Economic Security: Freelancing as a Fallback Plan
Freelancing with a day job can do more than ‘just’ bring in a little side cash. While that does help, there are more advantages to consider. Freelancing is a way to distribute risk. Especially in uncertain economic times, it’s good to seek alternative forms of income than full-time employment. Having a single source of income leaves you vulnerable.
How secure are you at your current job? If you’re still in the 9-5 trenches, and vulnerable to layoffs, then developing a freelance side business is a fallback plan to consider. Let’s look at some factors that make freelancing ideal in today’s economic climate.
4 Benefits to Freelancing
Risk Assessment: When I talk to people about freelancing, the word that I keep hearing back is risk. Yet a typical freelancer might have a half-dozen clients, none of whom represent more than 30% of their total income stream. Compare that to someone with a day job: One client, worth one hundred percent of his income.
On top of that, times have changed since the days when HP or IBM would reward good behavior with lifetime employment. No, like Paisley, Tie-die, and the Peace sign, those days are long over, and I am sad to say, unlike the Peace sign, I do not expect a comeback anytime soon.
Fallback Plan: If your day job is eliminated, your company goes bankrupt, or anything else goes wrong, you’ll find yourself in the unemployment line. Unless, of course, you have an ongoing freelance business. In that case, you’ve got some predictable income and a stable of clients — many of whom want more hours than you could previously offer them.
All of sudden, you’ve gone from “freelancer with a day job” to “full-time freelancing.” You can call those clients up and express your sudden availability, while possibly collecting a severance package from your layoff. If you don’t collect a severance, well this fallback plan turns out to be even more important.
Freelance Mastery: If you work for a company on salary, it can start to feel like there is a little machine that deposits a dollar into your bank account every two minutes — regardless of what you do. This isn’t my idea, it’s a reality Paul Graham observed after he sold his company to Yahoo and stayed on for awhile. Graham noticed that he was paid the same amount regardless if he was sitting in a meeting, reading email, or just drinking coffee.
Most freelancing, on the other hand, is generally paid piece-rate — you get paid for delivered work. Surf the web all day and you earn nothing. On the other hand, if you can do quality work faster than estimated, your hourly rate improves. This creates a sort of positive feedback loop, like athletics, by which we work harder to get more rewards.
Wikipedia describes the positive feedback loop as “A produces more of B which in turn produces more of A,” we might describe that as “freelancing rewards awesome work with money, which in turn produces more awesome work.” If you want to get better at what you do, outside of corporate rules and regulations, you might do well to put your effort into more freelancing.
Freelance Autonomy: Large businesses focus on “process” or “methodology.” They’ll tell you where to work, when to work, what to work on, and how to do it. Freelancing inverts that relationship, focusing on results and outcome, not on process.
The popular speaker Merlin Mann calls this “That thing you do,” saying that “As long as everything inside the box goes exquisitely, nobody is ever going to have a problem with you. Because ultimately, nobody cares what happens inside the black box. All they want to do is eat the hot dog; they don’t care how it got made.”
Freelancing Advantage in an Economic Downturn
In his book Outliers: The Story of Success, Malcolm Gladwell identifies three factors that can lead to outstanding results: Autonomy (ownership of your own process), complexity (the process is complex enough that it can be done better with practice), and a direct relationship to effort and reward. It’s no great surprise that they all show up in freelancing and are often lacking in full-time employment.
The big surprise, the one we don’t talk about very often, is the leapfrog advantage someone with a small freelance portfolio will have in the event of a layoff or restructure.
The big surprise, the one we don’t talk about very often, is the leapfrog advantage someone with a small freelance portfolio will have in the event of a layoff or restructure. First, you’ll have more money in the bank. Second, you’ll have work to do, which will keep you positive and motivated. Third, you’ll have meetings to attend, business to do, customers you’ve turned down to re-call, a potential client list — likely a list of “things I would do with my freelance business if I ever had time.”
After an economic shift, all of a sudden, you have the time.
Examined this way, it’s a wonder anyone has one of those “day job” things anymore. If you must have a day job, a small freelance portfolio becomes something like disability insurance; the law doesn’t require it, but it should.
If you read FreelanceSwitch regularly, you probably don’t need this list — you could come up with it yourself. Instead, next time a family member expresses “concern” that you freelance, hoping you would “get a good job,” a friend feels uneasy about your “risky” lifestyle, or a corporate recruiter doesn’t understand why you aren’t interested in a “great” corporate job, send them this list.
Of course, it’s possible you are the concerned friend or relative with the great corporate job. In that case, have you ever thought about just how risky it is to have just one client at a time, and what a loss of that one client might mean? You might do well to consider taking on some freelancing and disperse your risk.
Unemployed or Entrepreneur
While I was writing this, a restaurant in my local area, Perkins, shut down without warning. Not the first to go under recently. I’ve woken up in the morning with a job, only to lose it at lunch; it’s no fun. I can’t imagine having my company vanish overnight, and being out on the street competing for work against hundreds of friends and co-workers.
When I lost my job, I had the great benefit of a small freelance practice and established client-base. I hope the people working at Perkins had something similar. The Perkins people who had a sideline freelance writing business, a online graphic design business, or a something more locally based, like a DJ/party business, are suddenly entrepreneurs; the ones without are just unemployed. All of a sudden, that’s a big difference.