Tag: consulting

The Freelancer’s Toolbox

A few years ago, I wrote a series of posts about the mechanics of consulting, developing business, and setting rates. People have told me that they found those useful, so here’s one about tools.

There is a big difference between “doing a little consulting” vs. going independent for the foreseeable future. You don’t need most (or any) of this infrastructure if you’ve just gotten clearance from your boss to do a one-off gig or if you’ve got a couple of months between roles. You also don’t need an LLC, a tax ID, a bank account or a corporate credit card. Just track hours, income, and expenses on a spreadsheet, set aside about half of what you make for taxes, declare it all as consulting income, and move on with life.

A person could work for a long time without most of these tools. Many do. After all, why invest $9/mo in a time tracking app when you could just keep notes on a scrap of paper? That argument holds, and honestly it holds pretty well, for accounting and productivity software – again – as long as you’re just doing a couple of gigs per year. A well organized set of spreadsheets, a disciplined approach, and a couple of hours every month or so can take a person far.

It’s that “couple of hours” that eventually turns the corner, at least for me. Tooling up saves time, and the old saying about time is absolutely true for consultants.

With that as context: Here are the tools that I pay for rather than re-inventing them. They save me time, both in the data-entry part and also in the correcting-errors and the showing-my-work parts. The list is long because I’m a big believer in using tools that are built to do the specific thing I’m trying to accomplish rather than using terrible bolted-on functionality, hating it, and then working around using Excel (looking at you, time-tracking in Quickbooks).

JWZ‘s law of software envelopment applies: “Every program attempts to expand until it can read mail. Those programs which cannot so expand are replaced by ones which can.” To this great statement I would humbly add a corrolary: “We don’t have to use that garbage.”

The List

Time Tracking: If you’re going to charge for your time, you need to track it. Even on fixed-fee engagements, you should be able to quickly and accurately answer the question of how many hours you have worked for a particular client. Pro tip for clients: Asking “how much of our 32 hour not-to-exceed will we have consumed as of this afternoon?” is one of the fastest ways to separate the n00bs from the pros.

I use Toggl ($9/mo). It has a straightforward web interface, a browser plugin, and a mobile app. People also like Harvest, which has a robust free tier that does basically the same thing.

Password Management:

You should already be using a password manager.

Get a password manager. Seriously. Please go set it up. I’ll wait. Good password practices are the digital equivalent of hand-washing. Passwords are the dead minimum and SMS messaging has security holes you could drive a truck through. For that reason, please also set up two-factor with app-based authentication and biometrics, and burn those post-it notes you’ve got stuck under your keyboard. Information hygiene, and its appearance, is doubly important for freelancers. We have access to many different systems and absolutely must not rely on memory or [SHUDDER] re-use to keep our client’s systems secure.

I use LastPass ($3/mo !!!), though 1Password is also great. I do not recommend relying on browser plugins, apple’s keychain, or google’s password manager for client passwords – mostly because they are not terribly portable if you wind up using client hardware. Also, if you’re like me, you’ve probably got a lot of other stuff on Apple and Google that doesn’t need to mix with your client credentials.

File Sharing: You’re going to need to share files with your clients and you need to be able to do it with at least some minimal consideration for information security. I use DropBox Professional ($19/mo). I bump up from the standard package for the “enhanced auditing capabilities” and versioned rollbacks. Box is also fine, though I find the interface a bit less intuitive. It’s possible to get by with Google Drive or Microsoft’s OneDrive, though I find Google makes it w-a-a-a-y too easy to overshare, and using Microsoft occasionally drops me into a nested hell of re-authentication that always seems to lead, somehow, to my XBox Live account.

Many clients will add you to their shared folder setup, which makes all of this un-necessary. Roll with this and assign a nice strong new password as part of getting it set up.

Microsoft: Go ahead and get yourself a subscription to Microsoft 365 ($9/mo). Just do it. I know that Google is free. Do it anyway. There is a center of mass around Microsoft’s productivity tools and it will save you time and effort to have your own copy.

Adobe: You will need to edit and digitally sign PDFs as part of the contract process. Adobe Acrobat Pro is ($20/mo). Having your own copy will (again) save you time.

Zoom: It is absolutely worth $12.50/mo to never have to cut a good conversation short at 39 minutes.

Sure, you can get by on Chime, Teams, Meet, WebEx or whatever [shudder] … but nothing says “I am totally legit and will show up to do the work I am pitching you” like a 41 minute Zoom meeting.

