Category: freelancing

How to make the leap from freelancer to business owner

https://unsplash.com/photos/c9FQyqIECds

I made the leap from freelancer to business owner in 2019 after I noticed I wasn’t quite operating as a typical freelancer but more as a mix between the two. It made me think about what the differences are and how it would affect my business and life if I operated more formally as a business and not as a freelancer. After tweaking my business over the span of several months, I made a shift towards positioning my business, Midstride Technologies, as a web development company instead of freelancer.

If you are a freelancer, you may be wondering what exactly is a freelancer? Are there any real differences between being a freelancer or business owner? In this post I’ll go into detail explaining the differences, pros/cons, and how to use 2nd Order Thinking to make your own decision.

As a preface, I transitioned from being fully employed to freelancer a few years ago and wrote a post about that here.

What is the difference between a freelancer and small business owner?

While there is no official definition of what differentiates a freelancer from a business owner, I find this description of a freelancer quite accurate.

A freelancer works solo as a contractor for clients that pay her by the hour or by the project. A freelancer’s goal is to fill only her own available time, securing jobs that pay well and are a dependable source of work. In many cases, freelancers don’t need a business license or any formal registration with the government to operate.

Lending Tree

A freelancer by this definition aims to fill their own hours and typically works on shorter projects. If the company utilizes your services for a long period, over a year and essentially asks for all of your time, you are basically a full time contractor for that company and not really a freelancer anymore.

So freelancers will typically gravitate towards work that is shorter, ideally recurring, and allows you to work with other clients on flexible schedules. Another common characteristic of freelancers is that they can work from anywhere, they often do not have a business office or need to see their clients in person. These days with COVID this is not a big differentiator given a lot of the world is working from home.

A small business owner (SBO) on the other hand can work as a contractor for a company but their business should first be incorporated or have a formal business license. Aside from this technical difference, a SBO focuses on running the business and will bring on subcontractors or employees to deliver on projects. The focus of the SBO is to find ways of generating stable revenue, finding contracts, and hiring the right people. Being a small business, a SBO normally wears many hats doing Business Development, Marketing, and in my profession web development. Sometimes these roles can be contracted out as well but the key thing is that as an owner you are managing all of the operations. As well, instead of trying to max out hours it’s more about profitability. Often times it’s best to aim for 80% utilization instead of 110%, so you have room to wiggle and manage more new work.

What are the pros of being a business owner over freelancer?

Ability to Scale Up

You can hire people to do the work you normally do as a freelancer which allows your business to scale up and take on more work. This can be quite exciting when you first begin to do this. When you find the right people to help and manage, and the client is happy, everything feels right. In addition, instead of saying “no” to more work, or giving very long time horizons, you can usually take on more work than you would as a freelancer.

Increasing Revenue & Profit

Because you’re taking on more clients, you’ll be making more money which is always exciting. If you’re smart about how you manage your expenses, you should be able to make more profit as well. Typically, in my industry of web services you would make the difference on your company rate and the pay out to your contractors by the hour. There are many ways of doing this, but that’s the most straight forward. As a freelancer, the only way you can usually increase your profit margins is by increasing your rate, lowering your expenses, or providing and selling more value on a fixed rate project.

More Services

With a team at hand, whether it’s employees or subcontractors, you can also offer a more diverse range of services. For example, for my company Midstride Technologies, I offer full stack web development services and hosting as my primary offering, but I am able to manage design & copy work for clients as needed. I position these as secondary offerings, where if the clients prefers that I handle it all I can do that. As a freelancer, I would be offering referrals instead.

Sales and Closing

This depends on your referrals and leads, but presenting your business as an established business can improve your ability to bring in sales and close in on leads. Your primary activity with sales is to build trust and prove you can do the work. When you are a freelancer if your lead doesn’t know you that well, you’ll spend a fair amount of time building that trust.

When you operate a digital business, it’s often the case you won’t have a physical store, and even if you do often times your clients are not within your city because digital services are not limited by geography. As a result, anything you can do to establish more trust, such as incorporating your business and making it known you’re here for the long haul, will help establish trust and land jobs.

