Ask HN: When to make the jump to freelance/consultant? | Hacker News Reader

Ask HN: When to make the jump to freelance/consultant?

121 pointsmxmpawn80 comments

I'm working full time as a data engineer/scientist but I also have one ongoing customer (a previous employer).

Another previous employer is launching a startup and has recently pinged me because they need to build a series of data pipelines and ML models for their product.

I've to talk to them about specifics but I don't see myselft having enough available time to make it work.

I've been thinking about starting my own data/ml services company for a while but I don't really know when to make the jump. I think (is a guess for the time being) that the income from this new job, in addition to the income of my current client, could be enough for my living expenses of this year, so I'm thinking if this is a good time to make the jump or not.

The problem that I see is that this new lead is from a previous partner of my current client, so both jobs are related to my previous employer, I don't have a pipeline of possible prospects for my service, so I'm not sure if I'll be able to generate a pool of prospects while doing the work for this customers.

My guess is that I should wait until there is a sign that I could probably get a stream of clients to keep the wheel going, and try to find the time to take this new job, maybe negotiating terms to make it possible.

What do you think?

Edit: I've savings already as I plan to buy a new home (I'm in Argentina, we buy it cash, no mortgage). I need three more months of salary to accomplish the home budget.

View on HN

Every scenario is going to be different, I took the plunge as a software consultant and can provide some datapoints.

I was laid off from my job as a software engineer about 5 years ago. I had previously worked in software consulting and knew the operating model and had a handful of potential clients. I had some savings and my wife works full time so I decided to give it a go for 6 months to see how it would go. I partnered with a colleague who was also laid off and had same appetite for risk as I did.

  * The first year was a grind, especially doing the non-technical tasks like networking/business development/invoicing/etc. 
  * We ended up being profitable on year 1, I made less than my previous gig as a lead engineer. We grew from 2 of us to having 1 FTE and 3-4 dev contractors in year 1. 
  * Keep in touch with engineers you liked working with, hiring is WAY harder than I expected. If you decide to grow, you will need a team for larger contracts. 
  * Business development is largely a numbers game, you have to get out of your comfort zone and talk to a lot of people/companies and get on their radar. 
  * One of our first non-technical hires was business development. We did this when we hit $1mm/yr rev. 
  * Being in a niche can be helpful if you are able to explain your value prop AND to differentiate yourself.
  * Don't view other consulting firms as competition. We've formed some great relationships with other companies that align with our engineering process and refer work when we have too much and get work when they have too much.

Over the last 5 years we grew from 2 "founders" (along with some former colleagues as contractors) to about ~40 employees (80% FTE's/20% contractors) all remote, US based. In hindsight, I think my favorite size was when we were ~8 people. It was big enough to take on 1-2 large-ish contracts, but less stress in keeping pipeline full. The risk tolerance for having a 6 figure payroll every 2 weeks is not for everyone!

(edit formatting)

How many years experience did you have? :)

I had about 15 years professional experience as a developer.

What’s your income now? Like is it an order of magnitude higher?

Yes, I make considerably more than I did as a IC engineer but I have significantly more stress/risk.

> Edit: I've savings already as I plan to buy a new home (I'm in Argentina, we buy it cash, no mortgage). I need three more months of salary to accomplish the home budget.

This is a significant last-minute edit. There's a lot of good advice throughout this thread, but I would suggest waiting until you've completed the home purchase and settled in before considering the jumping to freelance. It's only a few more months and you'll have a much better understanding of any issues and unexpected expenses of the new home.

Beyond that, you need to make sure that you can do the process of networking, selling your services, cultivating a pipeline of clients, and collecting from clients who don't pay on time. Doing the work is only half of the battle when you're a freelancer. If you don't excel at the business side, you might not enjoy it after you run out of immediate contacts with work for you to do.

This is true. I can't speak to the process of buying a home in Argentina but buying a house and moving is a significant change, and leaving your job to go self-employed is another significant change.

Finish the home project before you commit to the self-employment project. Your full-time job is a safety net you won't have when you first go contract.

