The Business of Freelancing

[00:00:00] Reuven: Hi everyone. And welcome to season three of the business of freelancing podcast. Today, we're going to be discussing freelancing 1 0 1. Is it for you? What does it mean to be a freelancer. I'm Ruben Lerner. And with me is Eric.

[00:00:14] Erik Dietrich: Hey everybody.

[00:00:15] Reuven: And we are back for a new season of lots of freelancing info, background ideas and guests.

As I said, this episode, we're going to be talking about: what does it mean to be a freelancer? What do you need to know? And is it really for you?

So Eric, let me pose the question to you. What does it mean to be a freelancer versus having a real job?

[00:00:36] Erik Dietrich: So for me, freelancing in the broadest sense is the idea that you're not working a salary job. So your basic unit of work for a living goes from being the job to the gig. And it can take a number of different forms. The most basic sense of this is that you stop having guaranteed work and instead your doing engagements, gigs, whatever you want to call it. So you work for yourself. I think of freelancers as people who are their own bosses. Does that square with your understanding of the world.

[00:01:06] Reuven: Yeah yeah, pretty much. I remember maybe 10 years ago. I said to my kids, most grownups go to the same place and work with the same people every day. And they were like, no. Cause as far as they knew, like since before any of them were born since before I was married.

And so from their perspective work is this thing that I do in my office at home, or that I go when there's no pandemic fly around the world or just go to different cities and do. But this notion of working with the same people on the same things for long period of time, and then getting paid by that organization, that's a completely foreign concept to them.

That I still don't think they quite get, but right. That's what we're doing. We are fulfilling all of those parts of it. And it's more risk certainly. Well, Actually I don't even know if certainly I'm not convinced that it's more risk than it was. But I think there's a lot of opportunity and a lot of freedom.

Just another quick story. When I was in graduate school working with a PhD, I had already been freelancing for let's call it 15 years at that. And I had to ask my advisor if I could take vacation time to spend time with my family. So I said, oh, we want to go away the last two weeks in July.

And he said, no, I was like, what do you mean? He said, no, that doesn't work for me. And I started crying both because I'm that kind of guy. And because this was the first time in 15 years that I had to ask anyone when I was going to go on vacation and get approval, it was just completely foreign to me as an idea.

[00:02:26] Erik Dietrich: What happened at the very beginning of your career? Did you have salaried work ?

[00:02:29] Reuven: Yeah yeah. The story is basically that I was in this program uh, when I was an undergrad at MIT that in theory leads to both a master's degree and a job. So you do this internship during the summers, and then you do a fifth year get a master's, then you go work for that company.

But I did not get into the master's program. So the company I was working with HP basically offered me a job. Anyway, I'd interned there for two summers, three summers. And I worked there for about two years. Then I moved to New York worked for time Warner. And then I moved to Israel.

And just before moving to Israel, the people at Time Warner said, what are you going to do? And I said, freelancing. And they said, oh, would you like us to be your first client?

So I had the softest landing possible. Although my impression is that's how a lot of freelancers or consultants get their start, where they worked for their former employer.

I worked with them for what was it, four years on that basis. And that was almost like seed funding for my consulting business, as I figured out what I wanted to do and how I was going to do it.

[00:03:20] Erik Dietrich: Sure. I had a longer stint in the salaried world. I guess probably 11 years post-college I worked other jobs. I was a software engineer for a lot of years, then a senior engineer architect. Eventually my last role was salaried was a CIO.

And I also boomeranged my last employer into being an initial consulting client. Stayed on in an advisory capacity to help them for awhile. And this was all now eight years ago. Can that be right? Something like that. Yeah. So I, had a similar, change from salary to the freelance world. And it strikes me too, one of the things, as I think back on that it's getting further and further in my rear view mirror now. But one of the main, like psychological differences, I think between having a job and being a freelancer is that with a job, you have this identity that can get wrapped up in the company.

Like you feel the company you work for is almost an aspect of your personality, or at least a lot of people do. Especially like Silicon valley, you know, you'll hear people talk like, oh, I'm ex Google, current Amazon, or whatever. There's this I guess identification the sense of belonging perhaps to a culture that then becomes not really a thing that you have going so much as a freelancer.

[00:04:25] Reuven: It's so funny you say that because I noticed that more and more like people are really excited to be like employees of whatever company they're at. And I just think that it's weird, but they think of it as normal. In fact, just recently I was scrolling through Facebook. I saw someone I know, who working for years at a big company as well.

And then he switched over to another big company. And he's now advertising for that, new big company saying this is the best place to work ever. I'm so happy to be a part of this company's family. He brings on his wife and children and they say, we're so proud of our dad and our husband, because he's part of this family.

And he says, come work for the best company in Israel where I'm working. Now, I'm thinking if you had asked him this two years ago, he would have said, oh no, it was the previous company, right. it's definitely part of his identity of where he is.

And in, in many ways I actually see that I guess I am also one with my company because my company is basically me. But I also feel like I have this freedom especially because I'm working with source stuff. I can say XYZ is bad, right? Like these people who are working for a company, they can't ever get up in public and say, my company made a stupid decision, or this is a really bad design because they won't be with that company for much longer.

But it does give you a sense of group and belonging, which, many people want. For sure.

[00:05:31] Erik Dietrich: Yeah. So, I mean, wasn't even thinking of that specifically as something to bring up, but certainly that's relevant if you're somebody who identifies strongly with like a company's culture and you do feel this sense of camaraderie, that's going to be something that's missing as a freelancer.

