Dear Ms. Theologian,

I am quitting my job of five years to pursue PhD studies and teaching.  The company has been great to me, very flexible with my schedule, but it’s time to focus more on my schoolwork.  But when I gave them my notice today, the idea of consulting work was brought up.  I create Visual Basic macros that interact between Excel and a mainframe, and do a variety of other technical-type stufff.  I was told it would be great if I could come up with “some kind of agreement” that lets them know when they could ask for my assistance.
 
I’ve never done consulting work before, and don’t know what I should stipulate–would they reimburse me for the mileage in my commute (that’s much of the reason I’m leaving!)?  Should I be asking for the same amount of money they’ve been paying me?  I’ve found a few contracts online, but I’m not sure what I need to have in writing.
 
Ideas?  (I don’t want to get sucked into working more for them than is convenient for me–but I do enjoy the work, in small doses).
 
Thanks!

-Future Consultant

Dear Future Consultant:

Congratulations on considering the wild world of consulting!

Being a consultant (and self-employed) involves a considerable paradigm shift, even for part-time work. Start with some basic research about tax issues with the IRS, because you basically have your own small businesses and Don’t Write Off that Write-Off can help clarify points about write-offs, which are confusing to most of us. 10 Stupid Mistakes Made by the Newly Self-Employed should help avoid any of the assumptions we all make about what it means to be in business.

As far as your query goes, you may want to present your employer with a simple letter offering the following information, which could be incorporated in a standard contract:

Contact Information  While this sounds extremely obvious, have a good think about how you want these folks to contact you. Do you have a preferred email address? Do you have a preferred phone number? Do you want them to use your home number (Ms. Theologian advises against this). And, of course, if you have a designated business line, then this is a tax deduction (it could be a cell phone too).

Types of Work that You Wish To Do You’ll wish to spell out the sorts of work you wish to do. Again, this is something to think about because you might be able to suggest a broader range of tasks than your work load currently encompasses.

Where You Wish To Do This Work  Now this is trickier. If you are working in their offices with their equipment during their work hours, you are dangerously close to being their employee for tax purposes. Unless you want that categorization, you should probably carve out a place in your home as an office space (which is also partially deductible).

Rates Do you wish to charge per item or charge an hourly rate?  If the amount of work is fairly fixed per item, it might be worth your while to charge per item. If the amount of time you spend could vary, you need to charge an hourly rate. How much should you charge? This is much more difficult, but it’s worth your while to investigate on-line what other consultants who do similar work charge and not simply choose a rate based on what you now earn. And do you want to have a different rate for last minute work? Many times consultants are tasked with doing work that comes about at the last minute (like on Friday afternoon), and charge more for this.

(A related idea: It might be possible to do this work not as a consultant but as at temporary hourly employee, which would allow your employer to withhold for taxes and pay your SSI, and perhaps for you to keep any benefits).

Hours Most clients want an estimate of how many hours you are available weekly.

Reimbursable Expenses  What do you wish to be reimbursed for? Ms. Theologian charges hourly for travel time to some clients, but not for mileage (though she does keep track of it as a business expense for taxes). Ms. Theologian also tries to have clients pay upfront for her travel (airfare) and lodging rather than book it herself and be reimbursed months later.

Other stuff you should do:

• make an appointment with some sort of tax prepararer, financial planner, or such to talk about business stuff so that you are not shocked and appalled at the year’s end when you prepare for taxes and realize you didn’t record something; 
• get a big folder (or box) for keeping all related receipts (office supplies, utilities for the home, cell phone bills);
• get a notebook for writing down mileage and keep it in the car with an attached pen; and
• create a spreadsheet for tracking your invoices.

Readers, are there other things to consider at the beginning of consulting?

And good luck to you, Future Consultant! It seems like this provides additional income and allows you to pursue your studies—great news all around.

-Ms. Theologian

P.S. If you’d like to write to Ms. Theologian, send an email to ms dot theologian at gmail dot com.