No harm in putting feelers out meanwhile though, networking and making yourself known in relevant circles. Worst case is that you end up with more full-time job prospects and not freelance ones.

I just started this today actually. Today is the first day where I am no longer employeed by any company and will need to find my own customers, invoice them etc. My field is ERP development and consultation.

I have 10+ years experience in the field and I was working for a consultation company. But on the same time I would always get messages on Linkedin from recruiters and at some point I thought I should give it a go and try to work on the projects during the nights and weekends.

Did that for like 6 months and felt I could do it full time and then I just kinda did it and will be doing it in the future.

Sounds like you got freelance work from recruiters contacting you for full-time job opportunities. How did you ask them about that, out of curiosity?

I always told them that i'm not looking full time but only part time but that only did work once I think. Most success came from building a small persona online, participating in the discussions, networking on Discords/Twitter and then the opportunities came.

I've done this - with Web Development, but still got projects this way. I just responded to the recruiter or directly to the company if I had their info, and stated my background, my rate, and asked if they were interested in working with my in a contractor capacity. It's gone very well, and I have several ongoing contracts from this process.

Basically just state that you are interested in the work, but not the current agreement and see if the company is open to hiring you as a contractor. If your experience is good and viewable/provable, they probably will be. And Bonus points if you are a good communicator and timely with such and delivering deadlines - many contractors are not and companies/recruiters get burned by them and those who ARE dependable are worth their weight in gold to companies.

how different are WMS and ERP?

An ERP often includes (some approximation of) a WMS (usually as an addon or module or such), but usually not the other way around. There's usually overlap (like inventory and order management), but a typical ERP doesn't handle the minutiae of receiving/picking/packing/shipping like a WMS does (and when an ERP does attempt those things, it's rarely done well - though to be fair there are about as many shitty standalone WMS implementations as there are shitty WMS-as-ERP-addon implementations).

Personally, as a freelancer/consultant, I never think there is a right time for anything in my life. Of course, you might feel differently (and it probably is different). I'm offering advice from my perspective only, and I don't have a home to make, or children to worry about. I've been freelance/consulting/whatever for about 2 years, so make of this what you will, but I'm still early stages having just been where you're at.

First I want to say, the risk might not be as big as you might think it is. You've a pretty in-demand skill set right now, more so than most SWEs. If things don't pan out as you expect, you can always get another full-time position despite the 'looming recession'.

That said, here is some unsolicited advice. Rebuttal as necessary :)

Regarding leads/prospects, if you do decide to make the jump, chances are you'll be tapping your professional network for leads, or pitching strangers if you happen to get on a call with them via cold email. This can work for a while, maybe get your first recurring clients, but I don't recommend working with a matchmaker like Toptal, Fiverr, Upwork, or an agency.

The platforms tend to have poor pay and bad clients. Agencies will limit your ability to build a direct relationship with the clients. I know people have built successful businesses using both of them, but for me having a direct relationship with high-value clients seems to have paid off doubly as I can set my own terms (fixed rate / value based) rather than the typical hourly model. If you can/want to build such a relationship, you should *get on the phone with a decision maker* (a huge unlock for closing work). Regular dev/engineer interview channels will yield regular dev work, pay, and circumstances (maybe that's a feature for you).

After a few sales calls for clients, You may realize getting leads to come to you is best, or at minimum people should have a reason to answer your emails like having some kind of branding or marketing, so start writing, coding, tweeting, or whatever regularly to get attention. Keep at it. It's hard work.

On top of everything, you will fuck up, and that's okay, so give yourself some breathing room financially and mentally.

FWIW, I futzed with Upwork years ago. It became super clear that it wasn't where I could sell my skills (deep backend, sre) effectively and come out with outcomes good for me and the client.

I do FTE work but occasionally dream of the side income (less so these days ha). :)

I think we all dream of side-income, but honestly freelancing on the side would be too exhausting for me (and employers don't typically like it).

I see the control over my time freelancing affords as my ticket to eventually make living off my own products (some day ;)

When you have enough savings to take the plunge and survive until you either pick up work or return to a perm position.

Many people love the idea of being their own boss but the reality can be quite different and they return to perm roles.