You know, you could start a business as an agency and grow your own, or you could get into professional groups or associations, like there's ways that you can achieve that kind of thing . But it's not baked in the way it is with the corporate experience, especially at like larger certain types of companies.

But that could be something that's missing. I guess we can get into that a little bit more later too, is like maybe run through some of the decision points that you might make. But it seems like it'd be helpful to talk about different flavors of freelancing.

And then you know, what day to day is like, so that as you're listening to us talk about who might want to do it, you have some frame of mind for what freelancing is like, assuming you haven't started already.

So what are the different flavors of freelancer? It's not all just like one homogenous scene. So maybe we should talk about that a little bit.

[00:06:26] Reuven: Yeah, it took me a long time, even like several years into freelancing to understand that it was not all the same. Cause I figured, oh, everyone is just instead of being a programmer on the staff of this company, you're a programmer who comes in as like a hired gun. And that might be a common one. That might be the first thing that many people, especially the tech world think of. But there are many variations on it. So what I just described is sometimes known derisively as staff augmentation.

So like a company has a team of five programmers, but that's not enough. They need 10 programmers, but for whatever reasons can't find five new programmers.

And maybe even if they could, they want to be able to get rid of them when the project is over and they don't have to deal with severance and legal stuff. So they need a bunch of programmers now to come in and be like a SWAT team solve the problem and then they'll go away and that's super for super common.

That was certainly the first kind of freelancing that's what I did. met people doing that. But big, headline good and bad is there's a lot of demand, so it's not that hard to find work, but it's also not as specialized. And so you typically won't make as much.

[00:07:25] Erik Dietrich: It's a pretty gentle runway for anyone listening, from being employed because the nature of a staff augmentation is. Essentially employee, like, so a lot of the paradigms for landing that work are the same, same they might interview you. You'll probably come on for, you know, it won't be forever, but it's an unspecified period of time in a lot of cases, you know, come on on a contract and that contract might go on for months or even years.

You will kind of have a boss at that company. So a lot of things are familiar, but the difference is you're kind of on your own for benefits. You're going to command a higher rate. You are crucially going to be more expendable. That's just the nature of the game. That's why you get a higher rate. You are your own boss, but there are a lot of aspects of that that can look like being a salaried employee.

So I'm guessing why it's so common as a first stop or a first kind of freelancing just because it's familiar. you can get a lot of help with sites, you know, like Upwork or what have you. There are a lot of mechanisms out there to help with the things that may be coming out of the employed world, you're not good at which we can get into here a little bit later. Well maybe a pro and con is like how much it's like being employed because on the one hand it's familiar on the other hand, it's what you're trying to get away from.

[00:08:30] Reuven: And look if you're employed at a company, then you have that nice feeling of every month or every two weeks or whatever it is in the country, you're dealing with that. You get a paycheck. And so with this sort of staff augmentation, it's similar at the end of the month, you invoice them and then they do a bank transfer, send your paycheck, whatever it's going to be, but you're paid monthly just as if you were an employee, just at a different rate, under a different sort of contractual relationship.

Some people would say, oh it feels great because I'm making more money. And yet I have the stability of employment. And there's definitely something to.

[00:09:00] Erik Dietrich: Yeah. And if you're thinking of going this route, put in for work on opera or other sites. But there's also agencies that like Robert half in the U S as an example that broker this kind of staff augmentation. So you go and you register with this agency and they'll go out and look to place you and find you gigs. So in a sense it's like working with, well, I guess you'd call Robert half like a recruitment agency, but you can subcontract for these agencies or you can go direct to your clients. Typically, what I've seen is You'll go the subcontracting route, if you are generally being placed with larger firms, because a lot of larger firms don't want to deal with freelancers directly.

So they'll bring on this agency to sort of serve as a middleman to go out and do recruiting. And then they're only dealing with the agency and it's the agency that's paying you. And that can be a pretty reliable way to always keep your pipeline full. If you have one or more agencies that you do subcontract with they're constantly out looking to place you, so they will be coming to you and saying, you know, I have this contract at such and such place. Are you interested? But again, you know, that starts to feel similar to like working with recruiters as a tailored employee.

[00:10:01] Reuven: And they're taking like large chunk of it, right? So basically let's put it this way. You subcontract for an agency and the agency is bringing in, let's call it $200 an hour for your work. There's no way on, God's greater. If you're going to be getting $200 an hour, they'll probably take you in half of it. and they might be right to say we need to spend lots of time going out and talking to these companies and marketing you and finding out where their opportunities. So it's that trade off, right? Are you interested in doing all of your own marketing and spending time doing it and that's not making money doing that?

Or are you interested in having someone else do that for you? We have to remember that if you are working as a program for 40 hours a week, then it's going to be in addition to those 40 hours a week, you'd have to do the other stuff. And we'll talk about that a bit later as well.

[00:10:41] Erik Dietrich: So, what are some other, I guess, ways that you see um, freelance work going, or kind of other flavors of freelancing that you see? I mean, I can think of some, but you know, others on your mind here.

