IT Contracting and consulting are terrible businesses to be in.
If you were ranking the merits of various business enterprises, they would come right near the bottom.
Don’t get me wrong, I’m a contractor myself, but it’s important to realise that this is not a good way to get rich.
Rich Contracting – Why are we in business?
Most contractors are in business with some idea of getting rich contracting.
This doesn’t necessarily mean big houses and flashy cars, instead they want to gain a certain financial independence – a feeling that they are in control of their lives.
People become IT contractors for all sorts of reasons, but many do so with an eye to being in business for themselves.
They see contracting as a stepping stone to starting their own business.
Many contractors dream of setting up consultancies, while many consultants dream of expanding their operations.
If this is your strategy for getting rich, then it’s not a very good one.
Rich Contracting – Why contracting is a bad way to get rich?
There are two main ways to make money from business they are:
• Gaining an income from your business.
• Building your business into an asset which you can eventually sell.
The second method is usually the more lucrative of the two.
Yet, if you are a contractor or own a consultancy, then your business is probably worthless as an asset.
For the simple reason that it needs you to run it.
You are an intrinsic part of the business. Your skills, reputation and work are the only thing of value.
How can you possibly sell it without you coming as part of the deal?
Simple answer – you can’t.
The worst business to be in is one where you sell your time
Selling your time is a terrible way to get rich.
Sure, you might get a good income, and slowly build up some savings and financial assets.
But really, any business that relies on its owner selling their time is just a job.
You may be earning $500,000 a year; but a big mortgage, BMW and expensive holidays will soon eat that income up.
You’ll get used to a better lifestyle, which means you need more savings to become financially independent.
Saying as Regards Rich Contracting
There’s an old economists’ saying, that for most people is painfully true. Expenditure rises to meet income.
Plus, your scope for growing that income is limited. There’s only a certain amount of work one person can do.
Really, you’re tying yourself to the treadmill for the long-term.
You’re probably thinking that some consultancies do eventually grow into big businesses.
Selling someone else’s time certainly has a lot better prospects than selling your own. In reality though, these consultancies are few and far between.
Most rely on the reputation and skills of their founders, without which they are worthless.
So what’s a good business to be in for Rich Contracting?
The best business to be in is one that you can go on to sell, i.e. one where you start with nothing and build an asset of great value.
You can only sell a business if you can realistically hand it over for someone else to run without any ongoing involvement from you.
So when you’re weighing up any business opportunity, this should be the first thing in your mind: Can I feasibly go on to sell it?
If the answer is ‘No’, then you should think about spending your effort somewhere else.