Bigger Contracts

When you are a business, you open up the doors to bigger projects. Freelancers often get the lower end of the market because they’re perceived as cheaper. Even if you have 10x more experience than the employees doing the work from a company, it’s harder to sell a client on a rate of $200/hour as a freelancer than it is for a company to charge $200/hour. It’s all perception but that is the game of sales.

Less Stress

If you are good at running your business and hire the right people, you can often have less stress. Your good people are doing the work, and you can focus on high level issues. When customers are getting the value they expect (and more), and your team are being paid on time (maybe with a bonus), life is good. Keep in mind this can go the other way quite easily, which I will explain in the “cons” section.

What are the cons of being a business owner?

It’s not all sunshine and roses when running a business, otherwise all freelancers would be becoming business owners. Here are some of the cons and reasons not to make the leap.

More Managing and Less Craft

This is probably the biggest deterrent for freelancers. As a business owner you spend more time managing, talking, looking at financials than actually doing what you were originally trained to do. More importantly, if you don’t enjoy this and prefer just doing your craft then you shouldn’t take the leap. The most important thing, aside from being able to make a living, is that you enjoy what you do.

More Stress

Running a business and managing bigger work is naturally going to create more expectations and potential for stress. You’ll have longer engagements which means you can’t always take that 3 month hiatus that you can as a freelancer. As well, you’ll probably have contractors or employees to pay. If it’s contractors, you’ll often need to pay amounts which can be quite high. If you have employees, it will be a more predictable amount but you’ll always be thinking about your burn rate and how long your business can last.

Long Haul Commitment

Clients that hire a business expect you to be around for many years, I know that’s what I expect when I hire a lawyer, accountant or anyone in a professional service. This can be a potential con if you’re not really committed to what you’re doing or unsure. If that’s the case, stick to being a freelancer as you really want to avoid a situation where you have to drop a client. Not only is it painful for the clients, you hurt your reputation immensely and this is what your business relies on for growth.

Liabilities & Insurance

As a business, you run bigger projects, have people working for you and as a result more liabilities. You should get insurance, which is another cost and expense but it’s definitely important to have this. As well, many clients will require some form of insurance.

Pricing Your Business Out Of Your Market

If you start charging more because you have more overhead you might become too expensive for your existing client base. This depends on how you structure your business. My goal with my business was not to increase my rate by keeping my overhead low. A key value proposition for my business is that I provide an affordable rate with the assurance of a formal business. Or put in another way, Midstride delivers the value of a web development shop without the overhead.

Use Second Order Thinking to Decide

How do you make the decision on whether making the leap is worth it? You can go through the pros and cons, add them up and see which is higher but I’ve found that never helps me. The problem is that this approach looks at everything at the present moment. In reality, these big decisions impact your life over time and it’s the longer term you should be thinking about here.

After reading James Clear’s book “Atomic Habits”, and buying the actual Atomic Habits log book, I adopted the framework of “Second Order Thinking”.

I can’t claim to be an expert on the method, but a simple implementation of it is the 10-10-10 method.

In short, think about how you would feel about making the decision of becoming a small business owner 10 minutes from now, 10 months from now, and 10 years from now. But let’s change the actual metrics of 10 minutes, 10 months, 10 years to 3 months, 1 year, and 3 years. You can pick any time horizon you like, as long as you focus on short term, intermediate and long term.

For example, the 3 months could be:

  • – More expensive
  • – Less time to do other things now that I’m converting into a business
  • – Cash flow is less!
  • – I need to learn how to hire and fire.
  • + Feel more confident in sales now that I’m running an official “business”
  • + Existing clients are pleased
  • + I can say yes to more work!

Then do the same for 1 year

  • + more time because I have contractors who are helping me
  • + more revenue
  • + more people to bounce ideas off and socialize with.
  • – more expenses (accountant)
  • – more stress and less time do to the work I really enjoy

and then 3 years

  • + making 3x what I made as freelancer
  • + Opportunites to partner with other companies are opening up
  • – I miss those 3 month trips where I could disappear
  • – My contractors keep leaving
  • – I need to hire an employee and benefits are expensive!