[00:10:52] Reuven: My big one, the one I've been doing for a good number of years now is training. I sort of slowly oozed into that as it were where I was doing some pro programming for a company like really when I started about 25 years ago. And so they said to me, we don't want you to do this programming. We want you to teach us how to do this programming. I was like, oh, okay. so I was always doing a little bit of that kind of training over time. And then I discovered there's a whole world of corporate training and there are people who do this, and now I'm one of them for just about every day. I work with a different company teaching a different course. So I have a stable of like, I'm know, 25 different courses I can teach. And companies call me up and say, are you available the first week in December to teach a group of 20 people advanced Python? I checked my calendar and either yes or no. And so I'm not developing new software and I'm definitely not doing something they would have in house.

This is like, they have an accountant and they have a lawyer or many accountants, many lawyers. They have me to do Python training and that's the sort of thing that I come in and do. And so I worked with many companies doing this. I've quite frankly, found this to be super fulfilling as well as lucrative in part, because their pricing structure assumes that you're working with an agency and that the agency is taking half and they still need to pay you reasonably.

So by doing it on my own, I'm able to take both halves of that. Of course, that means I do have to market myself. I do have to get my name out, all those things I just mentioned. But if you have skills and you enjoy speaking in front of people, then teaching those skills to others is definitely a way to go.

It's not a super popular thing to do, it's not unheard of by any stretch of the imagination. I know a few dozen people probably do that.

[00:12:21] Erik Dietrich: So I might like, if I think about it, zoom out and call training product I service. And what I mean by that, for anyone listening is productized service has elements of both being product and a service, which sounds weird since freelancing is almost my definition. I would say service delivery, like you're offering your labor as a service.

But a product I service is one that you package up and sell the way you might a product. So like with training, there's going to be a flat pricing structure or like a tiered pricing structure, depending on certain options that are configured. And then another one I can throw in there as what my business had subscribed. We have engineers, the right content for companies that are marketing to engineers and selling blog posts or selling you know, campaigns and the different things that we sell. Those are dissimilarly, discreetly priced. There's a discreet deliverable, et cetera. So a writing you know, some marketing offerings, or maybe you would get into like doing website builds something like that, where you say I'm going to go stand up a WordPress site for you for $10,000 a piece.

That's what I think of as product I service. And it is a flavor of freelancing that has certain ups and downs. I think I would personally advocate for a productized service style of freelancing over staff augmentation for a variety of reasons. I don't know how deep we go here on that.

Like maybe that's the stuff of a future episode this season about pricing and positioning, but it is an interesting alternative. It can be more profitable and it can be easier to market in a lot of ways . That being said, the thing about a product I service as I imagine you can attest is that you have to stock your pipeline a lot more.

You're having to bring in a lot more business because if you're selling a website build for $10,000 let's say, you have to do you know what 10, 15 of those a year. If you want to make the kind of money that you do versus a staff augmentation, you might only ever need a gig per year or something. So and I think that would cover a fair amount of ground, like training, writing, content creation, certain marketing, or build offerings or productized services.

[00:14:10] Reuven: Yeah, absolutely. The nice thing about product or service is the difference between that and just plain old services, is that you're saying it's like choosing a product off the shelf. So you don't go to the supermarket and say, wow, I really like this brand of peanut butter, but I'd like it to be, 20% chunk here and you go negotiate with cashier.

Can you just add more peanuts to this clearly not right. It's a seal that you either take or you don't. And so practice consulting a similar, you have this thing that you're offering and people either take it, or they don't. They accept the price or they don't , at least in theory. Obviously the world's a complex and messy place, but basically the way it's supposed to work. So with me with training, like companies come to me and they say, we want to do intro Python. I say, great. That's four days such and such a price. That's many people and they either take it or they leave. And obviously there'll always be a little bit of, adjustments, but very much less so than if I go to my lawyer and say, I want you to drop a contract for me. Cause that's going to be very specialized and very different each time someone talks to them.

[00:15:03] Erik Dietrich: Yeah. speaking of I guess custom stuff, I can think of a couple more flavors. One is where maybe you're doing custom project work, but not really in a staff augmentation capacity. And what I mean is if you take what I was saying as a product I serve as like you know, stand up a WordPress site for you with the following characteristics for 10 K, maybe instead of that, you're building custom sites for people in your ticket price.

There is probably high fingers, maybe six fingers or high five fingers, or maybe six fingers. But you go into that doing custom application development. Crucially. You're not a staff augmentation because you're owning this project. Somebody coming to you and saying, I want you to build this thing for me and the scope there.

Maybe isn't known the pricing get interesting, but there is a discreet end to that. They're not bringing you in as a little bit of extra labor. They're bringing you into accomplish something. So that's. Like custom project consulting. And then there's another thing that I did for a lot of years in the form of management consulting, which I would, I guess, maybe in a sense called true consulting being paid for advice.

So companies would bring me in to help them make decisions about what to do with code bases or how to build an org chart or something. And in those situations, when I had that practice my deliverable to them is typically something like a write-up or a presentation to the board of directors or something along those lines where I was just telling them what to do.

So you've got like custom project work and then like, I feel bad. Like it's elitist to call it true consulting. I just don't know what else to call it because of how often the terms consulting and contracting get kind of conflated, but the idea of being paid for pure advice .

[00:16:33] Reuven: It's really funny. You're saying that because Israel, in particular, people would ask me at some point, oh, do you do projects or do consulting? And I would always think it is consulting when I do projects, like what are they talking about? And then I understood that culturally people here, when you say I'm a consultant, they just mean advice. They don't mean doing all that other stuff. There are other terms for freelancing, contracting, you name it. And right. The consulting is come in. Like I had a company me to do this, like two, three years ago, some people in the us, which was didn't buying a web development firm in Israel.

