Geoscientists without Jobs, Part Six
“Are you STILL interested in geoscience jobs in Houston, Paul?” I get this email once a week from one of many job search sites I frequented over the last year. In that time, the number of open full-time jobs in the oil business has hovered just north of zero. While oil companies are still advertising intern positions (although one wonders who is left to mentor them?), those of us with experience wanting in the game have to do so under the banner of consultancy. If perusing the biographies of geoscientists on LinkedIn is any indication, the old trope about “consultant” being a euphemism for “unemployed” resonates with uncomfortable familiarity.
There are countless books, seminars and courses on starting your own business and defining your unique value proposition; the reader is encouraged to determine his or her own course as a consultant. On offer here are some practical guidelines for consultants about money; mainly, what to charge, tax implications, and getting paid in a timely fashion. (I’m neither an accountant nor a lawyer, so I disclaim all advice here. These are lessons learned from experience, and you should seek the advice of a professional before putting your skin in the game.)
It is nearly a truism that first-time consultants do not understand what they should charge r their time. If you’ve never been in charge of budgets and hiring, you may be surprised by what it costs a company to employ someone, and therefore what makes a consultant an attractive option to a potential client. If you’re employed in the US and want to know your fully-loaded cost, a good rule of thumb is to double your salary. A full-time US employee works 2,000 hours in a year, so your cost per hour is a simple calculation. Charging much higher as a consultant reduces your odds of securing a contract unless you have unique skills that command a premium. With over 70,000 oil and gas professionals on the streets in Houston alone, uniqueness is unlikely. Charging much less carries risks, too. Once you find out that actually billing 2,000 hours a year is a bridge too far and you’ve averaged out the feast-or-famine cycles of consulting, your annual income may not be as impressive as your hourly rate might initially lead you to believe it should be.
Once you set a rate, you have to stick with it. Charging different rates to different customers will cause trouble. Aside from the reputational issue, you create an additional ethical problem for yourself by creating an incentive to bill hours to one client over another. There are exceptions to the rule, though; if someone is willing to engage you for extended periods (a month or more), it is customary to discount your hourly or daily rates.
Taxes are also markedly different, and include such surprises as the so-called “self-employment tax”. As of 2016, the IRS codes state a self-employed person will pay an additional 15.3% on your first $181,000 of gross income in addition to the customary income taxes you pay as someone else’s employee. Since you have to pay estimated taxes on a quarterly basis as well, you need to keep enough on hand to cover those payments every 90 days to avoid costly penalties.
Unlike employment where you get a paycheck every 14 or 15 days, you won’t get paid until you send your clients an invoice. If you’re not familiar with terms like “net-30”, be prepared to wait for your money. Payment terms and timelines should be included in any contracts. Keep time sheets, even if the client does not request them from you, so you have an auditable trail of your time and costs for a project. Keep track of all your costs and receipts; if the client is not willing to cover those expenses, you may be able to deduct them on your taxes.
If you contract with companies based in your own country, your path to resolving contract disputes is well-established. If you sign a contract with a foreign entity that dictates legal actions must be filed in their home country’s court system, you are at a disadvantage. Since the most likely dispute you will encounter is non-payment, one way to mitigate this risk is to ask for a retainer for some portion of the contract. If your client routinely deals with contractors, this will not be an unusual nor unreasonable request. If the client is unwilling to consider this, take that as a red flag. You then have to weigh the risks of waiting months to be paid or possibly not at all.
Remember your consulting contracts are, in fact, legal contracts. Your clients are bound to pay you, but you are also bound to deliver on your work. When you’re a struggling consultant, it is tempting to take any work offered, even if it exceeds your skills. Remember your reputation is the coin of the geoscience realm. From the last column, readers may recall the reputational benefit of altruism by referring potential clients to more qualified candidates. When one factors in the legal, financial and reputational risks, discretion is also the better part of contract work. Stepping outside your comfort zone is good for growth, but leaping off a cliff in pursuit of your contracting quarry may leave you feeling like Wile E. Coyote in that moment before gravity kicks in.