Why I’m Quitting Freelancing
After a second full-time stint, I’ve decided to seek full-time employment opportunities. I’ve had a few people ask me why I’ve made this switch, so here’s my reason why.
First, to clarify: I don’t mean to put freelancing as a profession or those who make that career choice on blast. I have plenty of friends running a business where they are happy, profitable, and thriving. This is me thinking through a decision based on my personal context.
So let’s start with a question:
”What did I hope to get out of running a service business?”
It seems like the ceiling on earnings is higher…
A salaried senior level engineer can earn a salary of ~$100,000/year. Over 40 hours x 50 weeks, that’s $50/hour. Freelance rates of $75-$150 in some cases are standard. Therefore, the potential earnings are much higher. I know other consultants who say they pull in $250,000 per year. Sounds good to me!
However, there are a lot of other variables in this equation.
Jobs come with benefits such as paid leave, a 401k, and health insurance. And ugh, is health insurance a big one in the US. The comparison between my plan and my wife (who works a full-time salaried position) is insane. Switching to her plan meant I was able to receive much more coverage at a much lower price.
There’s also the point that other financial institutions, such as banks, don’t think so highly of the self-employed. It’s more challenging to get a mortgage as a freelancer than as a “traditional” employee.
On top of that, for this math to make sense, you’d have to keep a steady pipeline of billable hours. Doing that requires sales and marketing work, so you’re now either working fewer billable hours or more hours than a comparable salary job.
Instead of the equation looking like this:
(effective hourly rate of $50/hour) vs. (effective hourly rate of $100+/hr)
It looks more like this:
EHR of $50 better health insurance 401k paid leave ---------VS----------- EHR of ~$100 worse health coverage responsible for taxes/retirement working more hustling to fill pipeline
And when it comes to filling the pipeline, that brings me to my next point:
You Can Diversify Your Risk By Working With Multiple Clients
Full-time employment is putting all of your eggs in one basket. One person can remove 100% of your income. By working with multiple clients, you can spread out that risk. If you rely on 4 – 10 people for your income, no one of them leaving is completely breaking for you.
But here’s the rub: In my experience, finding this kind of work as a freelance developer has become damn near impossible.
Almost every opportunity I’ve come across was of a full-time nature. Clients wanted 40 billable hours per week, and commitments of months, not weeks. Sometimes as much as 12-18 months! Employee protection rights laws be damned.
Working with multiple clients was more akin to doing 2 – 5 full-time contract gigs per year. You get all the risk of working for a single company, with all the fun of getting zero benefits!
So why bother? There’s one other reason:
You’re running your own business though, right?
Am I though? Building a business is all about leverage. As a service business, there are two ways to go:
- You can scale up as an agency, and get to a point where you are no longer fulfilling the work.
- You could develop products that you sell.
I explored the agency route but ran into some issues. A lot of the opportunities I mentioned earlier explicitly wanted individuals, not agencies. Beyond that, I never cracked the code of balancing time & money, either hiring ahead of demand or getting a full enough pipeline to justify the work. Maybe with more time, more money, or more gumption, things would have been different. But 90% of business ideas fail, right? I try not to beat myself up about it.
Then there’s the second one. Creating assets. Running a service business requires designing services, and then marketing, selling, and fulfilling them. To build a product, you’ll also need to design, market, sell, and source that.
Building assets while freelancing is running two business at once. Also, working a job does not infringe on your ability to create products. My ultimate goal financially is to build assets that generate value and are worth something. It’s the only way to build wealth I know of that takes less than 40 years.
I never intended client services to be a permanent solution, but a bridge to something else. But after taking stock, I realize that freelancing is actually in direct conflict with that goal. It looks like my freelancing operation had left me:
- No more money than a full-time position…
- less security due to lack of benefits…
- less time to work on products because I have to hustle to keep the pipeline full…
- and less energy, because all of that is fucking stressful.
So I asked myself: “why am I doing this?”
I couldn’t come up with an answer.
So if you know anyone who is hiring, hit me up.