If you’ve ever thought about freelancing then this article is for you. First we’ll look at some of the pros and cons of full-time work and then do the same for freelancing. And for those go-getters interested in freelancing I’ve got a primer for you on how you can start. Overall I think that freelancing is harder than full time work, but the benefits are oh-so-worth it.

But before we start, let me tell you the reason for this post. About a month ago I was asked to be on an Alumni panel for Information Students at BYU. A few of the students were interested in how I freelance, so I thought I’d put this ‘down on paper’ for all to see. I’m a successful freelancer, and my hope is to give those students permission to (sooner or later) start working for themselves. You see, most of us just get a full-time job after graduation (nothing wrong with it), and that’s all we do for the rest of our lives. But is that the best that we can do? Is there a different path that will help us to enjoy life more? Let’s find out.

Full Time Work

Full time is great!

When you work for someone else you give up a portion of your time (typically 40-50 hours a week) in return for a salary. This type of work is generally stable, and once you are hired you’re hired for life, or at least for the time being. The steady paycheck makes it easier to buy a house, support a family, make your spouse happy, get a loan, and it gives you a tight little box to plan your life around.

It’s also great for getting experience, improving your business network, and reducing risk when switching to a new field. There’s also bonuses, health insurance, your employer pays it’s portion of FICA and medicare costs on your behalf, and they also pay for your unemployment insurance. Lastly, they pay the electricity, and give you a computer, a desk, and sometimes even free food. Life here is good.

Full Time Issues

All in all it’s not a bad gig. But there are problems to working like this. First off, the relationship between employees and employers is tenuous at best. In this relationship, your employer wants to pay you as little as they can without losing you, and your incentive is to work as little as you can without getting fired. That’s the underlying notion of a salary. They want to maximize revenue and minimize costs, and you? If you have a salary then you’re not getting paid more if you work harder, so unless you have other forms of motivation you might be limited in your motivation to work hard. You see, a salary lacks incentive. It lacks risk. And it reduces your overall productivity because there is little benefit for you to work more.

The second issue is raises. I’ve worked for companies in the past where every year (If I am lucky) I’ll get a small raise. It’s usually 3%, but it’s not enough to cover inflation. So unless I can move up and get a new position in the company, my spending power will be less after getting more raises, even though my salary has gone up. Then if a recession hits or the company does poorly then the raises might not come at all. Which is a double hit, especially considering it’s becoming more and more expensive to pay for the costs of living.

And those are my two biggest issues with full time work. It’s like we are setup to fail, and unless we can get a new job–either with the same company or elsewhere–then we are stunted. The best case scenario is that we can become so valuable that either someone else hires us for more, we get promoted, or we then have the power to command a raise lest we go somewhere else. But where?

Freelancing

The joys of freelancing

Well you could go work for someone else, or you could start being your own boss (yes, yes, when you freelance you have many bosses, but… you can fire them. More on that later). It’s not as easy as it sounds, but here are some of the benefits of working as a freelancer.

You get to set your own hours. As long as the work is done (and sometimes even if it isn’t) you can take off the time you need. No permission slips, no scheduling, just do it. The commute is awesome. It takes me about 12 seconds to get to my main-floor bedroom that I use as an office. This saves me at least 50 minutes a day compared to my last job. And on rough days when the kids are noisy I could go work at a library, the startup building (a co-working space), or somewhere else.

The money is good. I’ve only been freelancing for a year now and I bring in an average of $7,200 to $8,200 a month. But that is going up. Last month I broke the $10,000 range, and it seems that my average is on the rise. There seems to be a good amount of work around, and if I want to work extra in the evenings I always can. Best of all, I keep learning, and as I learn more and become more valuable I get to raise my rates. Currently I bill around $100 - $125 per hour for freelance design and development). And it’s very possible for a skilled freelancer to make $15,000 a month. I know Paul Jarvis charges $7,500 per web design. A local freelancer and fellow MISM I know charges $125 per hour for wordpress websites and Ruby on Rails development. A student freelancer in the IS program charges $75 per hour for Rails Development. A local banking company charges $225-$250 per hour as their standard rate. A local startup charges $225 per hour as their rate (also run by a MISM graduate who if he did freelancing would charge $125 per hour.) A DB company in Salt Lake charges $165 per hour. The highest I’ve ever heard of is Brennan Dunn who charges $20,000 per week. But he’s in a class all by himself. Honestly we have to stop thinking of ourselves as employees with stunted earning potential, and start thinking of us as people who create real value.

But what about those sites like Fiver, or elance, or odesk, or freelancer.com, or toptal… etc. Forget them. Those people often play the commodity game, and try to win on the lowest cost. Really, when does a real business person just want the lowest cost? No, they want the highest value, and there is a stark difference. Honestly what most business owners want is more sales, customers, leads, and prospects. In other words, more money. The sooner you realize this, the sooner you can start charging a real rate.

Freelancing woes

Yet freelancing has it’s problems. Balancing projects is hard. When you are in the middle of one project you need to start thinking of the next one. You also have to keep track of your time, finances, submit invoices, pay yourself, pay taxes, do payroll, pay for business licenses, pay for health insurance, unemployment, FUTA, FICA, Medicare and in some cases asset taxes (which is an evil tax in my opinion). Not to mention buying software, furniture, and buying your own equipment. Granted, once you get practice in doing all the paperwork it isn’t horrible, but it is a pain. A total messy, frustrating, and annoying pain which will exist until you get better at it.

