Neil Lewis - Innovative Entrepreneur

Solving problems by growing profitable businesses @neil_lewis

3 choices for freelancers who want to advance

You’ve secured a number of freelance jobs and the projects are coming in, great!

You’ve got a steady flow of clients, some repeat and some new, so you are sure of a steady flow of work.

But you are restless for more. If so, what’s next?

Every freelancer has three choices (more or less),

  1. Continue as you are, taking on freelance jobs, or
  2. Take on other freelancers and sell your freelance skills (or agency skills now) on a wider basis, or
  3. Start a non-agency business (or, put another way, a business which sell products and services as packages and not on an hourly rate)

So, which should you take?

Well, let’s get clear about these different businesses first.

  1. Continuing as a freelance worker is simple and clear. You sell your time at an hourly rate or on a project basis (calculated on an hourly rate).
  2. Taking on other freelancers means one of two things. Either you collaborate with other freelancers and allow each freelancer to contract directly with the same client, or you set up agency or company and the client contracts with the company and then the company sources the freelancers. This is, in effect, an agency.
  3. The third option is to set up a business to create a product or service and then sell that. The business takes on the cost of designing and creating the product as well as (in many cases) the marketing risk too. So, you might begin an e-commerce website or design a new toy and seek to get it manufactured and sell into retail, or you might build a new website tool or mobile application and sell that via affiliates or apples itunes store etc…

Risk…

So, let’s start with risk,

The downside of freelancing is that work comes all at once – or not at all. The risk is of feast and famine and whilst it feels like you have control of your time, you are, in truth, at the beck and call of your client. Recently, clients have become more cautious which means that they delay decisions to start projects and then want to hurry to finish them sooner, whilst negotiation on rates.

Equally, the ratio of pitches vs projects won has increased with more freelancers expressing concern that their best ideas are taken duing the pitch phase but that doesn’t necessarily mean they get the work.

Hence, freelancers can easily find themselves spending half the week pitching for work – and that work is unpaid.

The good news is that you don’t have to pay other people’s salaries or office costs if the work doesn’t materialise.

The risks of an agency are significant. You have all the risk of pitching for work that you don’t win whilst having to pay fixed salary costs whether you win a pitch or not. Numerous agencies have gone bust because just one client collapses or is unable to pay.

Freelancers can avoid this risk by simply collaborating with other freelancers or, if they take on freelancers themselves, then ensuring that the freelancer contract is as flexible as the work won. However, this remains a tough way to earn a living with significant increase in pressure. Normally, the head of the agency become the business finder and winner, so if you are particularly talented at PHP, design, copywriting, SEO etc…. then this is not a great role for you to be playing.

Thirdly, setting up a business clearly carries the costs of designing a product, service or website / application has the risk that it might not sell and all the development effort will be wasted.

The solution here is to ensure that your designs are tested early in the development phase to ensure that they either fit with the market or don’t, such that you can adapt your product in real time without wasting too much time or effort.

The challenge of a business is that successful businesses are built with a range of skills and it is rare to find a single individual who can accomplish everything by him or herself. Hence, the ability to build a team is a critical (and often forgotten) skill in building a successful business (which is one step above building a product that sells).

Reward…

The reward are all different too

1. Freelance workers with established and reliable clients have greater freedom and have more fun (they work on a range of interesting projects and don’t end up being part of company politics)

2. Agencies are pretty tough businesses to run. The reward is that you will earn more money but probably work longer hours and spend more time in the office (you certainly will loose any freedom you had as a freelancer).

3. Building a business is not easy either! However, if you want to build a long term income that pays whether you work or not, a royalty so to speak, then you need to become a shareholder in a successful business, or perhaps, just build a business and then sell it.

Next step…

So what is the next step to the freelancer who has built a success career offering freelance skills but want more?

Does he, become an agency? Or build a business?

There seems to be little purpose in building an agency. If you want a business, why not build a real business with a product or service to sell? Equally, you can mimic the good points of an agency simply by collaborating with other freelancers without actually taking on the fixed cost risk of a traditional agency employer.

If you really do want to take the next step and build a business, then it is time to start looking for partners or fellow founders. If you can become a key part in a successful business, then not only will you be creating a potential shareholder gain that will allow you to retire or at least pay off the mortgage, but also, you’ll place yourself on a rapid learning path.

What you learn by being part of a fast growth start-up will develop your skills and knowledge faster than any MBA or business training course,

So, if you are ready to take the next step, then it is time to start looking for start-up business partners.

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Written by Editor on July 18, 2011 and filed in Entrepreneurs, Freelance Jobs, Freelancers, Innovative Entrepreneur, News, Opinion , ,


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