It’s hard to really predict everything, but it’s within reason to predict a few scenarios. The important part of this exercise is that you may notice a big discrepancy between your short and long term assumptions. It may be that a lot of the negatives are just short term pain.

Below is an example I created using whimsical.com

These examples above are just to demonstrate how to visualize it. A little pain for more gain is when you should seriously consider doing it. On the other hand, if the benefits don’t seem to make sense for you, then you have your answer!

For me personally, I was tired of saying no to more work, and wanted to take on bigger projects with more authority. While I still enjoy being a developer who is a cog in the machine, which is something I still do, I equally love managing projects and hiring.

How to make the leap?

So let’s say you’ve decided to make the leap and formally become a business or at least position yourself as a business. How do you do it?

I will follow up this post with another one which provides some actual tips to converting to a business. Whether it’s registering a business or tweaking your marketing and positioning, there are subtle tweaks you’ll want to make.

8 healthy habits for freelance developers

man and woman in black tops jogging at bridge under clear skies

I’ve been freelancing for 5 years and in the past 2 years really began to notice how my body was starting to fail on me. Nagging pains I had in my 20s were getting worse by my 30s and at times debilitating. I’m fit and healthy by most standards so something wasn’t right. I decided to look at my habits, test things out and created a few golden rules I try to follow on a daily basis. This post covers 8 of my healthy habits that have really benefited me in the past year.

A bit about me.

Once I hit my 30s, I noticed that ever year I would start to have more work related injuries. From a sore low back, strained eyes, a tight neck, tight hips, all of the above started to become worse. The part that boggled me a bit was I’m more active than the average person. I normally do cardio every day or second day, play Tennis weekly and do some workouts in the mix. I also saw massage therapists pretty frequently so it seemed like I had a pretty good health regiment. 

After some reflection I started to realize that the bad habits I had accumulated in my 20s were just coming out in my 30s. In addition, the freelancing I had taken on in the past 5 years heightened the effects. Working without interruptions meant less breaks. Changing my office to a coffee shop or co-working space meant I had less control over my ergonomics. 

To combat this, in the last year I did some research, compiled notes from health professionals and built my own list of healthy habits to follow. I have been using these for the past half year and have noticed vast improvements to date. I hope that you find some of my tips useful. 

(note: I’m not a health professional, consult your local health care provider if you have major issues)

1. Be Mindful 

This may seem like an odd one, but I highly recommend thinking & writing about your health every day. I keep a log through a google spreadsheet that tracks what I’ve done and how I feel at the end of the day. My hope is that I will be able to determine what is working for me long term. 

Throughout the day I try to listen to my body. Is there a part of my shoulder, back or leg that is nagging me? If so I change it up, I move from sitting to standing. Or if I really need to, I go for a run and hope the deep breathing and movement resets the parts of me that’s hurting. Being a freelancer you should have the flexibility to control your schedule a bit more which is great if you need to just get out of the “office” and move. 

Tips

  • Keep a log or diary to track your health. 
  • Stretch and do mini exercises throughout the day. Consult a Physio for specific exercises to address your common pains.
  • Try the 7 minute workout.

2. Don’t wait till the end of the day

I remember a health practitioner telling me a study that showed it takes exponentially more time to rewind the effects of sitting. As an example, lets say it took 5 minutes of walking to reverse the negative affects of sitting for 30 minutes. If you sit for double the amount at 60 minutes, it wouldn’t be 10 minutes of moving but 25 minutes of moving to reverse the effects. These are made up numbers but the point is that the longer you go without a break, the much harder it is to reverse the damage. 

My own experience supports this, as my solution to working all day was to do one big exercise at the end of the day. I found in the past year that breaking up the day with smaller exercise is more effective. In fact, I would prefer running for a total of 30 minutes in the middle of my day and than running for 1 hour at the end. I’ve always found that exercise mid day or earlier in the day maximizes my energy and makes me feel less achy by the end.

Tips

  • Make room for 15–20 minute breaks within your day to exercise, especially during your “lull”.
  • Cut your lunch short to do exercise.
  • Walk briskly to grab a coffee.