So they wanted me to come in, talk to people, like interview them and then write up a report. Should they, or should they not make this purchase? And it was different than things I'd done before, but it was kinda fun.

[00:17:12] Erik Dietrich: Yeah. I always liked those kinds of gigs. I mean being brought in as an expert to offer advice you command a level of respect. So if like you were an employee and then you go off on your own and you're kind of acting as a staff augmentation as a pair of hands, then you're often going to be treated as like an employee and you have a quote boss at the company, but I guess, the more they're leveraging you for your expertise or advice, there's a different way that you're treated. They're kind of bringing you in as an expert, especially if they found you because you're giving a talk or doing something along those lines, they come to you and say, help me, tell me what to do. And that's a pretty nice way to make a living. enjoy doing that for a number of years.

[00:17:46] Reuven: I tell people what to do for free. So being paid for it is even better.

[00:17:49] Erik Dietrich: Okay. And then I guess there's one other thing I could mention, which is just that if you were doing like custom project work or a product I service or something, then maybe at the outer edge of all of this, you start to become an agency owner. And I would argue at this point, you're kind of leaving the purview of freelancing. Like once you start to hire other people, you're becoming a business owner or an agency owner or something. But there is going to be kind of in-between area where maybe you're just flexing up work to other subcontractors, you know, bringing someone along for the ride to help you on a custom project. So there is this situation where you're freelancing, but you're also bringing in other help. Maybe short of being just a full on business owner. Well, that's the wrong way to put it because as a freelancer, you incorporate like you have a form of business. So I don't mean to say it that way, but I typically think of freelancers is basically individual practitioners that have their own single person business. Whereas if you start to hire employees and stuff, there's kind of a different feel. People stop calling that a freelancer.

[00:18:43] Reuven: Yeah. Like when I first started freelancing, I saw it as a stepping stone to having this large army of people working under me, going out and doing lots of software projects. And I got up to about five employees and that was just before the .com implosion of 2000 and I laid them off . And In trying to deal with the frustrations, anger and so forth of what had happened and, picking up the pieces. I basically told my wife, okay. I think I understand now I don't want to have employees, like a mess. And then there was this period about 10 years when I would have one employee helping me out with projects.

And then finally ended that with him. And so now I'm completely on my own and it's a totally different mindset. I'm not aiming to hire lots of people. I'm not aiming to have the learner office towers. I'm aiming to do things that are fulfilling for myself. At the same time, I've been talking with someone about expanding my courses and how I do them. And he said to me if you really want to get to seven figures and above, you're going to need a team. I said, the team, oh my God, I really don't want to hire people. He said, oh yeah, like we'll need a virtual assistant. You'll need someone to answer your email. You'll need I'm like, oh God, Basically me then hiring subcontractors who are specialists in certain things that I can't don't want to do like graphic design. But that's still, I think call it like freelancing plus or something along those lines.

[00:19:56] Erik Dietrich: I definitely think there's a gray area there. I don't know. At what point you stopped being called a freelancer? I do think that like the common thing people think of when they hear that term is, you know, gig oriented type work, usually a solo practitioner. But yeah, I suppose there's this in between area where you know, bringing on certain kinds of help or whatever, but yeah, that's interesting. Like, wouldn't say if somebody was like freelancing doing like web development or something and they brought in a VA, I don't know that you would stop being a freelancer at that point or a freelancer that's brought in someone to help you with some tasks. So it's interesting how much gig work has kind of spread through the economy, if you will cause like being a VA or a certain kind of specialist, like this would be another form of freelancing. So I don't know, there's this kind of mix and match you can out of like gig oriented freelancers. You can build a business without taking on staff.

[00:20:42] Reuven: I mean, look at all these people doing deliveries, doing driving of rideshare and so forth, you could argue. And certainly the companies that quote unquote employ them argue those are taught employees at all. Those they're all freelancers, they're running their own businesses.

Oh, okay. I think that's arguable, but fine. But right. It takes all shifts decides and now the internet obviously has made it much easier for people to do at least that sort of low-level freelancing. That's definitely closer to the staff augmentation. It's drivers, staff augmentation, as opposed to, high level strategic consulting on what route to take to get to it.

[00:21:12] Erik Dietrich: So, I mean, I think that covers at least the different kinds or flavors of freelancing I can think of. And maybe we can dive then into a little bit, like a day in the life of a freelancer or maybe like a business cycle if you will. Like, we should talk a little bit about what that looks like compared to say salary and employment.

And I think the biggest thing is, as we talk through all these things you have to keep in mind is when you show up at work as say a graphic designer. Typically, almost all of your time is going to be spent doing graphic design. I mean, you might go to some status meetings or have certain points of interface, but the expectation is that like nearly 100% of your time is going to be spent in trade doing like technician oriented work. Whereas when you go off on your own, there are aspects of the business that were always taken care of for you by other people in your salaried rule that you now have to assume, and that's going to include marketing your business, doing sales, doing the books, things of that nature.

I'm trying to think of maybe the best way to tackle it, but I think of like, do you want to walk through it in terms of end to end the life cycle of a customer is like, or, you know, gig to gig? What do you think is a good way to tackle this?

[00:22:17] Reuven: Yeah, I'd be like, in my case, there's not that much. Cause like I'll have a new customer and they'll have continuing customers. So like last week, out of the blue, I got five phone calls and emails from different companies, interested in me doing some trainings.

