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I thought we’d talk about freelance tips and realities because it’s come up a lot when I’ve been interviewed on other podcasts lately. I was recently interviewed for the App Guy podcast while I was at a conference last week. The reality is that the amount of people—I think it’s 50% by the year 2020—are going to be freelancers. It’s not necessarily freelancers in 3D printing, but the business world is moving to a lot of freelance.
Listen to the podcast here:
3D Freelance Tips
We have been doing this a long time. I want to be clear that we are not an agency-style firm. We are the only designers in this firm right now. That doesn’t mean we don’t use freelancers; we do. We have some part-time employees that work virtually to support us, but we are a small entity. Essentially we are a freelance partnership. It’s a bit different.
There are a lot of realities to freelancing. It’s a common problem for a lot of people to decide to freelance and think it’s going to be easy. I don’t want to scare people off from it because there are a lot of rewards to it, too. But to think that you’re not an entrepreneur and you’re not in business is a really big mistake. It’s setting yourself up for failure.
Think about it this way. You’re in-house at a company, and you decide to go out on your own but keep the company you have as your freelance client. That happens a lot. The company kicks you out and you become a freelancer. That happened in the late ‘70s at Herman Miller. It happens at loads of places. They kick out their designers, and they decide to outsource a certain level of their business. You can still maintain and be a part of that. That happens.
Or you’re on a project. They outgrow the heavy, intense part of the project, and they move everybody else into freelancing. That happens in software development a lot.
In that world, you have to think of yourself as an entrepreneur. It’s happening a lot more now, especially because of the millennials and how they view life and business. We’re not millennials, but I have siblings that are and other people in our family certainly are, too. They seem to be less willing to work at a job for a number of years, paying their dues. They want to do more sooner. They get criticized for being impatient. Call it what it is: they have the entrepreneurial spirit. The reality is they hunger for more, and they want to go out and do more sooner. One of the ways you can do that is to be a freelancer. That is how we started. In 1993, a year out of college, Tracy had a job at that time, and I didn’t. So I decided to start freelancing.
Freelance Tip #1: Think of it as a Business
The number one tip that I have is you must look at it like a business and not an hourly wage. If you’re coming out of the business world and saying, “Essentially, my salary + benefits makes me at $50 an hour. That’s what I’m going to charge,” you will lose your shirt. That’s not enough.
You have to adopt a completely different perspective and attitude toward what it really means to be in business for yourself as a freelancer and what you need to charge. You are not competing against an hourly wage. Not at all. That hourly wage has a lot of encumbrances on it that they are not considering. In other words, if they were paying $25-50 an hour for a coder or a designer in-house, they should be paying almost double that out-of-house and very likely triple that.
There is an allocation for your use of their space, for the equipment that they have to provide for you, the benefits
they have to provide for you. All of those things get lumped into the actual cost of an employee’s number and the total cost of goods that the company is paying for that labor. They even have a bigger number than the salary divided by the number of hours. They will try to tell you that your real cost is your salary plus benefits. It’s really so much more than that. They have overhead of the space they are renting, furniture they had to buy, computer and software they had to get, liability insurances they are paying for, and you need those things, too, to do the freelance work.
And it’s because you need those things that you have to adopt a business model of pricing. That’s the way to be successful there. You have to consider the total operating costs of it. You don’t look at it like, “I already own my computer and my 3D printer, so there is zero cost.” You have to look at it as what you are charging today is the replacement cost for those items. You have contributed your computer, your 3D printer, whatever software you have to your freelance business. That is value you are bringing to it. Is any investor going to invest in a business that isn’t going to buy that type of equipment to do that work? I know we’re talking about freelance right now, not investors, but still. You have to think of it like a real business. That’s my number one tip. You are a business, not an hourly employee. Think differently.
Freelance Tip #2: Systematize
The second tip is that you have to be systematizing yourself. You have to develop systems to do things that don’t require your time and/or resources. Outsource things. You have only so many freelance hours available during the day. You must spend them on the things that make you the most money. You must spend them doing the design work if that’s what you do. You must spend them coding if that’s what you do. You do not need to spend them doing the operations side of your business such as invoicing.
It’s hard to think that way in the beginning, but you must keep track of that because it does cost you a significant amount of time that is not billed to any client. They won’t pay you for running your own business. They want to pay you for whatever service or value you are providing to them. You must think of client services as if you are answering emails, if you’re doing other things, those things cost you time and money. That time is money.
The return on investment of your time is the most critical factor in any freelance business. You must make sure that if it costs you $50, you can pay someone $10 to do it for you, then do it. That’s a good multiplier. 5x your costs of that raw labor cost is a good multiplier to use. Some people do it as low as 3x, but really, we have found that that is cutting it too close. It doesn’t give you enough buffer for when you underestimate jobs.