3. Get a standing desk. Just don’t stand all day.

Standing desks are a great invention and it’s amazing at how many types of solutions there are on the market right now. When I started freelancing, I decided it was time and bought a desk from [Varidesk](https://www.varidesk.com/). 

If you have the ergonomics right, standing while working is a nice change up. You’ll start to use your legs and feet more and generally I find it easier to engage your core. The major benefit for me has been the reduction in tight hips and quads. 

The downside is that if you stand too much you can do other damage. I started out standing too much and ended up having a really sore back by the end of the week on top of sore feet. 

As a freelancer, because you can be on the move quite a bit a standing desk at your home office is not always a solution. I find a middle ground here by bringing a portable standing desk solution from [Stand Stand](https://www.standstand.com/). I normally don’t actually stand when I use it because I find it just means my neck crane down. Instead I use it to bring my monitor up to eye level and rely on a wireless keyboard + mouse to work. 

Tips

  • Use a standing desk that has many options in height.
  • Try to stand & sit about 50/50.
  • Aim for 25 mins to 50 mins max for each if you can.
  • Get a soft pad for your feet when you stand.
  • When working at coffee shops consider using bars or higher tables so you can stand. 

4. Use a Pomodoro timer

The Pomodoro technique is a way to manage your time by breaking them out into chunks. For example, I have a pomodoro app installed on my computer that goes off every 25 minutes. Usually after 25 minutes I will get up, move around and take a break for 5 minutes or less. Then I will get back to work and start it up again. I don’t always take the 25 minute break if I’m in the “zone”, but knowing it has gone off sticks in the back of my mind and eventually I’ll take that break.

As a freelance developer, you need to make sure you get up and move. Without co-workers to chat with or water cooler breaks, you run the risk of staying in one position for too long.

Tip 
- I use the [Be Focused app from Xwavesoft](http://xwavesoft.com/be-focused-pro-for-iphone-ipad-mac-os-x.html) to manage my time. Although there are plenty of time / pomodoro apps on the market.

5. Protect Your Eyes

I have pretty decent eye sight and don’t need prescription glasses… yet. I used to have a lot better eye sight in my 20s, probably 20/20 but now I know it’s not there anymore. While I’m not sure this will necessarily save your vision, I do believe that the glasses I bought from gunnar reduce the strain on my eyes and maybe help me sleep better at night. If you consider the amount of staring you do on a screen, the first thing you should protect are your eyes. Especially for the younger generation growing up with mobile devices in their teens, the amount of screen time you will have by the time you hit your mid 30’s is going to be dramatically more than any other generation. 

Tip 
- Consider investing in glasses that help with “digital eye strain”. I’ve been using a pair from [Gunnar](https://gunnar.com/) and have been quite happy with them.

6. Stretch every day

While I do recommend some exercise everyday, I would say stretching is more important. Make sure to stretch out the hips, gluts and shoulders everyday to avoid limited mobility. If you really want to take care of your body then do some Yoga, Pilates or some dynamic stretching. There are a ton of free resources online to get you started. Most likely there are also a ton of awesome Yoga & Pilate studios nearby you as well.

Tip 
- Find a good Yoga course online. I like Yoga with Adrienne.

7. Activate Your Core

When you think of your core, go beyond the 6 pack, think of what’s underneath that. If you already get this then you can skip this but if you don’t then here’s [an article](http://www.dianelee.ca/article-training-deep-core-muscles.php) which goes over them in more technical terms. 

Basically, if you can activate your core while you work and move around you’ll find that you become stronger in all aspects of life. First, your posture will likely improve which will bring the rest of your body into alignment. Also, it will highlight poor ergonomics once you do find proper alignment because you’ll see how your body has being pushed into a position which likely encourages the shrugging of your shoulders and tilt of your neck.

Tip 
- Do planks every day and start to find exercises which engage your core. Better yet, see your local physio to get some exercises to get the basics on engaging your core properly.