So first of all, I have to talk to them. I spoke to each of them on the phone, right? Some of them contact me via LinkedIn. Some of them contact me via phone. So we talk to him via email. So all those communication channels have to be monitored. That's already something you gotta be doing.

And then I had to schedule time, so gotta have my calendar. And I use Calendly this, you know, external program that lets me do that and make sure that it doesn't conflict with other things. And then we had a phone call and then we started talking about what I do, what are their needs.

In one case it was actually a training company. And as soon as I understood that, I said, oh don't think it's going to work. And she said, why not? I said, because I worked directly with big companies. And what I take now in terms of a fee is probably what you would be taking or more. And I told her what I'm making. And she said, oh yeah, we could never afford that. Like good for you. So, weeding out those people, like you got to have those phone calls that are going to go nowhere. I had a phone call with someone. totally preposterous. I can't believe I actually took this phone call. But okay fine, you got to take the good with the that. And then once let's say it seems like you're on the same track. You might have to have one more phone call. You might have five more phone calls. You might have none. And they might just say email us a proposal and we'll move on. So of those five companies one wasn't going to work out cause the pricing one was going to bring out cause they were bozo.

Another basically seems like a flaky guy. Who'll get back to me in a few months, but two of them are like super, super interested in doing things. So we're going to move forward and keep talking. And then I just send them a proposal, money, time schedule, blah, blah, blah, blah, blah. Then they have to onboard me as a supplier to their company and we have to agree on syllabus and so forth.

Then I actually do the real work. Then I show up and I actually teach the course I'm going to do. Then I have to invoice them and make sure that they've paid and give all the accompanying documentation to my accountant, who has a bookkeeper who does this stuff for me. And then I can say, Hey, how about we do another course either they ask me or I ask them and I try to upsell them on if we did into a Python and another six months, let's do advanced math.

So forth. So all of those things is Eric said in a normal company, as it were, you're doing one piece of that. And when you're freelancing, you have to do all those things. Now, in addition, tell you, it was probably like two, three years ago. My counter, when we were having our annual review of my statements, he said, Rubin, you're very good at what you do in terms of training. And you were a terrible CEO and I of course bristle at this and he was like, look, you have to be more on top of the budgeting. You have to be more on top. Like he sees as an accountant that I'm just not on top of that. So everyone's going to have their strengths and weaknesses also. And I see it as hooray I paid the mortgage and we have money in the bank.

But like should, if you're smart about it, be much more strategic and thinking forward . Anyway, what is similar and different in what you do or what you've done in the past?

[00:24:54] Erik Dietrich: Yeah. So, I mean like these days the business I own hit subscribe has employees like we've grown. So the sales cycle, or the day to day wouldn't apply so much. But if, I think back to the specialized management consulting practice, I had mine was a lot more gig oriented. There were often longer gaps between the kind of projects that I would take on. So the projects would be extremely high paying. But like I might not have for a few weeks at a time or something, or I might be juggling a few different things. So one of the things during my consulting that was notable is this idea of feast or famine.

Because it wouldn't be that just like, you know, once a month I spent a week trying to do a sales, interviewers sales call with people and then a couple of weeks of work and then a wrap up. And then the next one just materialized. Usually it was three things would call me at once and I wouldn't have time for that. And I've been trying to get one to, you know, Hey, can we start in a month or two? But I guess, I think in general about it. There was similar to you sales cycles you'd get tire kickers. You would get conversations that seem fruitful and then they would go to, because by the way, listeners if you think you get ghosted a lot after job interview the decent thing to do would be to you know, follow up with you.

Nobody feels that obligation towards vendors. One thing to bear in mind is that when you go freelance, you become your own business and people are a lot less hesitant to treat business owners like crap in that sense. So they'll, do a tire kicking call and then you'll never hear from them again. Or maybe four months later, they call you up out of nowhere. They're like, all right, I'm ready to get started. I mean, you just have to kind of get used to that. You have to get used to the overwhelming majority of work that you do. Especially at first on the sales front and proposal creation and all this you're going to waste a lot of work.

There's just no doubt about it. And I say wasted work in the sense that you'll create proposals and have calls with people that never become customers. You will, through the process, get better at that better at disqualifying, bad business, more efficient at generating proposals and all that. But there is a lot of work to bring in the customers and that's not including marketing concerns, like, you know, building a website or going out and giving talks or that kind of thing.

So there's the sales and marketing piece, which I'd spend a good bit of time on in my practice. The actual service delivery kind of varied. Towards the end I made the engagements typically shorter and shorter, or I took on retainer gigs, but early on, I might go and do something for a few months at a time.

And during the service delivery, you're mostly focused on what you're doing, but you're still, you know, taking phone calls or whatever for the next gig that's coming up. So there's an element of managing your leads and customers and former customers with the work that you're doing. And then there's post engagement. So any follow up that's necessary, especially if you've agreed to stay on, to consult for awhile or something. And then, you know, if you're doing this well, you ought to check in from time to time with them to see how you're doing. Both they'd be a good service provider. And because there's no one that's easier to sell to than a previous satisfied clients.

All of that would be in the regular, like seasons of the business, if you will. And then there's, things that come up more periodically like legal, you know, you go and engage with some company that demands that you carry insurance or sign a contract. So you're probably gonna want at least to know who your lawyer is in case you need to ask for some advice, you got to do your taxes periodically.