It sounds like the perfect time to jump to freelance. You've got 2 clients already.

However... What happens if both clients back out and you suddenly get no work for a year? Do you have 1 year of savings runway? Will your family and living situation survive no income for a year? You need at least a year of runway because it's perfectly normal to go for 2 months with no income and if you've only got 3 months of savings then you'll start panicking.

Also getting a mortgage as a freelancer is more complicated. Have you bought all of the houses you want for the next 2 years? (Freelancer mortgages require 2 years of company accounts, so you won't be able to get a mortgage for the next 2 years)

One element required is to have a network big enough to sustain itself off recommendations. I think that's absolutely necessary at least for 80% of your business revenue. If you're just hopping from one client to the next, you're not going to be in a strong decision to make good choices for your company when it comes to negotiations.

I've been a consultant through my own company for 15 years and never needed to do this.

I simply apply for contract roles.

My day rate is 150+% of the average for my role and area and my contract terms are ridiculously weighted in my favor.

You can learn to negotiate going from one client to the next.

And you mainly have to be able to negotiate better than the client. That's pretty easy usually.

Where do you find these roles

Seconded.

The vast majority of contract roles I see here in the UK are brokered by recruiters who will enforce their own standard contract terms & rates on a take-it-or-leave-it basis.

This kind of approach seems like it has no chance of working as the recruiter would rather place someone at an "okay" rate rather than having to risk submitting a higher-rate candidate and having the client balk and go away altogether.

Yes recruiters, and outside IR35.

It isn't true that they set rates and dictate terms. Push back, negotiate with them.

If you have recruiters who know you deliver, which drives more business for them and makes them look good, they'll listen to you and break their backs to place you even at rates higher than other people. They become your marketing team.

They're salespeople. Make their job easy and make yourself a tool that generates more long term commission for them. They'll bank on you and you'll be first in line.

All they care about is an easy win and their commission and sales targets. If you're their easy win, you're golden. The higher the rate they can place you at the more it works for them because the commission is percentile.

I interview really well. I'm a salesman too. They know if they can get me in the door I'll get the gig and they can get their cut of 50% above market rate.

I get to strike terms from contracts, set my notice period ... whatever I want really.

Build the relationships.

Offers through my network always outperformed recruiters in my experience. It makes sense considering a recruiter would charge 10-20% of the contract.

I'm friend with recruiters and I add everyone on Linkedin so I can just log in that horrible spam infested thing that is my Linkedin feed & private messages and get an idea of what rates are going in market.

15 year+ consultant through my own company with recurring clients and more work than I can handle (and no interest in delegating or growing)

Never needed to network. Don't have to market myself. Never had or needed a full time position and never been short of work.

Get to know good recruiters who have streams of contract work with goal based outcomes.

Learn how the contracts are managed by middle men and understand why consultants and contractors are needed and what risk profiles they serve.

I'm used when times are tough, deadlines are tight or goals absolutely have to be hit.

My day rate is higher than my peers.

I'd say do it, find your niche and be ome the goto person for a specific kind of work.

Why work with recruiters at all?

They’ll charge 30-50% over your rate. They provide zero value besides the initial contact.

Their overhead impacts your negotiation leverage for a higher rate.

Recruiters typically charge approximately 10% in the markets I am familiar with.

They also act as a free sales force and have supplier agreements with end clients. These are very hard to secure directly for one man bands.

I would argue that it's not really consulting or running your own business if you are working through a recruiter. It's more akin to short term employment. That may be fine for your aims however.

Recruiters are also an insurance policy for clients. They mitigate some risk.

> They mitigate some risk.

Do they actually mitigate some risk? Or do they make the client feel like they've mitigated some risk?

I mean, value is value.

But I gather many clients have a strong working relationship with one recruitment firm so that if anything goes wrong, that firm will want to maintain the relationship and find a replacement ASAP from their pool.

Recruiters here typically take 10-15% and I don't care as long as I'm getting what I want in revenue.

Most recruiters are absolute snakes. They can be very useful and you don't have to let them negotiate for you.

