Four steps to becoming an independent software consultant
What to do and take into account before becoming an independent software consultant? How should the transition from employment to entrepreneurship be handled? And how to find projects? On this page you will find the answers to these questions, among others.
Many brokerages help independent software consultants to find projects. Most will require a meeting with you before you become a part of their network. Most of the time, the meeting is casual, since you are becoming partners that help each other.
Brokerage companies handle the customer acquisition for you, adding a margin top of your hourly rate. You’re billing a brokerage company that bills the end customer.
What happens at the meeting?
- The brokerage company presents itself, the depth of their presentation is dependant on how familiar you are with the company.
- The company wants to hear your story.
- The company wants to know which industry you would like/do not particularly want to work in.
- The company will ask for your hourly rate.
- You can ask about the company’s operating methods and the priorities of possible cooperation.
- You can ask if the company offers other services in addition to project brokerage.
- You can ask about payment schedules.
- You can ask about possible restrictions (NDA, non-competition…) if you go to a project through them.
In Oslo, the average software developer working on an average customer’s average project is billed at 900-1600 NOK/hour, depending on the brand of the invoicing company, developer’s experience and customer relationship. In some specific situations, experienced developers can be sold for up to 2000 NOK/hour.
Witted assists senior-level developers and designers in becoming entrepreneurs and acquiring customers for absolutely free. All you have to do is get in touch, and then we’ll go over your details. If everything seems good, we invite you for (remote) coffee. We are very interested to hear your story: who you are, what your superpower is and what you would rather do. By describing what kind of projects you are most interested in (industry, technologies, duration, location), we can find projects that are right for you. We also provide support in contractual and legal matters.
You can relax while our agents hunt for a project that matches your expertise and wishes. When a potential gig is found, our agents will present it to you. Your profile will not be presented to the end customer until you have given permission to do so.
If everything goes well with the end customer, you decide your own hourly rate and invoice the working hours from Witted at the end of the month. Witted adds its own commission on top of your hourly rate and handles invoicing the end customer.
- Once a good-sounding project has been found, check the terms of the contract drawn up by the client and have a lawyer check it as well. You can get the help of a lawyer, for example, through Witted or a trade union.
- Since you have not yet started a company, you can sign the contract as an interim solution under your own name. In this case, the contract will be between a natural person (you) and a legal person (end customer or brokerage company).
- Sign a new contract after you start your company. In this case, the contract will be between a legal person (you) and a legal person (end customer or brokerage company).
Before you can start your new project, you must have sent your notice of resignation to your current employer. This is done in writing in accordance with the employer's guidelines.
- Submit a binding notice of termination in writing to your employer.
- You are now full-time entrepreneur!
As a freelancer you are your own employer and responsible for setting your hourly rate and invoice the work you do. To be able to do this you need to have a company.
Sole proprietorship or limited liability company?
You can offer your services a freelance developer both by having a sole proprietorship company (ENK) and a limited liability company (AS). ENK is the easiest to set up and the least bureaucratic form of company, and also the cheapest as it costs nothing to set up. The risk of having an ENK, on the other hand, is that you are personally responsible if something goes wrong.
Creating an AS initially costs 5,570 NOK in establishment fee to the Business Register in the Brønnøysund Register Center. In addition, you must have at least 30,000 NOK in share capital. You can pay the establishment fee with this money.
As a rule of thumb, it will not be worthwhile to establish an AS if you will earn less than 100,000 NOK annually. If, on the other hand, you earn more than 750,000 NOK, it is directly unprofitable with an ENK.
Therefore, we recommend all developers we are in contact with who want to become freelancers to set up a limited liability company (AS). We have good experience from people in our network who have set up AS through Folio Stiftemaskinen. Read more about Folio Stiftemaskin here.
How to start a limited liability company (AS)?
The easiest way to start a limited company (AS) is through Folio’s Stiftemaskin. This is a free service and you can choose to open a business account with Folio or another bank. By opening an account in Folio, you will get an account as soon as you have filled in the foundation papers.
1. Choose a company name
The name you choose must be at least three letters and contain the letters AS. If a company with the same name does not already exist, the chosen name will most likely be accepted. You can check whether your desired company name already exists here.
2. Choose the company’s main business area
If you not using the company for anything else, you can as a freelance developer write IT consultant services.
3. Open a business account
You can choose any bank you want when setting up an AS, even via the Folio Stiftemaskinen. The advantage of creating a business account in Folio is that you will have access to the account within two days, but in other banks it can take up to 8-12 weeks.
4. Wait for the company to be created
While you wait for your application to be processed by the Brønnøysund Register Center, you can use the time to create a plan for operations and accounting. If you're lucky, the Brønnøysund Register Center only takes 5 days to process applications, but it can take up to three weeks to get an organization number.
Everyone with an AS is obliged to submit a tax return, annual accounts and shareholder register statement every year. At Witted, we have good experience with freelancers who use Fiken's accounting software. Read more about Fiken here.
5. Starting a company during the notice period
If you have not finished your notice period yet, you must ask your employer for written permission to start a company. This is because starting a similar or competing company may violate the non-competition clause you signed with your employer.
Witted makes becoming a software freelancer easy
Setting up a company – We’ll plan the start together with you so that there is no break in the billed work. We can start looking for projects for you even if you haven’t established a company yet or are still employed. Setting up a company is fast and easy nowadays, and there’s no rush with it; we can do it together when you’ve found your first project.
Customer acquisition – Don’t waste billable hours on the lookout for projects, our agents will handle customer acquisition for you! You set your own terms, such as hourly rate and the specs of your ideal project (industry, technologies, duration). Our agents will search for suitable projects for you accordingly.
Running the company – There are over 1700 Nordic software freelancers in our community, and they have recommended several accountants, insurances and tools for fellow independent contractors. We will gladly pass on the tips so that your journey as an entrepreneur would start smoothly.