So there are these occasional annoyances that you have to deal with. And all of this layered on top of. Making sure that you're staying competitive and continuing to develop your offering and not just doing the same things over and over. So there's a lot to juggle at it. I'm trying to like, do you have a sense of what the ratio of time that you spend that is billable, so to speak versus, you know, like how much total time you spend on your bed?

[00:28:19] Reuven: So normally like prepared endemic times, I was probably doing good 80 to 90% of the actual course delivery. That was because I wasn't really developing a lot of new courses and things were coming in. Like I didn't have to worry a lot about sales and marketing. I had to deal with bookkeeping and invoicing, but that was mostly automated at this point.

And, or I just handled a pile of papers to my accountants bookkeeper every month and they rolled their eyes. But if I were doing it smarter than I would spend much more time on outreach. Trying to get new clients. And that's where I've been on the one hand spoiled on the other hand, very bad at . I'm spoiled in that I don't need to, because my name has gotten out enough and Israel is a small enough country and people in tech switched jobs enough that every time I asked him where did you hear of me?

They say, oh used to work at such and such a company. And they knew you. So they recommended you. When you get to that stage, it's very comfortable and nice, but I'm trying to break into new markets. And actually just before recording, I would go over the last few days, I've started trying to reach out a little bit to people like cold calling, cold emailing them.

It is hard, no matter how long you've been doing this, and frustrating and painful. And if you don't have anyone referring you, and if no one knows who you are, that's what you're going to be doing at the beginning. And you're gonna be spending, easily 70% of your time trying to get your name out.

[00:29:26] Erik Dietrich: Yeah, that's a great point. I mean, this is really going to vary. So once you're established, if you've got a good reputation at least the time to do prospecting generate leads and new business goes way down. But if you were to just quit your job today with no plan hanging out, you're single to freelance, you'd spend pretty much all of your time trying to find customers.

So it can really vary. And actually now that I think about it, mine would vary a lot too. Like when I was doing longer gigs, obviously then you're spending, a lot more of your time on the service delivery versus other aspects of the business which sounds great, but like, if you are doing one client protracted gig that's, what's known as a whale client.

So right now for three months, four months, you only have one client. Assuming you weren't on a contract. Then the next day you wouldn't be making money or whatever. I guess it's really gonna vary throughout, anybody's listening time. But I think that no matter how efficient you get, how much business is coming to you, there's going to be a certain ceiling on how much of your time can be pure service delivery. Because you own a business and no matter how efficient you get or how much you reduce the time you're spending, managing that, you still own a business and that's non-zero time to do.

[00:30:27] Reuven: Here's an imperfect analogy if you own a home, most of the time. You're just living in the home. but occasionally you'll need to do maintenance. Things will break, will need fixing, you'll want to expand something. So that's like the time spent as a homeowner as opposed to a home user.

So as a business owner, you're gonna have to do that sort of maintenance on your business just as you do on your home. And it might be more, might be less than at the beginning. You'll be learning how it works. The vocabulary is to understand what these various experts are telling you.

[00:30:52] Erik Dietrich: So I like that analogy too, maybe as a transition to, into talking about like, who would be good for freelancing and who wouldn't that if you were going to move into a home and do a lot of DIY, presumably at first you wouldn't know how to do that. So there's a lot of like figuring things out and doing them in perfectly on the fly in the beginning.

And I think you need to have a decent capacity for being willing to. Dive into something that's unknown or uncertain and figure it out at least well enough to get it done. And what I mean by that is like, you don't need to figure out how to do your own taxes. You can certainly get an accountant to do that, but you need to figure it out well enough.

How to do that to at least go find an accountant, to do it and to understand what to send that person and to mentally know what you need to be more efficient about getting that person, your books or whatever the next year. And you're going to have to replicate that across all facets of the business.

So you are becoming, I guess, the CEO as a freelancer of a small, but like existing business, which means you're going to have to be willing to at least learn something about sales, marketing, finance, taxes, legal, all these things that might come up. So I would say it's in the E-Myth revisited that he talks about the idea. Of being an entrepreneur versus having an entrepreneurial seizure. And he talks about everybody having like three different personalities within them in different proportions, the manager, technician, and the entrepreneur. And without going, I guess too far into the weeds of that book. And the idea is a lot of people enjoy being the technician, which is just where you write your software or you do your graphic design.

And that a lot of people who hang out their freelance shingle, aren't really being entrepreneurial. They're just tired of having a boss, who's telling them to do things they don't agree with about practicing their craft. And if that's you, you should be sensitive to the dynamic that you have to have some entrepreneur in you at least enough to facilitate the technician work.

Like if the only reason that you're thinking of freelancing is because you don't like your boss. You don't really have the option of saying, I don't care about finances or I don't care about sales. You have to care about those things.

[00:32:46] Reuven: Absolutely. I mean, you're going to have to deal with these things. And you're also suddenly going to be responsible as we keep saying for income, right? Like I've been doing this for a while and I feel an incredible sense of accomplishment of wow, for the last 25 years, we've managed to, paid off our mortgage, gone on vacations, we have savings in the bank and I've managed to do that myself, like without having someone paying my paycheck. But, there were many months when it was not so easy when I would, at the end of the month, be calling all of my previous clients saying, Hey, do you need anything next month? I've got only limited time available, which maybe was a transparent way of saying, please take me on because I have lots of time available.