DocuSign: Having my own Docusign account ($10/mo gets me five “envelopes” per month) turns out to be super useful for pushing decisions forward when I run into a client who is unsure how, exactly, we go about formalizing agreements these days.

Accounting: Make no mistake, Intuit’s QuickBooks is awful, but it’s the best of a bad lot. Hateful as it is – the damn thing is going to live forever. My advice is to use it rather than falling in love with some easier to use, cheaper, more modern alternative that will eventually die like all the rest (I’m totally bitter about the times this has happened in the past).

The team at Intuit are world leaders in the ongoing competition among UI/UX folks to see how little of the screen area an app can dedicate to the thing that the user is actually trying to do. This makes the already high and ever rising price galling. I use their “Plus” offering ($90/mo !!!) because I occasionally subcontract out to other freelancers, I give my accountant a login at tax time, and I give my clients the option to pay by credit card or ACH without me having to deal with their digits.

Oh, but I do hate Intuit’s products. Everybody does. They are living up to what I said on LinkedIn a year ago: The correct rate is “the client is complaining about it but paying anyway.” Well played, Intuit, well played. We complain, but we pay.

Payroll: You don’t have to have a payroll company, but if you do, Gusto ($40/mo + $6/mo per person) is the best.

The reason you might consider having a payroll company (rather than just taking money out of the company whenever you need it) is a little thing called the “S-corp election.” This is an 100% legal and ordinary move that lots of people do every year. Without changing anything about your LLC, you (your accountant, really) can choose to be taxed a bit more like a company and a bit less like a person.

The benefit of the S-corp election is based on the difference between individual and corporate tax rates. The federal corporate tax is a flat 21%. Massachusetts (where I live and do most of my work) adds a flat 8%. Many freelancers find – after adding medicare, social security, and the various other taxes to their base income tax – that their gross taxes are higher than federal plus the state corporate rates.

With the S-corp election you declare and pay yourself the lowest salary that you are able to claim with a straight face. Your payroll company pays you that, taking out all those individual taxes and issuing a W-2. You pay the (presumably lower) corporate tax rate on any remaining profits.

All all the software you use to make that happen – from time tracking through to accounting to payroll – are business expenses – which means that they get subtracted off prior to taxes.

I promise that this is not a scam.


All-in, that’s about $250/mo in software. It’s certainly not zero, but it’s not going to move the needle if you really commit to freelancing. You take it all of your profits (AKA income) as business expenses, and you’ll save a -lot- of time.

There are other recurring expenses too, though they depend on your exact practice.

If you do in-person meetings, you should have access to a co-working space so you don’t have to meet clients in coffee shops. Many freelancers choose to pay for a postal address that’s not their home address, both for image and for privacy reasons. I use a minimally fancy American Express card ($500/yr) because, among other things, it lets me create custom statements per client for expenses.

I will leave all of that, and more, for a later post.

As always, I’m very interested to hear your thoughts.

The Mechanics of Consulting

Since going independent in February, A few people have asked me about starting an independent consulting practice. This post shares some of my experiences. In order to keep it to a manageable length, I have omitted stuff like developing and maintaining relationships with clients, writing statements of work, running the actual projects, as well as the banal necessities of invoicing and collection.

If you happen to be thinking of doing something like this, please keep in mind that your milage will certainly vary. A cursory internet search about starting a company turns up lots of strong opinions – many of them written by people who seem to be selling something. I’m not an attorney, I’m not a CPA, and I do not specialize in setting up small businesses. This post describes my experiences and should be taken with a grain of salt.

With that, here are some of the mechanics:


I registered an LLC with the secretary of state of Massachusetts. This involves filling out a straightforward web form and costs $500. There is a $500 annual fee to keep the company active, and a $500 fee if you want to make changes to the filing (like updating an address or a name) in the middle of the year. I paid an attorney to fill out the form for me, but in hindsight it’s simple enough to do for yourself.

My understanding is that I didn’t have to register an LLC. I could also have simply started “doing business as,” myself. I registered both because I thought it was cool to own a “real” company, and also to provide a legal framework to keep my personal and my business finances separate. Despite the words “limited liability,” an LLC does not actually provide much in the way of legal protection for my assets. That sort of protection comes from consistent, audit-ready financial practices, and insurance.

The form requires a brick and mortar street address as the official location of the business. Everything else can run through a post office box, but the state wants to know where the business actually operates. Since the filing is a public document, some people might be leery of using their home address. When I started my business, I rented a mail slot from WorkBar, my local co-working facility. That let me use their address rather than my own.

