT sector. For example, there has been a significant rise in the number of cyber security contractors over the last 12 months - and the value of security skills is reflected in the daily rate on offer. Your experience within the wider corporate world and your soft skill set can help you to win contracts, so bear this in mind.

Also, research the rates of pay currently on offer and come up with a rough financial plan based on these figures. There are a lot of hidden costs when working for yourself - holiday pay, sick pay and other employee benefits are no longer available. Although, a higher rate of pay is available as a contractor, giving you the freedom to choose how to spend your earnings.

2. Outsource the tough stuff

When you become an IT contractor you have to wear a lot of hats. You are your marketer, HR department, accountant, financial advisor, facilities manager, CEO, CIO and help desk. Plus you have to find time to complete a few contracts as well.

Make the most out of online tools and outsource as much of the peripheral work as possible. There are many cloud-based services out there to help you on your way and to offer you further flexibility in the way you work as a contractor.

For example, an online accountant can take care of processes such as setting up as a contractor, those endless HMRC forms and maximising your take home pay. There are many on offer but try to pick an accountant that specialises in the IT contractor market - Nixon Williams and their Vantage service are a sound choice, offering a fixed monthly fee, easily accessible cloud-based portal and direct contact with a personal accountant.

3. Prepare for the rainy days

The IT marketplace is continually evolving so your skill set will need to shift to meet the demands of the industry. In quieter periods, invest in yourself with some training or embrace a networking opportunity to try to foster new leads. Market yourself.

Training should focus on your existing skill set so you can build expertise in one area. For example, .NET skills are constantly in demand but, while a knowledge of C#.NET is obviously required, try adding some web-based development training on top to boost your CV.

You will also need to build up a cash reserve for quieter periods. A good rule of thumb is to have three months worth of earnings set to one side so you can weather the storm. As contractors demand daily rates of between £500 and £750, according to the Nixon Williams 2015 Contractor Survey, this should be easily achievable and help you to prepare for the future.