If you have no cushion of income. So if your partner's not making enough, you have children, which costs a fair amount ,if you don't have health insurance ,if you have other expenses, freelancing might not be for you.

Again, I was lucky that I started doing it when I was single unmarried. No children did not own a home. So It was very low risk for me to enter and make a ton of mistakes along the way. If I were to start now three kids, we just paid off the mortgage, but having to deal with that would be a different story altogether. It doesn't mean you can't, it doesn't mean you shouldn't. It means you need to think a little more and make sure that you're not risking everything make it a wise bet rather than just rolling the dice.

[00:34:00] Erik Dietrich: Yeah, I think the way I would conceive of it as like. If you're going to hang out your shingle and freelance you're gonna have to be comfortable with your own set of risks, but you have to assume that for some period of time in the beginning, assume that you'll have no business, assume that you'll have no income. And that has to be okay or you're working a salary job and you're lining up your first, however, many gigs or something. However you tackle that. If you don't have anything lined up, assume that you won't for awhile because there's a couple of things that are going to happen.

Number one is you're going to go off on your own and you may not have anything for awhile, but number two, if you go off on your own, you're going to start to get antsy if you haven't planned ahead. And you can get into this vicious cycle of taking bad gigs and taking on bad business and that can feed back into itself, where if you were taking on, you know, work where there's like a lot of scope creep or you're in a contentious situation. You're stressed out, you're working hard to please that client you're having a bad relationship. It's a lot harder to then to muster the energy at night to go out and find better clients.

So I think that one of the biggest determiners for you, if freelancing is for you in the short term, is can you afford not to have business in the early going? And if the answer to that is no, I'd be really careful about it. If you've got mortgage payments coming up and no runway. In that situation, like maybe you're mentally suited to be a freelancer, it's just not yet. So if that describes you you want to do it, I'd say build up that runway or form a plan or lineup, you know, the engagements that you need. But, I wouldn't jump off without a safety net, so to speak.

[00:35:24] Reuven: And you can also like, I'm, not, every company will allow you to do this in a variety of different ways, but depending on what work you're doing, you might feel like work part time. So work say three days a week and try freelancing two days a week, or start with one day a week . And little by little see what's working and what isn't. The more sort of risk averse you can be when starting out.

Again, it depends on what you have to deal with day to day, but doesn't have to be a complete gamble if you plan ahead. Also remember that as a freelancer and we've mentioned this, you and the business are pretty much the same, which means that the whole idea of work-life balance and how many hours are you working versus not working?

So I've, have a cousin who's a technical writer and he hates technical writing. Like he doesn't find it exciting at all, but it pays the bills, that's okay because when five o'clock comes around, he's done, he's not dreaming of technical writing. He's not thinking about the products he's at home.

He uses his wife, friends, whatever. Whereas if you're a freelancer, the odds are pretty good that you're thinking about your business all the time. And you think about can you afford that sort of time? It's not going to be 40 hours a week, certainly not the beginning. And how does your family interact?

How much time do they expect you to be around? What can, and can't you get away with and you might need to negotiate this with your family, with your partners.

[00:36:32] Erik Dietrich: I think another thing worth mentioning too, is that you have to be okay. Not exactly what feast or famine. You can work to sort of smooth out the business that you have coming in, but you have to be okay. With uncertainty in a way that you wouldn't as a salaried employee. As a salaried employee, you show up to work every day.

You can budget like clockwork, you know exactly how much money is going to come in. The only risk, albeit a very major one is that your employer would let you go. But if you are running a business, especially in the early going, you are going to have variable income and some months might be less than others. Some months might be boom months. So planning can get harder. I mean, for me, I'm sort of risk averse. So it took a lot of years before this went away, but this kind of constant feeling of. You know, is this house of cards going to crumble on me?

Like, you know, I've had a good run here, but like, you know, what, if the business dries up, et cetera .You might, have stresses at a day-to-day job that are like that, like, oh, I'm worried my boss is unhappy with me or whatever, but there's a kind of like existential undercurrent of potential worry that you have in the job. Which isn't me saying that like, unless you're super easy going, you're always going to be wholly stressed out. But there's more uncertainty when booking business planning or finances, et cetera, especially in the early going.

So I think you need to be or at least have a strategy for being Zen about like, not knowing exactly how much income you're gonna have or how much business you're going to do or how far out you can book.

[00:37:50] Reuven: I think after we got married? My wife asked me, so how much money do you make per month? I said don't know. It depends. She said, what do you mean? What kind of answer is that? I said it really depends. Like what kind of work I'm doing and how many people pay me. And some of them are net plus that 30, 60, some of them don't pay. She was like that's crazy now.

And I guess it is because, especially if you're coming from the salaried world, not to know how much you're making any given month, as long as you haven't changed jobs or changed positions is indeed bananas.

But I got used to it. And so I got used to, okay. On balance, on average, income will be enough and we'll be fine.

[00:38:22] Erik Dietrich: Yeah, it's actually a great point. Like I think of this both for my own consulting practice. You're going to have months with like different amounts of revenue coming in.

But once you get established and you start having a history and you get used to it, you can look back and say, well, okay, I have, 12, 24, 36 months worth of data. And you start to take comfort in the fact that, yeah, I don't know how much I'm going to earn this month, but I do know how much I tend to earn on average.

And you can start planning against that. And then there's also a point where it, depending on the nature of what you're doing and how successful. You are you eventually might say, I mean, I've done this in the past is to say, this is the amount that I want to take out of the business each month for personal.