8. Aim for cardio every 1–2 days if possible.

Cardio to me is a given. The benefits of getting your heart going with a run, bike, swim or whatever it is that you do are vast. Aside from burning calories and improving your mood, you’ll be getting your body moving. I recommend that you put cardio within the break you carve out for yourself following Tip 2 on breaking up your day.

Tip 
- Remember to stretch after you do a cardio exercise. Otherwise you might end up tighter and be creating an injury in the long term.

Wrapping Up

I hope you found some of these tips useful. If you have any daily habits you incorporate into your daily life I would love to hear them. There is no one size fits all solution, I’m constantly tweaking what I do so I expect this to change over time.

How to make the leap from employment to freelance developer

MacBook Pro, white ceramic mug,and black smartphone on table

Before I started freelancing, I had been working full time as a full stack web developer for about 10 years. While there are lots of developers who start their careers as freelancers, I would guess there is a large majority of developers who would like to work for themselves but are not able to line up the pieces. Here are some tips from my own experience that I’ve compiled that I hope will help you get closer to becoming a freelancer.

Build up your financial cushion

Before you can take a leap you need to figure out your cost of living. How much do you need to live comfortably or even well? What is your burn rate, and what could you cut out if you had to? It’s important to do this before because once you become self employed the line blurs between your personal costs and your business costs. I recommend having enough cash to live off for 2 years or at least 1.5 years so you give yourself the time to really try this out. You want to make sure you’re not completely stressed at the beginning, a little is good but not the kind that hinders your ability to think clearly and creatively.

Tips

  • Often a more effective way of increasing your profits is by lowering your burn rate by cutting out expenses that are not vital. Making more money is difficult because you’re usually not factoring taxes into your take home pay when you look at the bank.
  • Be careful with any subscription services as those costs will really creep up on you fast.
  • Setup a spreadsheet with your expenses & income for the year. Figure out where your money goes and how much you save. Once you know where you’re at, you can start to target goals for yourself as an independant freelancer. Here are two handy google spreadsheets you can try out to get started on budgeting.
  • Budget Template 1
  • Budget Template 2

Network

Connect with people in your field and start to build up a list of people you could email or call about sending referrals your way. The first thing you’ll want to do when you begin your business is to send an email to people within your network about your next chapter in life. The larger the pool of people the greater the odds of solid referrals. Most people want to help out friends and are often excited about friends who are starting their own business. You might be surprised that people you least suspect become your supporters, think ex-bosses as an example. It’s important to remember that your bosses are often entrepreneurs and will appreciate the challenges you will face when you make the leap to self employment.

Tips

  • Compile a list of contacts/emails including people you would like to have on the list. Work on growing your list and network so that when you’re on your own you have a solid list of people to reach out to.
  • You might find this tutorial handy. It gives you a way to streamline your own personal leads with google spreadsheets. I personally use Trello but if you have a lot of contacts or leads to manage a spreadsheet would be more appropriate.

Become friends with people who aren’t developers

Developers often stick together, we grab coffee in packs and generally put on headphones to stay in the zone. Try branching out, while I love the developer culture it’s usually not developers who will be able to help you expand your business. Often they are the ones you want to hire or subcontract to.

Tip – Try joining company functions which involve other departments and just chatting more with other folk.

Put yourself in the shoes of your boss

When I started working for myself I started to have a lot of empathy for all the people I had worked for before. You realize how hard it is to run a business, keep expenses low, and make clients happy. When you are working in a company it’s easy to get complacent about the business side, and focus on code output.

Tip – Assuming you’re still working at a company, take the opportunity to understand the business and how it makes money. Even try to get to know your boss better if that’s reasonable.

Become good at what you do

It’s paramount that you become really good at whatever service you are selling. In my case that was specifically being a full stack web developer. If on the other hand you are really good at APIs, then try to become an authority on the subject. Setup a site about it, a newsletter, write a guide or set of tutorials… all of these things will have huge payoffs when you need to prove to a lead why they should hire you.

When you are on your own, you are no longer able to hide under the brand of a company, you are the company and the brand, so it’s important that you do whatever you can to become really good at your craft.