You aren’t allowed to have the same name as another registered company. Attorneys can do the search for you, but google and the secretary of state’s website provide a solid first pass. Because my brand is just “me,” I used my name in the filing. There are many reasons that a person might name their company based on what they do, rather than on who they are. Based on my experience and that of several friends, either path can work.

Legal contracts always use the formal name as registered with the state. In conversation, I may refer to my business as “Dwan Consulting,” or similar variants – but on the contract it’s always “Dwan, LLC.”

Tax ID

Once the corporate registration has been accepted, you can apply for a corporate tax ID from the US government. This is another self-explanatory web form.

You will receive a PDF with your company’s tax ID, which you can use to fill out the W-9 form that all your customers will want.

Bank Accounts

With the tax ID in hand, I set up a pair of business bank accounts. I use the checking account for the vast majority of my transactions, and the other one to hold money for taxes. A good rule of thumb on taxes is to set aside half of your gross income. This is almost certainly overkill. Over time you will accumulate data that allows a more accurate number.

Credit Card

In addition to the bank accounts, I use an American Express card for my business expenses. The one I use has an annual fee and comes with benefits that in my opinion make it worth the money. The benefits that I like the most are passes for in-flight internet (I used one in writing this post!), access to airport priority lounges (snacks, comfy chairs, good wifi, and ample power outlets), upgraded memberships in car rental and airline upgrade programs, and so on. There are tons of non-billable expenses associated with business travel, so this works for me. As mentioned above, your milage will vary.

Since I set up the tax ID number with the IRS, my company can have its very own credit history. This will come in handy if I ever decide that I need a business loan.


Some of your customers will insist that you carry insurance. Whether they do or not, it’s a really good idea to sign up for a policy. I was surprised at how little it cost for me to have remarkable amount of coverage.

There are two primary kinds of policy that are of interest to the independent consultant. I have both, and it costs me about $100/month:

  • General Liability: This is insurance in the event that I directly cause damage or losses to my customers. For example, if I spill coffee into their precious server and destroy their data, that’s general liability.
  • Errors and Omissions or Professional Liability: This is insurance in the event that I do not directly cause the damage, but my advice and service are bad enough that when the accident happens – it’s obviously my fault. If I wrote the design that specified that the office coffee pot should be located directly above the precious server, that would fall under “errors and omissions.”

Boilerplate Legal Agreements

I had the good fortune to work with a lot of different contracts and agreements during my time at Bioteam. Because of that, I was confident enough to distill several example documents into templates for Nondisclosure, Proposal, and Consulting agreements. If you don’t have that background, this is a place where I would suggest hiring an attorney to be sure that you understand the terms and conditions under which you intend to do business. This is particularly true if you intend to write software or generate intellectual property.


I use Quickbooks Online. It’s about $50/month, which comes with bank account integration and time tracking. I like the time tracking feature a lot, since I can create invoices that show, day to day, when I was on the clock. I make a practice of recording my time in the system every day. Time tracking software like Harvest is also quite good in this regard. There are other features of Quickbooks that I haven’t needed yet, like payroll and direct deposit.


Taxes are a big deal when you’re out on your own. You are responsible for both the employer and the employee portion of social security and medicare tax. You are also responsible to file quarterly pre-payments. Even though it’s not technically required in your first year of operation, it’s a good idea.

As mentioned above, a good rule of thumb when starting out is that you should set aside 50% of all the money that you get paid. That will feel really uncomfortably high, but it’s way better to over than to under estimate. Over time, you will get a feel for your actual effective tax rate.

I pay an accountant to do my taxes at the end of the year. We usually sit down and go through quickbooks together so that he’s confident that he understands my system, and then he does the rest.

It’s worth noting that a single member LLC like mine is something that the IRS refers to as a “disregarded entity.” The government, doesn’t care if I move my money around between my own pockets. This means that even though it’s a big deal to me when I pay myself, it doesn’t matter at tax time whether I moved money from my business checking to my personal accounts. It’s all the same filing.

Expenses and Deductions

There are lots of good references out there about what you can and cannot deduct as business expenses. I tend to err on the low side, only using the business accounts where it’s really unambiguous that the only reason I’m spending the money is to support my business. I know people who are more aggressive on that front. It seems to work out okay for them.

And that’s it! Even though there are plenty of moving parts, it’s really not all that complex to set up and run a sole proprietorship.

I’m interested in whether this post was interesting or useful to you. Please leave comments or shoot me an email.