And when the businesses often are consistently exceeding that you can start to bank on that a lot more the way you would, if you had a job you can, and we'll get there. It's just, takes some time. If somebody that's listening and thinking about freelancing, like maybe as a last thing to cover, would there be any definitive thing to say. If freelancing probably isn't for you or you know, words of caution, I guess not to end on a down note, but maybe to help people make a decision.

[00:39:19] Reuven: When I was little I was like, I'm gonna run my own business. I'm going to have this whole thing. And so it was always like in my head that I'm going to do that.

I didn't know what it meant, but I was excited by the idea of running my own business. So if you're like that and you're willing to put in the work , then great. But if all you're thinking about, as Eric said is like, oh boy, my boss is a jerk and an idiot, and I could do all this technical stuff better.

And if I'm on my own, that might all be true, but that's not sufficient. And you're going to be very frustrated very quickly. When you realize that all of your consulting clients are all run by those idiots and jerks who are just like your boss, but now they're the ones paying you or not. And you have to deal with them in multiple companies all the time.

And also thinking about your family, risk runway, all these things. I would say you want to plan, you don't want to just jump into it, but fortunately you probably can plan, especially if you have a full-time job. You can do some thinking and maybe even some moonlighting to slowly stick your toes into those waters and see how it'll work.

[00:40:12] Erik Dietrich: Yeah, I love the moonlighting. I do. I mean, that's how I actually got started.

Many many years ago, like before I fully went off on my own, I would take on moonlighting projects. And that's good because it gives you a taste of it. And also if you start moonlighting and you set up, you know, a business entity or something. It lets you learn about how to run your business maybe not all at once. You learn initially how to set up the business entity and maybe find a few clients and then you kind of ease your way into it. So I think the closing piece of advice or consideration I would offer like a reason not to go into freelancing that we haven't touched on is there's kind of like. I think a cottage industry of people out there that are like, I'll teach you to freelance.

And a lot of it is predicated upon selling you a certain lifestyle. Be your own boss, work from home, and you can get into like a little bit of shady territory there. I think my point with this is if somebody has sold you on lifestyle, be your own boss, work from home, work from the beach. Yeah, maybe I'm a digital nomad and like I do, I have a purely remote business, so I do all that. But it doesn't just materialize and there are real trade offs associated with doing that, for instance, in a lot of situations, if you're wanting to always work from home in your pajamas, that's going to limit your sales opportunities because there are customers that are going to want you to come in.

So it's not that you can't achieve all of the things that you hear about, but it's that they don't come part and parcel with it. It requires hard work, it requires trade-offs. if you're thinking I want to freelance, cause it sounds great to work from the beach or work in my pajamas. I'd reevaluate your motives there cause there's no magic path to a great lifestyle. You have to work for that.

[00:41:38] Reuven: There's that old saying? Wasn't the 10 year overnight success where, oh, wow. How did that person get so successful? Oh yeah. They put in a lot of work ahead of time.

[00:41:46] Erik Dietrich: Yeah, 100%. So shall we do picks?

[00:41:48] Reuven: Let's do picks. Go for it. You got anything interesting this week?

[00:41:51] Erik Dietrich: Well, just cause it came up topically. One of the things I would recommend is checking out the book, the E-Myth revisited and it is generally a book about building a business. But I think back I've actually listened to it on audio book twice and I think it applies pretty well to anybody that's considering a freelance practice or a solopreneur type practice.

It will walk you through a lot of ideas. In and around kind of understanding, I guess, the psychology and in different parts of time that you're going through and building your business. And it I think establishes a lot of good definitions around phrase you'll hear a lot working on your business versus in your business.

So I'd give that a read because it sort of surfaces the, good and the bad of business ownership and is designed to like. I forget how he puts it, but it was basically he wrote this book to sort of get despairing, business owners, solo, preneurs, whatever, out of a slog and like back in control of their business.

So it's good for surfacing, probably the pitfalls and giving you a framework for success. And that's it for me.

[00:42:47] Reuven: So I'm going to record, but a book that could be the business, but it's necessarily about it. called high conflict.Why get trapped and how we get out. It's by this journalist named Amanda Ripley and I read a book of hers a few years ago called The Smartest Kids In The World about schools in Poland, South Korea and Finland and how they ran and how they were good and bad.

And I love that book. And when I heard she was coming up with a new book, I ran to get it. And this book is truly one of the best books I've read in a long time. It's about how do we deal with, politics, the pandemic, anything. it's what do you do with people who are just talking past each other who are so furious with each other and listen to each other. And basically like, how do you try to untangle that situation, how you try to work toward resolution, as opposed to just the Sheldon for the, of Haha the other side is feeling pain.

I must have won and really eyeopening, interesting book. And thought about it a lot, not just at the national and international and political level, but also the interpersonal level as well. Where she quotes someone there saying that " Embarrassing someone is the nuclear bomb of our emotions".

And I'm like, wow, that really makes me think about things I've said and things that have been said to me. So a highly record.

And there we go. That's our show for this week. We are super excited to be back with a third season. We would be delighted to hear from you with suggestions, ideas, for topics, for guests, for things we should do. We have all sorts of ideas for shaking the podcast up a little bit and inviting some of you to participate in it in a more interactive way.

Follow us on Twitter, take a look at our show notes and except that it's the business of freelancing. And we'll be back next week with the business of freelancing.