Steps to Disaster
There are 25 steps to disaster whenever the market does turn down for IT Contractors. To be forewarned is to be forearmed.
Many IT Contractors have never experienced a downturn in IT Contracting.
Many of them have become IT Contractors since the last major downturns in 2001/2 and 2008.
To them it has been remarkably plain sailing.
They have probably doubled what they were earning as permies and have a lot more spending money.
Investing in Stock Market
Like IT Contractors before them they have probably invested some of that money in the Stock Market.
Contractors tend to invest in he Stock Market when both the IT contracting market and Stock Market is booming.
They have spare money in their bank accounts and want to use that money to make more money.
However, that is usually the worst time to invest.
Booming Market a Problem
It’s always been the problem for IT Contractors.
Many want to make their pile and get out and then do something else (or nothing at all).
They therefore invest spare money in the Stock Exchange to further that end.
It all goes very well in the beginning.
Whilst the IT Contractor Market is booming the Stock Market is booming too.
Every week (usually on a Saturday) the IT Contractor calculates his or her net worth adding up their cash, the profit from their house (or houses) and the value of their Stock Market shares.
The problem is that before the bottom falls out of the IT Contracting market, the Stock Market starts falling.
Market Downturn Comes
Then, when the contractor is suddenly out of work and with few prospects of getting any more work for a year or two they have to sell their shares, which by that time have plunged, as contractors tend to buy riskier shares in an area they know, i.e. technology, but which fall by greater than the average share.
If anyone wants to know what it is like in a contractor downturn just look at some of the Unemployed Horror Stories from the last downturn here Unemployed Horror Stories
25 Steps to Disaster
Here are the 25 steps to disaster for contractors.
1. There are boom conditions in the IT Contractor market with soaring rates and plenty of work
2. You invest some money in the Stock Market so that you can get out of contracting quicker
3. The Stock Market soars and your shares go up even more as you’ve bought the mainly riskier tech shares
4. Your house or flat is soaring in value buoyed by the boom conditions
5. The Stock Market starts to fall a bit, which is a bit annoying but you’re still up plenty
6. The Stock Market takes a sudden dive and your shares are suddenly not as profitable as you would have liked but you still have a profit
7. The economy then starts to turn down and you soon see news of contractors being laid off
8. You are told that you are not being renewed at your current company as they are getting rid of all but a few contractors
Steps to Disaster – Falling Share Prices
9. Your shares are falling more and you are not much in profit now but there is no point in selling them now
10. You leave your current contract without having another one but hopefully it won’t be too long
11. Agencies are interested at first but after a couple of weeks or so interest starts to drain away. There’s not as much opportunity as you thought
12. You’re invested to the hilt so you don’t have much spare cash and you don’t want to sell your shares whilst they are down, so you ‘borrow’ money from what you had saved up for the taxman
13. Your shares are still sliding, and some of them are now below the price you bought them at and the money you saved for tax is starting to dwindle. Calls from agencies are getting few and far between even though you have applied for jobs through job boards that seem right up your street
14. You decide to sell one of the shares that are still in profit and then another and another. Soon you are left with just a portfolio of the dud shares, or the ones which have fallen the most
15. As time goes on your shares are worth less and less but you have to keep selling them just to get by
Taking Equity Out Your House
16. You start thinking about taking equity out of your house but that proves difficult as you have no work and no income. Worse still, you will be having trouble soon making the payments as the money is starting to run out
17. You start thinking of selling your house and moving to a smaller one. However, house prices are now stalling because of the downturn and it is taking longer and longer to shift them
18. You are reading on IT Contractor websites that there are loads of contractors out of work,, and worse still, many pundits and analysts are saying that the boom days of IT Contracting are over and it will never be the same again because of Work Permits, offshore outsourcing etc.
19. There’s just no calls coming in even though you apply for everything on the job boards whether it is an exact fit or not. The money has virtually disappeared and you are behind on your house payments. You are going to have to put it on the market or lose it – but nobody seems to want to buy it
20. Your spouse or partner have had enough of all this and are departing taking any children you might have because of your increasing bad temper and lack of income
Try To Take Permie Job
21. You start waking up in the middle of the night in a cold sweat wondering what is to become of you and whether you’ll ever work again. You have never done anything else but IT and so would have to take an entry level job at something else. So, you start giving homeless people 20p wondering if it might be you soon
22. You try to get a permie job, just to tide you over till the market picks up again, but they are wise to you, and despite your saying that you really want to turn permie, and that it is not just because of the contractor downturn, they are wise to you and are not interested. They are probably looking at laying off permies anyway
23. Agencies are calling you and asking what would be the least you would take in order to take a contract. They are bidding contractors down for the very few contracts that are available. You give a rate that is less than your outgoings and hope against hope
Contract at Reduced Rate
24. There are several scenarios now. It could go a few ways. You could suddenly get a contract at a reduced rate, probably far from home with the extra expense, or the pick-up might start and contractors start to gradually get back to work, or you manage to find some small time work in a pub or driving a mini cab that just keeps the wolf from the door, or you could go under losing your house, car, all your money, your spouse / partner, your children etc.
25. If you are lucky, when the downturn ends you will be able to get back on the ladder and start all over again smarter and wiser and more cautious about how you use your money. However, if your skills are old skills and no longer in any great need.
Those are the 25 steps to disaster for IT Contractors.
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The worst possible is starting contraction before a major downturn, especially when you have never experienced a downturn
I started in 2000, had 2 very good years and then boom and the downturn of 2002 was worse than 2008
I agree they dont want you as permie, there will be a lot of candidates and they know and tell you will leave if the market improves, leaving them in difficulty, even if you are top notch with a top notch cv