Hacker News Reader

Comment by paulmatthijs | Hacker News Reader

There’s a thing between being entrepeneurship and working for a company: freelancing. It’s for those that feel no attachment to a company, but do have a very developed skill set or trade.

In our free market economy, there will always be a system where someone hires you to create value, which costs less than it makes them, in the end. If you want a bigger slice of that pie, you need to make it a viable business case. Hiring a top freelancer to create value, without the hassle for the employer, is worth a markup. Being scarce helps too.

To me, it sounds like your main issue is that you feel you don’t get enough of that added value you bring. If normal compensation schemes don’t cut it for you, you surely must be able to ask a major hourly rate as a freelancer, or a royalty.

View on HN

Freelancing by contracting is risky. The company you work for maintains the right to fire you for no reason whatsoever, and you would not be able to earn unemployment. Also, unless you are a particularly skilled employee or are working in a hot market, you probably won't be paid as much after considering the fact that you'll have to pay for your own healthcare, your own liability insurance, do your own taxes, and deal with the considerable gaps in employment since freelancers are some of the first that are fired at a company.

Freelancing may work well for the top 5% or 10%, but it's not a good thing for most.

While there is obviously some risk, in my experience it is very well compensated. If anything, I think an irrational level risk aversion means there are basically not enough good freelancers to go around and the demand/pay is high.

The standard formula I recommend to a new freelancer is (what-you-would-make-as-salary / 50 / 5 / 8 * 2) = hourly rate. Anything less is undercharging. So if you would make 100k in salary, you can’t charge less than $100/hour. This is an absolute floor.

If you follow that formula, you’ll be able to cover the healthcare, tax accountant, gaps between work, and other expenses and still make your base salary.

But the ceiling is much higher. For a company, hiring a full time employee is just too much risk. You have a few hours of interviews to determine if they will be a good match, and if you are wrong, it is an extremely expensive mistake. Likewise if things slow down, you’ll have no flexible capacity. Freelancers are a dream come true.

Also, in my experience, companies do not think of freelancer rates in the same way as salaries. Freelancers are not on the organizational chart as it were. Whereas standard HR hires and the attached salaries come with a load of political and ego driven baggage, freelancers are thought about more like buying a new office printer. If there is a need and the budget, the company will hire you and you might be making 3x what the project lead makes.

If you're able to get a salary of 100k, then you're that top 5% or 10% that I mentioned _might_ be able to do well in a hot market. There are lots of people who aren't so lucky and don't have that opportunity.

$100k isn't a particularly high salary for a software engineer in the US these days. Even in lower COL areas.

If you honestly believe this, then you are living a very privileged life. Be happy about that, because it is very lucky.

Those salaries _can_ be found in other areas of the country, but they are almost completely concentrated to tech hubs of the country. Lots of cities throughout the country don't have these jobs.

I don't live in a tech hub. The only place I've lived that was close was Northern Virginia (for only two years) and I hated it so much I moved to Florida.

I graduated from a fairly average state university with a BSCS in 2002 and joined the Army. My first software engineering job (which was hard to land given I had gone 4 years since college doing something completely different) paid $55k in 2006. I crossed the $100k threshold in 2012.

Though, I'll admit the raises haven't been as generous the last few years, and I did have to move a few times for jobs :)

But I really don't think my life has been particularly privileged or out of the ordinary for a reasonably competent developer (and many here on HN who do live in tech hubs make quite a bit more than I).

Sure, I gave 100k as an example. But I think the same principle applies more generally. It is perfectly possible to run a freelance business charging $50/hour, just expect that your total annual take-home (after health, sales work, accountants, and so on) to be in the $50k range. As for being in a hot market, well this is hacker news and programming is a very hot market right now.

I think a lot of people have a mistaken impression that freelancing is hard to pull off. In my experience, landing a contracting gig at a big hourly rate takes roughly the same amount of effort as it takes to interview and land a full time job. If you can land a full time job, you can probably freelance.

My 2 cents to everyone here: nowhere in the discussion did I hear of setting hourly rate based on the value you're bringing to the company. It's all about how much the other company was paying you and how much more you're worth now. It's good to be ambitious, but as a freelancing consultant - think about the value you're bringing for the client. Set your rates based on that. You bring X value, company gets 10X benefit.

> Freelancing by contracting is risky.

Isn't that the point of the OP? He already has low-risk, constant-reward situation and he's sick of it - obviously, he wants more risky, more rewarding scenario.

Egads! I'm so ready to do this. I'm in my late 30s and have been a salaried engineer my entire career. I'm sick of corporate culture and dealing with dysfunctional petty politics. My current environment is particularly depressing. You know the office from the first part of Joe vs the Volcano? It's kind of like that :|

I'll admit, there's an element of risk aversion holding me back. That and I simply can't afford to start at the bottom and work for peanuts in order to 'build a reputation' as a freelancer.

Moonlight. Build customer base and savings cushion. Jump from corporate gig.

I've been doing freelance/contract work since 2004. My advice would be to start by doing hourly contract work through agencies/recruiting firms. It's not glamorous, but it initially saves you from having to worry about sales and collecting the money, perhaps the two most stressful parts of freelancing. You'll get a check every two weeks and develop contacts in different organizations. Find an accountant that specializes in professional services and set yourself up as an LLC and do the work with a corp-to-corp arrangement. Once you get comfortable and have some reliable clients you can cut out the middlemen.

Do you know anyone that has left your company and is now working somewhere else? Talk to them about contracting opportunities.

And don't fall for nonsense about 'build a reputation' as a freelancer (mostly this is an attempt to reduce the rate you'll accept). You skills and experience speak for you, regardless of whether contract or full time.

What unique skills do freelancers have that you don't? Finding new gigs (not important to someone hiring); filing taxes (not important to someone hiring); having an accountant (not important to someone hiring); owning/operating a corporation of some form (not important to someone hiring).

As another data point, I'm about the same age, live in Idaho and freelanced around 2012 charging about $30-40 per hour and taking anything I could get on Elance/oDesk (now Upwork). I flipped PowerPC iMacs with the blown capacitor issue, took a local service call once or twice a month, and worked on shareware. I eventually went broke, but I landed a $50/hr, 6 month contract in a local office at the end doing backend web work.

I managed to save about $20,000 and freelanced the same way the next year or so, but charging $50/hr. Money steadily dropped, but it was mostly due to taking fixed-bid contracts, not tracking my time well, estimating done dates and then failing to bill after the deadline. So try not to give time estimates (which are often by by a factor of 3-10 or more), and if you do, be sure to bill if you go over. They are paying for the time it takes you to solve a problem, not your ability to guess at unknowns that can't be known until you've done them.

After that, I got a great gig at a local agency. If I find myself being a contractor again, I would charge 1.5-2x my desired hourly pay. In internet tech now, that's probably $75-150k/yr, $35-75/hr, even in rural areas, so a $75/hr freelance rate is probably a good minimum.

In other words, there's not an easy way that I could see to survive long as a contractor by taking a pay cut from your current salary. It's better to think in terms of charging twice as much as you're paid now, but finding work half as often. Which is generally worth it because it gives you time to work on your skills, do side projects, etc. I would not take other advice to moonlight, because a programming job by itself generally tends towards burnout.

Doesn't freelancing dry up during economic downturns? I recall hearing some rather grim stories during the 2008 recession and the dot com bust and, if one takes the various economy related articles that appear on HN with increasing frequency these days seriously, we're about due for another bust.

Salaried jobs dry up too.

Reply on news.ycombinator.com