Freelance Tip #3: Overestimate Everything
Overestimate the amount of time it’s going to take to do everything because it will take you longer than you think. There are a lot of distractions in freelance business. Not only that, but especially if you are hungry for work and you want to get the job, you are going to underestimate it. It’s not only the amount of time it takes you to do the job, but it’s things that your clients do that delay jobs getting done and increase the amount of work you have to do. You don’t want to be the client that hems and haws and comes back nickling and diming them, “I only agreed to do this, and now you want me to do that, so I will charge you more money.” Right up front, you need to estimate that job higher than you think it’s really going to be. That is part of your profit center, but it is also practical reality.
I guarantee you, especially in your early days before you dial in and really understand the proper amount of time it takes to do a job, that buffer is going to be so critically important for making sure you are making money on a job and not losing money.
The other thing in doing that is even though you don’t want to do it, you should track your hours. This is a good lesson. It’s really hard to do; I hate tracking hours. If you track your hours, you will find this out.
I even did this recently within our business just to see because we are spending so much time podcasting and we don’t get paid for it that I wanted to see the balance of hours we do. I looked at how many minutes am I spending everywhere? I wrote down every 30 minutes I spent doing general email, any minutes we spent podcasting. I counted everything, and I put it into a category of what we were doing. I based it on operations, new ventures, the podcast. When I looked at the numbers, the crazy part was that I was working extreme overtime. What were you doing? A huge number of overtime hours. It was 66% overtime. That’s how much I was working. If you think freelancing is going to be fewer hours put in, you are kidding yourself. It is always more.
Freelance Tip Summary
I have found freelancing to be tremendously rewarding. I would far prefer working for myself than working for somebody else. You have to be comfortable with that. There are a lot of benefits in that you can schedule your time as you need to. If you have to take a doctor’s appointment in the middle of the day, you don’t have to get anyone’s permission to do it. Those are the great things about it. That doesn’t track down which hours I worked; it definitely wasn’t from 9 to 5 for sure.
The other thing that I learned from it is that when you look at doing these things—when we are doing the podcasting, and it’s an investment in the future for our business and for us for sure. The reality is that you’re not getting paid. It’s not billable hours as a freelancer. When you look at that, you have to amortize your hours you put in and the amount of money you brought in over the course of the month. You calculate that. You figure out your net hourly rate.
When I figured out our hourly net rate, I felt like it was almost worth not getting out of bed for. I should not be doing anything. We were getting paid $46 an hour; that’s too low. We bill out about $150 an hour. That’s because we work more hours. We work more hours so our net amount ended up being $46 an hour. If you were only making $50 an hour, at the end of the day, if you calculated it that way, if that was your billable, it would end up being $10 an hour. You could work at Macy’s or McDonald’s for more than that in some states.
You have to look at it from the standpoint of is it really worth it to me, am I building my business? When my net hourly rate is so low, I am making a mistake in my business. This is why you want to track it so you can really analyze it and say: I have the right hourly rate, but I am sorely underestimating the amount of time it’s taking me. That’s the part I have to fix now. Or I have the right amount of hours. I did exactly what I said I would do on this job, but I didn’t charge them enough. You have to look at where your problems are in your business, and the only way to do that is write it down and track it for a while.
I wonder if a lot of people in the 3D printing industry, particularly in 3D hubs, face a lot of these issues. They are a small independent business of their own, a freelancer of sorts. You are taking jobs from anybody out there who goes to 3D hubs that are local to them. These people have to figure out how to charge for their service. Sometimes you have to put it out there and say, “I’m going to charge $100 to do this” and find out it’s not profitable to do it. You have to do it wrong first. That’s how we learned. We failed so many times that we got it right. That’s why we have developed this.
That’s the way it goes in the market. You have to set those metrics and check them. If you don’t do things like track your hours or every fraction or percentage of costs of all the things you are paying for to have a facility to work in, to have your computer, have your software, all this stuff, pay for your Internet connection.
I am always trying to upgrade the Internet connection to get it faster. I pay for the most I can get. If you’re sitting around wasting time for stuff to upload and are not being productive, that is a waste of time. That is something that has been very frustrating to me with uploading large CAD files or uploading our raw audio files to our podcast editor. Those things can take too much time if you don’t have a fast Internet connection that will get it up there in five minutes.
That’s tip number two with systems. You make sure your systems are streamlined and productive as possible. Wherever possible, if you can make money off of paying someone a fifth of what you’re making or are able to charge for it, then do it, as long as it’s not compromising your quality of what you are doing. There are a lot of administrative and busywork tasks that can be done by other people. If that leaves you more time to do the skilled, talented, whatever is unique about what you’re doing, it will allow you to do more of that, that is something you want to do over time.
I hope these tips are helpful and that these Business Mondays go like that and can help you with the realities of being an entrepreneur in this 3D print market. While they won’t always be so specifically 3D print related and can relate to any entrepreneur, they can apply to 3D printing businesses. That’s why we want to bring them to you.
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