One recent initiative I took on was starting a newsletter and website called thed Vue Js Radar. This forced me to stay on top of the technology which I use daily, engage with the community, give back to open source, and open up doors for contracts knowing that I am heavily involved with the framework. I’m not a core contributor but I’m one step above the large majority of Vue developers who consume and build projects in private.

Tips

Marketing and Positioning Yourself

One of the most important skills you’ll need as a freelancer is being able to sell yourself. Sometimes that can be just being really good at what you do, but often you need to know how to position yourself among the competition. If you’re in a competitive market, understand why you are a good hire for a company. For example, my primary competition are other full stack developers and small software shops which handle small to medium sized projects. While I’m continually working on how to position myself as more attractive, my angle is that I’m more affordable than a shop but can do the same work. Compared to other full stack developers I have 15 years of experience which is hard to come by, and more importantly I am a strong communicator. The projects I find I don’t compete for are the long term commitments or ones needing a developer with a very specific expertise. I purposely avoid these and do not focus my energy on positioning myself this way. This often means I don’t work with recruiters because they tend to work by matching you up with full time commitments and are often looking for people for point solutions that need specific domain knowledge.

Tip – I highly recommend following Justin Jackson to get an idea of how to market yourself as a developer. A lot of this comes down to building up your communication skills and learning how to write.

Define a roadmap

Before I took the leap to self employment, every quarter I would review and update a roadmap with my wife. Let me be honest here, every quarter turned to every year and then every second year :). The funny thing is that this roadmap has been pretty consistent. The goals we set out to do 8 years ago are more or less on track. If a goal wasn’t met then it’s likely because I changed the focus to another aspect of the roadmap. You need to have a roadmap, an idea of where you want to go. This is a personal roadmap that encompasses your professional life, because you really can’t separate family and work life, they are intimately tied together and become even closer when you start to freelance.

One day I was standing in a local shop and noticed how they had these awesome employee roadmaps posted on the wall. The key part of it was that it asked an employee to figure out the overlap between three areas:

  • Best in World
  • Passion
  • How I Make Money

When you can find the intersection of these three then you have found something you can really focus on. This concept actually originated in Japan and is called Ikigai.

Tip – Try filling out this template I use for my roadmap here

Value Your Time Like Crazy

When you work for someone you tend to work the same hours, whether that’s 9-5, 8-4, 8-8 (I hope not). Your day is set and there is really little room to wiggle here. When you’re done work you have a commute and a few hours to do something fun and relaxing. When you work for yourself it’s entirely different. You will find yourself working on regular core hours to overlap with clients or other peers, but really during that time you can do anything. It’s important that you schedule your days, weeks with a general goal for each. Break it out as much as possible, book yourself in like a client. The more clarity you have on your day the easier it is to just do great work. If you’re not sure what to work on or what’s a high priority, you’ll most likely just gravitate towards what interests you. Most importantly, the better you manage your time the more you can spend your free time with loved ones. A freelancer has the unique opportunity to work on their own hours and flex things. This gives me the opportunity to spend more time with my young boys and also the occasional coffee meetup with my wife on her breaks.

Tip – Use a tool like Trello to manage your workflow. Bonus points, hook it up to the https://planyway.com/ plugin to visualize your entire day/week. I schedule myself on monthly basis and re-organized my Trello board each morning before I do anything.

Ignore Imposture Syndrome

There’s a lot of self doubt that goes into starting your own business, especially if you are not making much money or any at all. Remember that this is as real as it gets and that working for a company is really sheltering your from that. When you take the risk of finding your own contracts and putting food on the table, you are the real thing. Don’t listen to the demons in your head that tell you regular employment is all you can do, you have to believe. That being said, if you really aren’t having success or enjoying it then it’s important to recognize that and do something about it. Whether that’s tweaking your strategy to make it work or going back to regular employment. Just recognize that you will have the imposture syndrome thoughts in your head all the time and that it’s normal.

Wrapping Up

I hope you found this post useful and can use some of these points to improve your career. If you have any questions or stories of your own to share I would love to hear from you. You can find me on Twitter or through the comments below.