Freelancing Isn't Free

Costs And Challenges Of Freelancing

Marco Zarate :: Solution Factor
Jan. 10, 2013

Why a talk on freelancing?

• Off the beaten path - not a technical talk
• Very applicable to developers
• Tends to be a popular subject
• Freelancing can be a great career option

Who Am I?

• 12 years industry experience
• 5 years as a full-time consultant
• Passion for LAMP, JavaScript, and the modern web
• Owner of Solution Factor
• Owner of Freelance Factor - freelance community
• Creator of TimePanel - fast time tracking and invoicing

Also Not An Expert

Goals for this talk:

1. Share my mistakes and losses
2. Share a tiny bit of my wins
3. Discuss pros and cons of freelancing
4. Help existing freelancers improve their business
5. Help anyone decide if freelancing is for them

Poll

1. How many freelance full time?
2. How many freelance part time?
3. How many don't freelance at all, but have considered it?

Let's Start With Hard Truths

• Freelancing is harder than a 9-5 job, in every way.
• Skill in your craft alone is not sufficient to be a successful freelancer.
• Marketing/Selling is the most important skill, and the most underrated.
• Successful freelancing takes years ... not days or weeks.

More Hard Truths:

In year 1, many freelancers:

• Worked twice as hard than they expected to
• Earned half as much than they thought they would
• Dealt with clients that didn't pay
• Spent time coding when they should've been selling
• Spent time selling when they should've been coding
• Considered going back to a full time job

Given All That, Why Freelance?

1. Flexibility?
2. Potential to make more money?
3. More diverse experience?
4. Better quality of life?

How realistic are those?

Fact vs. Myth: Flexibility

• You do have more ownership over your schedule
• Less "be here at 8am", and more "just get it done"

If given total freedom, how well would you manage your own schedule?

Fact vs. Myth: More Income?

• Personal win: pocketed $14k more in year 1 than my salary pay.
  • But I worked my ass off.
• Hourly rates can sound high, but that doesn't automatically mean more income.
• Fact: many consultants don't bill 40 hours a week.
• Fact: many consultants have considerable downtime throughout the year.

Fact vs. Myth: More Diverse Experience?

• From a business perspective, certainly.
• From a technical perspective, yes and no.
• Avoid doing the same kind of work over and over again.
• One area where saying "no" is important.

Full Time vs. Freelancing: A Realization

In a lot of ways, freelancing isn't better or worse than a full time job, you're just trading one set of problems for another.

"When it comes to money, my full time job provided it in the easiest way, but freelancing has provided it in the most enjoyable way."

Ultimate goal: obtain the best of both worlds.

Making The Jump

Getting started, business topics, etc.

Considerations Before Starting

• Industry experience
• Financial cushion: 6 months worth
• Start gradually (more on this later)
• Freelancing is a long term commitment
• Are you entrepreneurial?

Not all required, but do form patterns among successful freelancers.

Why Industry Experience Is Important

There's too much to be learned that's either too costly, or not obtainable, learning on your own without experience.

• Full, end to end, solution delivery
• Interfacing with clients
• Project life cycle management
• Discovering work you're passionate about

Don't Jump In Head First

• Start gradually, while still having a reliable source of income
• Develop a client list and a feel for what it's like to freelance before leaving your current job.
• Honesty is important
  • Be honest with your employer about freelancing
  • More importantly, be honest with yourself (how much can you handle?)

I Took The Gradual Approach

Freelanced 2.5 years while full time.

By the time I left my full time job, I had:

• 5 clients, 3 of which were regular
• 6-12 months of (enjoyable) work lined up
• My website up and running
• An accountant
• My company registered as an LLC
• Separate bank accounts for personal and business
• Business cards in hand

Why Is That Important?

Because year 1 will always be your hardest year.

Build your business to the extent possible while still having a reliable source of income.

The big benefit: you won't have to trade billable time for those activities.

Company Formation

• Sole Proprietor
  • The easiest, can start NOW
• Sole Proprietor - DBA
  • If operating under a different name than owner.
  • Register business name with county clerk.
• LLC (single member)
  • Can operate as a single member LLC.
  • Preferred due to personal asset protection.

Most freelancers agree it's more professional to operate under a business name.

Income Tax

Sole Proprietors, DBAs, and single-member LLC's are all taxed the same.

Income is reported on Schedule C on personal tax return.

Expenses are tax deductable.

A good accountant is a must!

Business Bank Accounts

Have separate bank accounts for personal and business purposes.

Don't use business funds for personal reasons.

Time Tracking and Invoicing

You'll need a tool for this.

Don't rely on spreadsheets and manual number crunching.

Personal plug: TimePanel makes time tracking and invoicing really fast and easy.

http://timepanel.net

Finding Work

Clients, understanding their business, etc.

Finding Clients

Understanding Two Types Of Clients

Technical type (developers, DBAs, designers, etc.).

Non Technical type (most everyone else).

How you deal with one isn't how you deal with the other.

Success selling to both depends on understanding that.

Technical Clients

Easy to work with from a technical standpoint.

Usually have experience with project management.

Highly value technical expertise.

A great source for work early on.

You can talk tech with these types of clients.

Non Technical Clients

Don't understand the technology.

Can't relate as much to technical expertise.

Only care about value you provide.

You can't talk tech with these types of clients.

Nor should you.

Common Focus Mis-match

Where Our Focus Should Be

Non Technical Clients Care About

• The value you provide
• Who you are
  • Can they trust you?
  • How well can they work with you?
  • Can you advance their business?

Clients require that your work advance their business in some way.

Selling Your Services

• Non technical clients don't care about technology; don't focus on that.
• Instead, focus on their business.
• Understand their problems.

A client's pain point is your opportunity - capitalize on that.

An Ineffective Sales Pitch

Client: Geez, these spreadsheets are killing me!

Consultant: Have you considered using a script to automate that? You know, like with a cron job? You should import those into a sql database and use aggregate functions to do your calculations for you.

Too much technical jargon the client doesn't understand.

A More Effective Sales Pitch

Client: Geez, these spreadsheets are killing me!

Consultant: I bet we could cut your time w/those in half.

Client: Wow, how could we do that?

Consultant: There's lots of ways to automate that stuff. Would you mind telling me what these are for and how often you deal with them?

Why The Latter Is Effective

• Client and consultant enter a discussion about the client's business.
• Dialogue also starts regarding the client's pain point, and how often it occurs.

The second point is key! It allows value discovery, and the ability to quantify it.

Discovery: What are these spreadsheets for?

Quantifying: how often do you deal with them?

Pricing Your Services

Hourly vs. Fixed Pricing

Day Rates

Value Based Pricing

Conclusion

Freelancing is harder than a 9-5 job.

Think hard about the decision; start gradually.

Success depends on selling and value delivery.

Know what your worth. A big way to achieve that is by understanding and quantifying the value you provide to your clients.

Thank You!

mzarate@solutionfactor.net

http://solutionfactor.net

http://freelancefactor.net

http://timepanel.net