It’s the time of the year where people start thinking about resolutions.
Eating right. Exercising more. Becoming a better partner or parent.
It’s also when entrepreneurially-minded employees start to question whether they should work for The Man for yet another year, or finally go out on their own.
In this article, I’m going to dig into what it really means to run your own business, specifically a client services business. I’m also going to look at a few hard truths that — if I do things right — might make you reconsider whether freelancing is right for you.
You might think, given the business that I run, that I want and encourage everyone to become a freelancer. And until recently, that was somewhat true. But the more I talk with freelancers and those who want to start freelancing, the more I’ve learned about the real pros and cons of being a solopreneur.
Why you might reconsider becoming a freelancer
Many of the people who worked for me at my agency were former freelancers.
They gave up the independence of working for themselves to work with me, and willingly confined themselves to my office for most of the workweek.
Why would someone go backward?
Well, it soon became clear that the motivating factor behind giving up freelancing was the uncertainty of it all. Most freelancers don’t have a strategy for getting clients. And even if someone has a solid base of clients, there’s no guarantee that they’ll have work when they need it.
And a lot of the freelancers-turned-employees I’ve talked to about this pointed to obligations as a big reason for transitioning to traditional employment. Many of them are heads of their household and are financially on the hook for supporting their spouse and possibly some kids.
Another was something that I think a lot of entrepreneurs either ignore (as a temporary inconvenience) or embrace: you’re always on the job. New lead on Saturday? Let’s field it ASAP. Need to work extra to take care of your mountain of responsibility? OK.
Left untreated, this quickly leads to burnout. And after a few years of the high-stress that can accompany doing client work and finding prospective clients and selling these prospects on working with you, the idea of “show up, do your work, get paid” starts to sound really appealing.
Trust me. There are days I want to throw in the towel and go back to that halcyon world of bi-weekly direct deposits.
Besides the instability that comes without a serious sales and marketing strategy (most freelancers don’t have one) and the burnout that can come from over-working or over-obsessing, there are other things that can cause you to regret freelancing full-time:
- Assuming you’re ready before you actually are. One actual client who promises you that they have “a huge project” is often insufficient. Don’t put your eggs in one basket. Work to aggressively build your network, even when you’re working full-time.
- Not realizing there’s a big difference between your last job and your new job. If you thought freelancing would mean doing what you’ve always done, but without a boss… think again. You’re now running a business, and you’re in charge of the marketing, sales, contract negotiating, product fulfillment (that is, doing what you do best), invoicing, and occasionally chasing after owed debts.
- If you want to do <your skill> all day, stay an employee. I can’t overstate this enough. Many of us are really passionate about our craft. We love doing it, and we want to do it most of each work day. This ties in with the point above, but being a freelance consultant involves much more than just doing whatever it is you excel at.
Now, why you SHOULD become a freelancer
There are plenty of reasons to quit your job and go out on your own.
The “gig economy”, as it’s known, is on the rise.
Savvy companies are looking for people who can jump in, solve a specific problem, and then leave.
And the rise of cloud computing, really fast Internet, and tools like Slack and Skype are allowing business to get done, even if everyone’s spread around the globe.
It sounds trite, but if taking full ownership over your own success is appealing to you — then you should seriously consider becoming a freelance consultant. It’s the quickest path that I know of to self-reliance. Unlike building a product like a software-as-a-service or writing a book, the “feedback loop” between starting and succeeding is pretty tight.
You can be courting a prospective client today, and billing them tomorrow.
More turnkey models — the sort that permit you to wake up to payment notifications from strangers — require more patience and time.
And they’re also not as guaranteed.
Many entrepreneurs invest time and money into building products that nobody wants, and there’s no way to send someone running back to the safety of employment like seeing their project stagnate and die.
Freelance consulting is a great way to “be your own angel investor” and subsidize the development of what you want to one day live off of. Unlike most salaried employment, you don’t need to freelance full-time.
You can, quite literally, double your freelancing rate and work half the hours and make the same income.
It’s hard for a lot of new entrepreneurs (including even ones who have been around for some time like myself) to not think, “it’s 9:30am on a Thursday morning. I should probably be at my computer working.”
But it doesn’t need to be that way. You don’t need to work full-time. Only you can set your availability.
And this leads me to my last major point:
You have permission to do whatever you want. There are no more gatekeepers.
If you want to make more money, charge more.