At the end of the day, as long as they get their cut they don't much care.

Saves me endless hours at $X/hr searching myself. It's more cost effective for me to bill a client for those hours than market myself.

If you know the industry and find good recruiters they'll break their back to place you.

How long are the contracts you're finding? And are you doing multiple at once? In the UK I struggle to see any contracting less than full time and six months. At which point, without annual leave, it feels like a much worse deal than an 0.8 FTE remote job.

My current one is in its 5th year. I often do a few years on then take a year off.

Look for "initial 6 month" type listings that renew. Many business don't want full time staff, they want a workforce they can flex and will pay more for the privilege.

I use recruiters because they're better at finding interesting work than I am. If I could do it all by myself then I would.

If you have enough connections to get you through your first 6 months or so then you can make the jump. Often when consulting your rate is double your normal take home so it balances out the period of searching for more work. But you highlighted the key anxiety in going freelance: you will always have to be selling your services. Its just like any startup except you are the product. Having to get new gigs will always be part of the job whether its now, 6 months from now, or 3 years from now

My general answer for people asking this question is: when you think you can sustain yourself. And it sounds like you're almost there.

It sounds like the question for you is whether you can find new clients at a rate fast enough to replace old ones. This is a question you'll never be able to answer fully as an employee, because employers generally don't like you putting out an "open for business" sign. So in your shoes I'd put together a marketing/sales plan, take the new customer, and devote some time over the next N months to seeing if you can build up enough interest and leads that you will have plenty of work down the road.

It sounds like the worst case here is that you get to the end of your contracts and have to go get another job again. Which is not a terrible outcome as long as you don't burn your bridges. And it's worth noting that after a period of freelancing you may decide you'd rather have a job anyhow, so you can look at the next months/years as an experiment not just on prospects, but on whether or not you will be happy with it.

> The problem that I see is that this new lead is from a previous partner of my current client, so both jobs are related to my previous employer, I don't have a pipeline of possible prospects for my service, so I'm not sure if I'll be able to generate a pool of prospects while doing the work for this customers.

Work on building your pipeline, and having customers from launch day on.

I did the same thing several years ago (left my job once I had 2 clients). I was also worried, but it turned out just fine. It's true that it will take a bit of work to get clients, but it becomes easier and easier as you go. Your current clients may know others, etc.

I have two big pieces of advice:

1. What other comments here say about money and runway is definitely true. It can be common to go a bit without clients - and even once you find a new one it might take 30 days for the project to start, then maybe you bill after the first 30 days, then it takes them 30 days to pay - that's 3 months from the time you found them to when you get the first money coming in! So make sure you account for that.

2. Have something you can point to which says "this is what I do, and why I'm good at it". In my case it was an ebook, but it could be a white paper, or sample projects, etc - but you need something that "tells a story" to the clients that you can do the job.

And good luck! It's scary to take the jump, but also very rewarding :)

How much work do you think the new work would take? Depending on the nature of the engagement, it doesn't have to be a 'jump' at all. If possible, an option would be to make it a more reduced hours engagement that you can moonlight. Then you can get the consulting experience, maintain the income of your full-time job, and see how it goes. Once you have one engagement under your belt, then it also becomes much easier to get more through WOM and very basic marketing/promotion through LinkedIn on what your skills are and what you can offer.

As others have stated in the comments also, a lot of consultants never have to do marketing or sales, they just get it word of mouth through their networks as they continue to do good work. I think doing that first job well, but in a way that's not as scary as jumping away from your full-time job is a good choice if you have it.

That's something I have to talk with this new customer, I'll try to start with a reduced amount of dedication and then increase it if needed as the project evolves.

You should consider two most important things (unfortunately, each other opposite):

1. Yes, better to start own business when favorable environment, for example, when see macroeconomic grow (now recession, and high probability of crisis), or when You have some money accumulation.

2. But business is by definition, PRACTICE of make stakes and earn profits on success.

- You will not practice if not try. And best practice at crisis.

Exist good solution of this contradiction. If You could afford it, look out at nearest to You business community (offline), and find experienced mentor, to mentor You and You'll pay him from Your current payment.

