Chicago, IL

By A.B. Dada

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On a recent slashdot article, I had posted a response to why I believe that 1099 work (contract work) makes more sense than W2 work (employment) for more people than one would consider.  W2 work means getting a job with an employer: working your 40 hours a week in exchange for “stability”, some benefits, and hopefully a committed employer/employee relationship.

I find W2 work ghastly for a great many reasons.

There’s an old adage: “don’t put all your eggs in one basket.”  When you get a W2 position with an employer, you’re doing exactly that.  The stability that people think they have comes from a few things the employer provides:

1. They find you work.  Instead of having to cold-call and make visits to possible future customers, your employer has their own department or team to find work for you.
2. They collect money.  When you’re on your own, a key element that kills many entrepreneurs is cash flow.  Customers rarely pay on time.  Sometimes they don’t pay at all.  Others will complain about the minutiae of a bill, wasting your valuable time over pennies and nickels.  Your employer handles cash flow so you don’t have to.  You just get your regularly scheduled paycheck.
3. They handle group benefits. Health insurance is a huge reason some people stick to a W2 job.  I will detail my views on the inefficiency of health insurance at a later date.
4. They manage your schedule. Get in by 9, leave by 5, hopefully do the amount of work you’re supposed to do without delays from other people.

This is all great, but it is such a limiting factor for your income and future, because all of these issues are a burden, not a gain.  Your job is stable, until it’s gone.  When it’s gone, you have nothing other than possibly some unemployment income and savings.  100% of your income is gone the moment the pink slip hits your desk.  All your eggs are shattered when the basket goes away.

The 1099 contractor can take all of these items, and do much better for themselves:

1. Finding your own work is time consuming, but profitable. In order to be a good networker, you should become a confident businessman.  Confidence is not something most people are born with, but develops over time.  Finding work initially is the biggest obstacle to becoming your own boss.  The positive side is that you can undercut your competition initially to at least get your foot in the door.  I’ll post a small series of ways to acquire your first customers, and do so in a way that is similar to going to school rather than feeling like a business move.
2. Collecting money becomes habit and ritual. All it takes is your first experience with firing a customer to realize that collecting money is not as bad as it seems.  When you get to the point that you have a few clients, getting rid of a bad payer can be a net gain, even if it is a short term financial loss.  Contractors are not as easy to hire as you’d think.  Integrating new contractors into a business operation can be very costly, time consuming, and horribly inefficient.  When you realize you’re doing the best job that can be done for a client, you have the upper hand in payment delays. I will add to the series posts regarding how to manipulate your work schedule around those who fail to pay on time, or who pay less than you deserve.
3. Group benefits are a sham. Except for the rare few people who have benefit costs significantly greater than average, most group benefits are truly a sham.  The reason why most people don’t acquire their own benefits is due to the ridiculous tax laws that provide incentive for group plans over individual ones.  Once you find the secrets (which I will share) to acquiring your own health care coverage, disability coverage, and other benefits, you will see a great savings in your financial future.
4. Schedule management is the deal breaker. Every entrepreneur I’ve seen fail has done so because they mismanaged their time.  They took too many days off, they showed up late or not at all, and they refused to plan for the juggle of self-employment.  Some days are work days, some days are billing days, some days are collection days, some days are marketing days.  Most days should include a little of all those types of days.  When you focus too much on one work process over the others, you’ll fail.  I’ll detail the secrets to balancing your work life with all the processes rolled into one.

I do believe that many employed W2 workers could do far better as 1099 contractors, even to their current employers.  Putting your eggs in a variety of baskets is the best way to prepare for wealth and stability.  In the coming series, I will detail the process to extricating yourself from the grind, along with a detailed story of my own failures in the business world.

If you have any questions, feel free to contact me so I can develop more answers on this site.