I have been in the industry for a while now, and one of the questions which keep on popping up is, “Should I freelance?” or even more directly “After all these years, why don’t you go it alone?”. The indication here is why don’t I become a dev for hire. While I no longer offer value through hands-on coding, I still feel younger entrants into the industry need to understand a bit more of why I think small scale software consulting is not a good idea.
Let us begin with a story. Years ago, I walked over to a clients office with a proposal in hand. I had just started a new consulting firm and even had two devs in employ. This was going to be our first major client. On my proposal, I had the devs profiles, the company profile, and what we thought we could offer.
The meeting was fairly long with the director of the client firm quickly going through what his vision of the product would be, basically a custom ERP. After our quick paced session, he asked, “So what will this cost us?”. I am against such estimates https://blog.chenchatech.com/2017/03/why-you-should-never-give-off-the-cuff-estimates/, so I explained we would need more time. Further given the amount of pre-work required, field visits, interviews point estimation, and so forth. We would need to charge just to develop the scope of work and associated project documents.
The mood turned somber as the director took it upon himself to explain just how stupid it was for me to have the guts to ask for payment for the work needed to estimate the real work. New in negotiation, I capitulated and did as he wanted me to do. In the end, they ended up going with another contractor, and we took the cost.
Is this why I ask you not to freelance? No, at least not the only reason. The industry is simply stacked against you. Let me explain further.
Low barriers to entry
There is no other industry where the cost of entry is a laptop, headphones, and a decent internet connection.
Your first response may be, sure, but what matters is not these physical assets, its what is between my ears.
Perhaps this is true, let’s look at it another way. If you are top 1% of the population in terms of intelligence, then a city like Nairobi with 3M residents, there are 30,000 people JUST like you if not better.
The truth is, you are not that special. Continuing to delude yourself in this way maybe fun even satisfying but will prove disastrous to your pocket.
The field will continue to flood with X consulting, X tech, X designs kind of companies. Profits will be suppressed.
The tyranny of time
Time is a limited and precious resource. You can not buy it, rent it, get a loan of it or in any other way extend it. What you got is what you got. Yet all activities need time to gain reality.
Guess what takes a LOT of time? Product development.
Real life coding is nothing like what you get in a teaching environment, there are no neat solutions. Past your fresh start, most of your time will be spent reworking existing code.
Vi has built its entire product successfully based on the idea you spend more of your time editing the code rather than adding new code.
Factor in the time you spend fixing bugs, and you are only coding 30% of the time.
The news gets worse, Business Development is an even bigger beast. Clients rarely know what they want to be built. More often than not, they feel their problem and have a sense tech may be able to help. It will be countless meetings and brainstorming sessions before you have what looks like an addressable problem and even more time to architect the solution.
Optimistically, you will be spending maybe 5-10% of your time coding, aka time you can bill the client. Do you see how this can become a problem?
Scale works against you
We all learned about economies of scale somewhere in Econ 101. The basic idea being our costs per unit reduces with the more units we sell. Did anyone bother to tell you about diseconomies of scale?
Some businesses get stuck in an unfortunate situation where every new unit sold costs more. As a solo tech consultant, you fall squarely in this bucket.
Technical engagements tend to offer little opportunity to apply prior knowledge. Yes, I know you can carry over libraries you have built, but unfortunately, you can not carry over business domain concepts which are likely what the client cares about.
You could always hire more devs, putting aside the question, why would they work for you and not themselves, experienced devs are hard to find, and when you recruit them, the cost will be significant.
Poor bargaining power
The old saying “No one was fired for hiring IBM” still holds its ground to date.
For established clients aka where all the money is, are characteristically risk averse. They have a working business model and don’t want to jeopardize it. Further, after sales support will always be a key concern. In short, procurement departments are allergic to one man shows!
There is some reprieve here, small businesses will be more willing to engage. Competition here will be stiff, even worse, you may find yourself encountering competitors who don’t really care about the bottom line. After all, most people in this industry are here because of the promise of freedom, a chance to work from the beach. It will be tough to underbid such an individual.
So what works?
Advisory services are clearly a profitable industry, so how can you be successful here?
Here is a little known secret, successful advisory firms are NOT paid for performance. If you were to call PwC, they would offer you not a solution to your problem, a hefty hourly rate. You, of course, you have no option, an audit is a regulatory requirement, and you are better off with a known name.
What about mutual funds? Well, always read the fine print. The fees are charged against your investment, not against what you earn. In short, they make money whether their decisions pan out or not.
You could get over this huddle by charging per hour as well. A time tested model is convincing the client to embed you in their team. So you take on tasks just like any other dev. This, to me, looks and feels just like regular employment with none of the employment benefits.
Large networks such as Toptal or Upwork may help. They also embed you in a team. In my opinion, the net effect is the same as above.
In fact, the only viable way I see out is to work on a product and use your consulting fees to get by as you wait to land on a product market fit. Once this is achieved, shift all your attention and resources to the product business.
Have you managed to make a freelance operation work? Talk to me in the comment section below, my Linked in chenchajacob or my twitter @jchex