Contracting is a very different world from the world of the big company employed and can be fraught with pitfalls for the beginner. Once you've made the decision to do it many who jump into it find themselves in a sort of cold-turkey atmosphere where they are being taken advantage of at every turn. After your first couple of contracts you have wizened up to the ways of the industry, but I'd like to help you shorten that learning curve if I may.

There is a contract to suit everyone's taste if you're willing to be a little flexible. If you take steps to plan for your future and gain a knowledge of the business you can do quite well. Here are just a few simple guidelines you can follow to make your contracting career a successful one.

Choose your contract length before you jump ship.

For those of you who have very little financial responsibility outside of yourself, such as no spouse or kids or house payment, feel free to grab any short contract you can find. Many of the short contracts are fast-paced and fun, and most are more lucrative than longer contracts. For those who want something a little more stable, contracts that are 6-12 months in length are quite common. Many have a possibility of extension and can easily go for years.

Build cash reserves.

If you're just starting out I usually recommend taking longer contracts at first until you get used to the idea of contracting. Use that time to build up some cash reserves in the event that things go sour. You should try to have 3-6 months worth in savings if possible just for peace of mind, and then you can pick your next contract knowing that you have the time to find one you really want instead of settling because you need the cash in a hurry.

Choose an agency or go solo?

The job of the agency is primarily to find you the job. Can you do that on your own? Think about it - there's a lot involved there. An agency gets their foot in the door at companies that might not be willing to deal with an individual. An agency does a lot of groundwork to find lots of positions at lots of companies so that they can offer you a variety. An agency takes care of collecting from the client and pays you regularly. An agency takes care of liability and errors and omissions insurance as well as your health insurance, worker's comp and in some cases training and vacation pay.

None of those things are impossible for you to do – they're just time consuming. If you're willing to spend the time to do them you will reap a larger income, sometimes up to 50% more, but you need to ask if it's worth it to you. There's something to be said for doing it on your own, but there's also something nice about working 40 hours a week and not worrying about the other details or how you're going to find the time to track down your next contract.

You control your own destiny.

Most of the contracts I've taken have been through an agency and I've learned something over the years that I'd like to share: despite the fact that you get your paycheck from the agency, and despite the fact that they hired you and can fire you, and despite the fact that your signed contract with them says you're the employee, the truth is - and don't tell this to the agency - they work for you.

You tell the agency the lowest rate you're willing to accept. You tell the agency the geographic locations you'd like to work. You tell the agency any special conditions of your employment. They can refuse to work with you of course, but then they don't make any money - and they're in business to make money. It is in the agency's best interest to keep you happy, because the hardest part of their job is finding the customers and finding the right contractors, and once they have a match they just want to keep it going so they can collect their cut and focus on other customers and contractors to build their business.

That doesn't mean you can be a demanding prima donna of course. No one will work with you if you're difficult to work with. I'm talking more about a mindset than a demanding attitude. Take charge of your own life!

Your rate isn't market – it's salesmanship.

You've got a team of developers who design a fantastic product that goes on the market and becomes a huge hit. Each of those developers made $80K per year slaving over the product until it was ready, and then the salesman took your hard work and made over $150K per year selling it. Hmmm. Is that fair? Maybe it is – selling is actually really hard work.

The first rule to selling yourself to the agency and customer is knowing your product. Know your strengths and focus on them, stressing the reasons why you think you're right for the position or why you need to get $10 more per hour than the average. I was lucky enough to learn a very important rule when I was first starting out: the customer will always pay for value.

If you are worth more than the average you better be able to sell it and prove it.

Don't focus on the agency's cut.

There is a tendency in the market for contractors to get upset with their agency because the agency gets paid a certain amount for every hour the contractor works. I've never really understood this line of thought. There is one valid reason for getting upset - if the agency is inflating their percentage so much that it's pricing you out of the market, but then you just find another agency.

Most agencies charge the customer 20-50% over your rate, so where does that money go? Well, if you're in California like I am, roughly 11-15% goes toward taxes. Another percentage goes toward the different insurances they need to have for you, and another percentage goes toward maintaining their office and staff, including the recruiter who found your job. Sure they make a profit also – I hope they do so they will stay in business long enough to pay me and find my next contract for me.

Normally you don't know what an agency charges for your services, but I knew a guy who was very upset when he inadvertently found out his agency was billing $70 per hour and he was only making $45 per hour. I just don't think you can beat yourself up over this. Is it fair for the agency to make this much off of your labor? Answer: Is it their fault they're better at selling than you are? Don't get mad, just realize that you're worth more than you thought you were and ask for $50-55 per hour for your next contract. Now isn't that better?

Employ multiple agencies.

You are in the workforce to make money and contribute to others' bottom lines as well. While this does include the agency, if you're going through one, you are under no obligation to continue working for them once your contract has ended. You should have no qualms about working for someone else.

The agency's job is to match companies with workers, and no agency has every match. When your contract is coming to an end send your résumé to every agency you can find that deals with your skill set in the geographic area you want to work. Your chances of finding a good contract greatly improve when you have more than one agency looking for you.

There are also a couple of web sites where you can post your résumé also. The most popular by far for the IT industry is www.dice.com. Sites like www.monster.com are more general but some have found success there. I use DICE a lot and have matched up with a job about half the time. The other half of the contracts I've had have been through direct marketing to the agencies or the client.

Out of courtesy I always give my current agency a two week head start on the competition to find me a new job, unless the agency was truly awful, which has only happened to me once. Once that time has passed I then market myself to all the agencies I've chosen. In a good market it takes 2-4 weeks to find a position, while in a bad market it can take 4-6 or even longer.

Consider getting your own health insurance.

Although most agencies have health insurance plans you can join, I've found that for a relatively healthy individual it is less expensive to pay for your own insurance on the side instead. There are two other benefits to this also: you can pick exactly the plan you want and you aren't forced to switch insurance companies as you go from agency to agency. Remember these expenses are tax deductible for most people, but check with your accountant.

Plan for your own retirement.

One of the big upsides to contracting is the higher salary you receive, but it comes with a downside too: little to no retirement plan. Just about every financial analyst will tell you to take a percentage of your monthly income and invest it immediately. This is good advice for employees also, but it makes even more sense for contractors with a limited retirement plan and a greater influx of disposable income. I'm not going to tell you how to invest your money, but I will say that from the research I've done there are some relatively stable and excellent choices for investing long term.

Network like mad.

Contractors know contractors, and contractors know the contract market pretty well. It's always a good idea to be on good terms with everyone in your workplace, but as a contractor you'll most likely find yourself gravitating toward other contractors you work with. They will most likely embody the same work spirit you do – the one that got you into contracting in the first place. Keep those connections even after you leave the company and you'll find that you can help each other down the road.

Most importantly, have fun!

There are so many good reasons to switch to contracting so don't let a rocky start sour you on the whole experience. If you keep your wits about you you'll find that the path to a successful contracting career isn't nearly as filled with uncertainty as you may have thought. It's my hope that these guidelines will help you get through your first contract or two with a minimum of transitional trepidation.

So go do it!