Any way, early start business is much better then late. Mostly, because when You younger, You have more health, and could do things faster.

> better to start own business when favorable environment, for example, when see macroeconomic grow (now recession, and high probability of crisis),

I could actually see the opposite being true. Lots of companies might not want to hire FTEs right now due to a maybe recession, but there's still a lot of work to be done, so they just use contractors instead.

> there's still a lot of work to be done

This is huge mistake. Looks like You don't understand enterprise economy and recession.

In reality, enterprise economy divided to two semi-connected parts:

1. making (sell) new products (new and existing services).

2. support of existing products (services), support subscribers.

Part 2 is near constant when recession (in reality it slow declining, but not much, typical 5% decline per year for US large enterprises).

And by definition, part 2 grow, when have activities on part 1.

But! By definition, activities of part 1 need investments, for development and for marketing.

Exists one exclusion - when Your competitor fail, You could try to gather his customers. This could be very cheap. Sometimes You will decide to pay money, to somebody, so You could avoid these customers, because now You don't have free resources and don't want to invest (read next).

Mean, to grow business, You should invest something, but when recession, money become expensive (fees are raising, inflation happen, but without grow), so You must cut costs, and first thing doing typical business - stop all development, and cut marketing activity.

You are partially right, support is also huge, but it cannot substitute development.

And by definition, development and support are very different types of work, so when recession, people must learn different things than when grow.

Sure, not all people learn well, and learning is very time-consuming process, so appear gap on market, between supply and demand. And because of this gap, appears illusion of lot work.

Oh that's easy, wait the 3 months and then quit. Subcontract out among your friends to make up for the immediate work you can't take right now.

Spend an afternoon to setup some branding for you data/ml company and when dealing with customers, mention you're a company and that they're not just hiring one guy but that one of the team will handle it.

I'm in a similar position. I'm saving money to build my house, I don't want to quit my main gig just yet and I'm trying to ramp up an agency doing mostly web development and I had good results offloading part of the work to other people. Learning to rely on external resources is crucial if you want to scale your business.

Best of luck!

I personally took the plunge, with enough savings to make it several months until the first invoice is paid. Some clients pay on time, some don't, some go bankrupt or just drag it out infinitely, from what I've seen.

Without that kind of savings (and being comfortable with watching them meld away for a while, taking the risk that you might not recover them), I would suggest to try to find a safe way to experiment with this. For example reducing your hours, or taking on a new main job with less hours, and taking on part time freelance work. Maybe there are things you can do for your potential clients with less hours than what you/they think is needed.

With regards to clients not paying on time or going bankrupt, one data point, after being freenlance for 18 years, I have lost about 3% to unpaid work, conflicts with clients etc... Besides this, I've had quite a few clients who have been late (up to 3 months)

When I first started, I remember researching a lot and reading that to expect 5% loss as a rule of thumb and have enough runway to last a year without income, I think that's a good rule to keep in mind.

Sounds good. Having clients before you start is essential. Focus on delivering good work, document it, so the next conversation with a potential client can be quicker.

I never really wanted to do consulting and freelance work, but through my network I got to a point, where more projects are lined up than I have time to do.

Also, one thing that helps me a lot is to just live frugally. Even though I charge a bit below market value I still could build up a financial cushion, so I do not have to work for the next 15 years or so, if something should happen.

I started on my own at the end of September; I'd resigned my job at Datto after an acquisition proved itself disastrous (never work for Kaseya, or any Insight Partners portfolio company), and the position I had lined up fell through for one reason or another.

I figured - I'm 40, I've always wanted to do my own thing, I've got runway... Why not? So I formed a company[0], started planning out a B2B product and networking like crazy; I'm fortunate to have a wide diaspora of former colleagues.

As I want to bootstrap my own SaaS app, I needed to get revenue coming in, so I began to offer my services on a consultancy basis. I got my first small customer at the end of November - a charity needing hosting and maintenance - and then landed my first major consulting gig at the end of December 2022.

Who knows what I'll be doing in a month's time, but I know that I can build a track record of helping others, and it's so varied! Every business or organization I talk to gives me more ideas for my app, so it's also a great way to collect more knowledge about the wants and needs of my potential customers.

