Home Biz Myth Busted – Independent Contracting is an Easy Way To Make Big Money
November 13, 2007 by Yvonne Russell
Home Biz Myth:
Independent Contracting is an Easy Way To Make Big Money
Laura Spencer knows a thing or two about home business. She is a succesful home based freelance writer.
She blogs at Work From Home Momma, Opinion Mom and at her writing blog, Writing Thoughts.
Laura gives us some background and then busts this home biz myth.
Background
I remember when I worked in the corporate world. The department that I worked for would hire independent contractors from time-to-time (often to help with a work overload).
Since we knew the rate the contractors were charging ($50 an hour), the other employees and I assumed that the contractors earned much more (on an annual basis) than we did. We used the average of 2,000 working hours in a year and multiplied it by the contractors’ $50 an hour charge to come up with a whopping (back then) $100,000 annual income for them.
Home Biz Myth Busted – Reasons Why Our Assumptions About The Contractors’ “Big Money” Were Wrong
1) Down-time
Most contractors don’t get 2,000 billable hours in a year.
When a project at a company ends, contractors are let go. There is often a lag of a few weeks, or even a month, between projects when they are not receiving income.
2) Benefits
We had them, the contractors didn’t. As a result of not having benefits, independent contractors usually must provide their own equipment, their own office space, and their own insurance. They must also cover the cost of lost wages for any sick or vacation time that they take.
3) Support Services
Most large companies have marketing, accounting, invoicing, and collection departments inhouse. An independent contractor must either perform these time-consuming functions themselves at no pay, or hire someone else to provide these services.
4) Variable Rates
Not all clients are willing to pay the same rate. One company may pay its contractors $50 an hour, the next may pay them $20 an hour. A contractor between projects might have to take a rate that is less than he or she can really afford just to pay the bills.
Conclusion
Yes, a corporation may pay $50 an hour to its contractors. Now that I’m a freelance writer I see that there is a good reason for that seemingly high rate.
HOME BIZ MYTH BUSTED!!
Thanks Laura… lots of useful insights here.
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What is your favorite home biz myth?
To submit your own favorite “myth busted” experience or tip, email me at yvonne.russell [at] b5 media [dot] com. Be sure to put Home Biz Myth Busted in the subject line so I don’t delete it as spam.
Include your name, the name and URL of your home business or business related site, so I can link to you. You don’t need a website or blog to submit your myth. Any business that involves working or managing the business at least part of the time from home qualifies as a home business.
Thanks for allowing me to submit my mythbuster!
My favorite myth, or the one I am tired of hearing, is that when you have a home business you can do things at your leisure. You don’t have to work as hard because no one is watching you, and in fact it’s harder to work because you can just sit around eating and watching TV. People seem to forget the fact that no work=no pay. A business is not going to run itself.
Also, I find it much more distracting to be in an office with chatty cathys, gossip, and office politics. That’s a lot more difficult to shut off than a tv.
Thanks, Laura, for the great guest post and all your points for dispelling this myth about independent contractor home businesses.
Thanks, DJ, for stopping by Home Biz Notes and sharing your thoughts. Yes, so many people seem to think independent contractors/home business owners can work at their leisure. As you say, no work= no pay.
Thanks for a great Home Biz Myth Busted submission, Laura. You’ve given some really useful tips here, which are readily applicable to any freelancer or contractor.
Thanks DJ –
I’ll be in touch about featuring your Home BIz Myth.
If any other readers have a Home Biz Myth they’d like to contribute, feel free to email as per the details at the bottom of the post.
We’d love to hear from you.
Great points, Laura! Thanks for featuring them, Yvonne–and Mary Emma!
Jeanne
My favorite home biz myth is that childcare is unnecessary when you work from home. While it may not be AS necessary, I would never get anything done without some sort of childcare for my son.
Also, a lot of large corporations only hire contractors through agencies. And the commission that the agencies take on the contracting fee can be as much as 30%.
Hi Karen
You raise a very good point, about having to pay commission to agencies – 30% is a lot to build into your price (or absorb).