If you’re tired of having your clients micromanage you, set the right expectations when you onboard your clients.
If you want to scale your business, nothing is stopping you.
You wouldn’t believe how many questions I get from readers asking things like “how do you trick your clients into paying you upfront?” or “how do you bill by the week?”
My answer is always the same: That’s how my business works. That’s my process. Take it or leave it.
This might lead you to think you need to be a hard ass curmudgeon to stomach becoming a successful freelancer. But that’s not true either. I’m always trying to shine some light on why it’s better to pay me by the week and upfront. It’s not “because I said so.” Instead, “here’s why I do it this way, and why it’s better for both of us.”
But isn’t freelancing risky?
As an identity, freelancing is on the rise. According to a study put out by Intuit, in just ten years 40% of the workforce won’t be full-time, salaried employees. And for a lot of people, this is scary. Just a generation ago, we lived in a world of pension plans and corporate loyalty. More of us are becoming free agents.
I get asked from time to time about how “safe” freelancing is, and whether it’s worth giving up the 9–5 to pursue owning a small studio or consultancy. I have a somewhat unorthodox definition of risk as it relates to business, and today I’d like to try to make my case.
The Single-Payer System
Most people are employees and have a single source of income. They get up each day, go to work, and collect a paycheck on a given interval. This is ideal, as typically we pay for stuff on another set of intervals — on the 5th the mortgage is due, credit cards on the 15th, car payments on the 25th, and so on. Employer income and personal expenses tend to counterbalance themselves quite nicely
However, the perceived stability of getting paid on a predictable schedule comes with a cost. You have one client, one customer — your employer. It might be more difficult in some states and countries than in others to sever the employee / employer relationship, but at the end of the day it’s still a one-to-one relationship.
To me, this is extremely risky. There are environmental factors — the company folding, downsizing, whatever — along with a number of internal factors that could cause you to be out of work.
Life as a freelance consultant
When you finally quit your job and go out on your own, you’ll have swapped one income source for a number of sources, most of which come and go. And this volatility means that revenue can often be unpredictable, even though this can be mitigated through upfront billing, which makes balancing our personal monthly profit (client revenue) and loss (personal expenses) tricky at times, especially if you aren’t the best at budgeting and saving.
Many freelancers can rightfully feel like they have many bosses. Being that for the average freelancer the arrangement is “I’m selling my time for $XX” an hour, this isn’t that far off from salaried employment where you sell your time for $XX,XXX a year, so the arrangement isn’t that much different. The big distinction is that the freelancer here needs to wear a lot more hats (sales, accounts receivable, accounts payable, etc.) — they can no longer just show up and expect that deposits will hit their checking account twice a month.
With this arrangement, you might have 3 active clients, which means a third of your income can dependent on one individual client. If one of your clients were to walk, your monthly income would take a big hit, but your expenses would be more-or-less what they typically are.
When people think “freelancing is risky”, this is exactly why they maintain that belief. You have a small number of income sources. Any of these income sources can disappear in a moment’s notice. And your finances, unless properly tended, can go into spasms.
Take a look at this guide for starting a freelancing business, and make sure that you’re bringing in enough money to match your lifestyle.
The Low-Risk Entrepreneur
If an employee has an employer and a freelancer has clients, the entrepreneur has customers — and lots of them. The low-risk entrepreneur isn’t dependent on any particular source of revenue, which has the tangential side effect of not being beholden or commanded by any particular customer. The diversity of their income generally removes much of the risk, save for any unforseen market upheavals (did I ever mention that the first company I started out of college was lead generation for mortgage companies circa 2006? Market upheavel.)
Take my business. I still sell my time, but I sell a lot more things. Books, software, classes, and now even a WordPress plugin. Literally hundreds of people pay me each month — some a little, some not so little — which makes me totally unfireable. I can wake up tomorrow, and know that my business is secure. This is something the typical employee or freelancer can’t do.
However, you might not have an arsenal of products that are being sold in your sleep. That’s fine, I didn’t always have these either. I’ve slowly built products over the last two years. But even before I got into products, when I was running my consulting business, mitigating the risk of the single or few payer system was high on my list of priorities.
In closing, if you want to take full control over your future…
- You want to set your own hours
- You want control over how much money you make
- You want to spend some of your time R&Ding your own products
- You want the pride that comes with owning a brand that you’re responsible for
…then becoming a freelancer is a great way of achieving that. And there’s no better time to start than now.