Personally I still struggle with balancing work and sales. I’d rather just work on a project, and though I like selling, it’s challenging to do both. Still it’s worth it. I see my kids more, I have more time, and I feel free. I love freelancing, and would have a hard time ever going back. I hope that I can keep this going, and I hope I will never have to work as an employee again.

How to start freelancing?

Now some of the students wanted to know what’s the best way to get started freelancing. So consider this a primer on how to start down the rugged yet rewarding path of freelancing. First you need a skill that provides value that you can sell in the marketplace. For me, I take a design that someone has wireframed and then make that into a workable (and fast) website (kind of like Bring Your Own Design). I also do full-stack development and build webapps. The webapps give me enough of a stable pipeline that I know where the bulk of my income will come from, and site building helps to diversify my portfolio and rounds out my soft-skills. But there are lots of things you can freelance in: SEO, design, programming, writing, db work, etc, just make sure that it is a skill someone would pay money for.

But what if you don’t have any ‘skillz’? Well, get learning. Set aside time to learn a valuable skill. In contrast, you can just jump in and start getting real-world experience as your reward instead of payment. To do this just contact a company that has a horrible site, and offer to redesign it for free. Tell them that they can have up to X amount of free hours, and in return you’d like a testimonial. So you put in some extra evenings and at the very least you’ll get experience, and a testimonial. Then you can take screenshots, write a case study about it, and put it on your site. I say a case study (as opposed to a portfolio) because it helps demonstrate your value, and is more effective than a portfolio. Now, one thing that can happen is that you build the site, hit your 15 hours, and they want more changes. Well then you say that you’ve reached the maximum of your free hours, but you’d be happy to do it for your regular rate. So you charge them your regular rate, and boom. You’ve started freelancing.

Then you do this two or three times and you’ve got enough material to be taken seriously as a professional freelancer. Of course you should write case studies about each, and add them to your site.

After that you I recommend that you learn how to network and how to solve peoples problems. Honestly you have to do this if you want to survive. Get some business cards (I learned this the hard way), have a good “me in 30 seconds” statement ready, and go network. One good place is your local chamber of commerce. Find an event there, and the work that event like your business depends on it. Don’t be too salesy. You want to know more about people’s problems and how to help them. But do let them know what you do, and how you’d like to improve their profits.

And that should get you started on the path to freelancing. There’s more to talk about such as business entities, taxes, project management, timers, etc… but those are items for another day. But we can’t leave without talking about two key items. Rates, and labeling.

Rates

Oh, what do you charge? There are so many posts on this, and some of them are dead wrong, and few give good advice. One good article is this one from Brennan Dunn (I frequent his site a lot). But what do I charge? Well recently I completed a project for a local group that run a lifestyle blog. They were low on funds so I only charged them $100 per hour. And before any of you students gawk at that number, remember that as a freelancer you usually can only clock 30 billable hours a week, since part of the time is spent invoicing, chasing new clients, learning, etc. In other words, not all your time is billable. So, depending on the client, I usually bill out at $100-$125 per hour. And I expect to increase this as I am able to provide more value. It’s interesting to note that I have an old client that I bill by the day (currently at $400 per day, though I’m working to increase that). Honestly hourly billing is awesome. You don’t have to worry about the overhead of project switching, and your productivity will increase. And a day doesn’t have to be 8 hours long. As a freelancer I’m more effective than an employee since there are less meetings, distractions, and wasted time. In the end, a ‘day’ is between you and your client, but anything over 6 hours should count. Especially since there can be evening work (like for deploys with DB changes). So just know that you don’t have to bill by the hour, and there are other ways to do it.

But really, what should you charge? First off, never less than $50. Ever. When you are self employed you have more expenses (see cons of freelancing), and you need to charge what you are worth. And for a student, living in Utah, who’s in a tech field, I consider $50 to be a good place to start. So if you were a student who could build a wordpress/squarespace site, and you didn’t have a lot of experience, I’d recommend $50-75 per hour. If you were a student and could build a webapp from top to bottom then $75-$100 is a good starting point. And if you have some good solid experience or you have you bachelor’s degree then $85-$100 is a good range to start. Now I say start, because this is just for starting, and after a time you should raise your rate. And I won’t tell you what you should raise it to. But know that people are willing to invest in things they know that will make them a profit. And as long as they make a profit, and are happy with what you’ve done, then it doesn’t matter if you charge more than market rates.

Consulting

Lastly, the term freelancing has a bad rap in some places. Granted to some people consulting also has a bad rap, but if you can show that you are a ‘technical consultant’ with strong tech skills, then that negative notion largely goes away. Yet, the term freelancer describes the field well, but it lacks in perceived value. So I tell my friends and fellow coders that I freelance, but to anyone else I tell them I am a Technical Consultant. It seems a small thing, but it makes a difference in my percieved value, and that makes a difference in my pocketbook.

Closing Up

And if you’ve read this far, thank you. I’ll likely write more about this topic later, but this should give you a good start. And hopefully you’ll have the courage to enter the wolrd of consulting, and to run your own shop. Nothing wrong if you don’t, but for those that do, well… it’s a wild, scary, rewarding, frustrating, profitable, and satisfying field. All wrapped up into one.

And if you have questions, then reach out to me. I’d love to hear from you and find out how I can help.

-Stephen Godfrey