If you have the opportunity and runway to give it a shot, I'd recommend trying it - put a plan together for how you'll achieve it, how long you can last without a gig and what you'll offer others. And then execute on it.

You'll never know unless you try.

[0] https://xarma.co

I've transitioned back and forth between employment and independent consulting several times.

The number 1 thing you need to be successful as an independent is A CUSTOMER.

Make sure you have work lined up in advance of leaving your employment.

Seems simple, but often overlooked. Especially when a person has a S/W project they've been working on, and plan to launch it into a business.

I'm in a similar boat (worse actually, since I'm on a visa) so I can't give specific advice, but @patio11 [1] greatly encouraged me to consider freelance/consulting as a career path.

I am going through the grind of prepping for the tech interview all over again, and it just occurred to me that I might be approaching this from the wrong angle. If instead of spending all these hours every day solving leetcode problems or trying to "grok" the system design interview, I spent them networking and building a portfolio, it might result in a much better ROI.

But alas, my visa status doesn't allow me to do anything either way. Maybe one day.

[1] https://www.kalzumeus.com/2012/09/17/ramit-sethi-and-patrick...

I could be another client as I need help with this, ping me at joseph dot misiti at mathandpencil.com

I left full time work for consulting after I did a project and discovered my bill rate was so high I could replicate my salary income while being less than 40% utilized. I wasn't doing something especially specialized; that's just what the market clearing rate for that contracting work was. I would not have guessed that rate before discovering it.

So my somewhat tangential advice is: figure out your rate, and start with a rate that doesn't require you to constantly hustle for clients to make your nut. It's easier to figure out the right (high) rate when you've still got a salary to fall back on, and much harder when you're grinding it out as a full time contractor.

Hello! I'm also on a similar boat. I'm based in Brazil, but do speak spanish as I work at Rappi. Would love to chat about this type of endeavor we got going on. Let me know if there is any prefered contact method!

Cheers and good luck!

Happy to chat, my mail is in the profile

I've done contracting and it's ok, but it's best if you have something more to sell than just your time. "Do you earn money while you're asleep?"

I'm self employed and work for only 1 client, so it's not very different from being employee, and I've ridiculously low expenses (haven't used my credit card since months and owner of my flat, no cars, very few possessions, simple free great life)

I would advise you to find a partner who is also a data engineer/scientist and team up, it would be much easier also to share the workload, ideally even someone with network will bring in some new clients.

good idea, YC has the cofounder matchmaker program, it's free and easy to use

I would really advise heavily against just separating freelance/full time as black and white, one at a time.

Really, it should be a slow transition - you work full time, you take up 1-2 freelance clients on the side. As you start to get more clients on the side, and you see a clear path to replacing your income, then you can make that jump.

If you just make the jump as a clear break, it totally can work, it does all the time. But it's just a bit riskier, and it adds a lot more weight and pressure to get deals, which can lead to a situation where you charge less than you are actually worth.

Btw, in my profile, the site I run is for freelancers to basically share their hourly rates. It's essentially levels.fyi for for consultants. May or may not be helpful to you at this stage of your journey

TLDR: - Keep your job, start taking clients on the side - Once you have enough clients and you see a clear path to replacing your FT income, quit and take the leap

I left my job with $12k in savings just before covid kicked in and ended my new plan. I make more money now than before and really enjoy my new work. Someone with your skills will be fine.

Freelance is a very different thing than actual consulting by the way

What I mean is working for a consulting firm is substantially different than what you do as a freelancer.

That depends, it's like saying a software engineer is different from a programmer. Can be true, or it can just be a different term for the same type of thing.

When you have a network large enough that you know for a fact multiple people would be interested and lining up to have your services.

As a consultant, urgently looking for a full time job: not now. Most probably not now.

Wouldn’t contracts be more in demand during a recession?

In places where layoffs are complicated, contractors are obviously the first to go.

They are also the firsts to be brought in during recession as they are more expendable.

Yesterday.

Reply on news.ycombinator.com