As 2013 comes to a wrap I wanted to take a moment to draw out some thoughts from my experiences being self-employed for 5 1/2 years as a user interface developer by trade.
Please keep in mind this article is written specifically for developers.
Use these lessons learned to help you survive self-employed software development.
I had a few startups fail while being self-employed. The main startup that failed I was partnered with a guy who wanted to build software for the rental industry. I built out a listing engine, a search engine and an ad platform based on what he said we needed.
What convinced me to close down the startup was after attending a sales meeting with him. I was really disappointed with his ability to get someone in the mindset of making a deal. It dawned on me: over several years my partner had lots of software at his disposal but couldn’t turn it into paid contracts and money coming in the door. He was always asking me to build something more…always making excuses why people didn’t buy. Turns out that he was good at prospecting, but couldn’t get signed contracts and checks in the bank.
Lesson learned: If you partner with a sales person make sure they can close deals and get signed checks. If they are always looking for you to build something more than run the other way. Good sales people can sell with a couple screenshots.
When I first started out I took a 20 hour per week contract for 6 months. This gave me enough income to strike out on my own while stabilizing my income. I could then do whatever I wanted with the other part of my week which I used to start my first major startup.
There’s been many times where I’ve taken 3-6+ month contracts with selling only part of my week. At times it wasn’t at my ideal rate…but it always gave me consistent, “no hassle” income similar to a full time job would.
Lesson learned: Taking a long-term contract part-time can give you some consistent income while you can focus on other things.
There is an infinite amount of work at a certain price. Once you go over that price, people cringe unless you are exactly what they are looking for and are referred to them (implicit trust). If you want to land contracts at 2-3x your peers, than you have to A) have a niche you target and be proven in filling that niche. B) be recommended for the specific job (then they don’t questions price).
Try to take jobs where people are looking specifically for you. You must build a very specific skill-set that people trust you and you are known for. Clients pay high rates without question when they trust you and know you will deliver…especially when there is a lot of upside for them.
Lesson learned: Anyone who is “shopping around” isn’t looking for you. Try to get in the position where you only take work where you are recommended as the person for the job. If you can get in that position, you can name your rates.
There is no better way to damage your reputation than being overbooked. I have hired 30-40+ contractors and also with myself being a contractor, I can tell you one of the most common problems of self-employment is being overbooked. Being overbooked is a terrible thing, but it happens almost more than not with independents.
It probably means one or more of these things if you are overbooked:
This has happened to me many times — since I’m an entrepreneur and not just a contractor, my ventures cost me money. If I spend too much money on my ventures than that leaves a gap to fill. That gap is filled by taking on too much work and sometimes over-extending myself.
Raising my rates, taking on less work and focusing on less projects has helped a ton with this…but I’ll admit it’s an ongoing problem. Balance is tough.
Lesson Learned: Taking on too much work is going to almost always be a problem as an independent, but it can be mitigated by raising rates and turning down work that isn’t exactly in your sweet spot. Keeping “six months” of savings is a general rule of thumb for contracting.
In order for work to come to you that matches that description, you have to declare exactly what you do. If you say you are a “PHP web developer”, people will come to you with PHP web application work. If you speak at a conference about it, that’s what you become. You can’t just waffle around as an independent and expect to land good work at solid rates. You have to know and declare who you are to the world and that’s the type of work that will come to you.
Lesson learned: You control what type of work comes to you by declaring to others what you do.
BONUS tip: It can help to niche yourself down with “for real estate agents” or etc. Where you have built up software they can use in that niche. Many of my friends’ product companies started by focusing on a niche and building software that is applicable to that specific industry.
Double BONUS tip: Instead of saying you’re a “PHP developer for real estate agents” it’s even better to state the value that you add rather than the technology you use. “I build software for real estate agents to close more leads” is even better.
I used to be confused by product companies who wouldn’t even take $7000/hr if you offered it to them to do your project. Why? Because…they have products where their efforts are multiplied and distributed across all their customers. Every hour towards their own business has an ^n multiplier effect, whereas consulting is an hour-for-hour or project-for-project exchange.
I made companies boatloads of money through this multiplier effect (charging $xxx,xxx and they make hundreds of thousands or millions off my work ongoing). It’s great that the multiplier effect allows you to continue to charge your previous customers and have consistent work, but that’s not having it work for you directly.
You need to have something, anything, that people can buy while you’re not at a computer — that’s truly a product. An e-book, an iPhone app, a web service…anything with a credit card form and a service people get value from while you’re asleep. Use the multiplier effect of doing the work once and getting an ^n return on that.
It’s the only real way to leverage the digital age we live in and why huge mega companies like Google, Twitter, Facebook and etc exist.
Lesson Learned: Build something, ANYTHING, with a credit card form that in exchange delivers value while you are sleeping. By focusing and adding value to a product, you can deliver value exponentially.
Frequently I’ve gotten so caught up in the idea that the software we were building just didn’t hit the mark on launch. There was a disconnect from the idea to adoption of my software.
Companies made millions off my work…but why were my companies failing? It wasn’t the idea or the software. It was customer adoption and building in that feedback loop with customers. I wasn’t clearly articulating the need and getting people to pay earlier on.
Now I charge from day one on my products in order to hone in on their actual needs and letting customer objections to the sale advise where to focus in product positioning. The feedback gained from real, paying customers is what leads my product efforts now. If people express a need or common objection — it’s time to focus in on solving that.
Lesson learned: Charging from day one and getting feedback on objections to the purchase helps you improve your product positioning and hone in on the actual need.
I used to be able to play around with my time and money way more than I do today. Too much time can be a bigger problem than being constrained on time. Self-exploring and side projects are fun and can teach you a ton…but it can also be irresponsible when you have people that rely on you for their livelihood.
Having a family has been critical in cutting out a lot of the extraneous work I did that didn’t apply directly to things. In general, I think that’s really good! All the work I do now I feel is directly applicable rather than “might be applicable someday”.
I try to now do in 30 hours well what I used to do in 50-60+. Sure, I focus on less things now but I feel more productive now with less hours to apply towards my work.
Lesson Learned: Constraining your hours forces you to focus on what’s important.
The final point I’ll make is that since you are self-employed, you have to decide what to do with your time. There isn’t someone there to say, “hey you, do this”.
I will argue that it is MUCH easier to be full time than be self employed because it’s easier to be told what to do than deciding what to do for yourself. You have to be responsible for yourself, your time, your food, your family…everything.
Deciding WHAT to do is much harder than you’d think, and that’s what you have to do EVERY day you wake up and look at the sun. The very reason why people want to be self-employed is the very thing that is most difficult about it.
Lesson learned: Self-employment is about knowing yourself…mastering what it is to be you and having a framework to make decisions of what you do with your time. It is about learning to apply YOU to the outside world on your own terms. And it’s much harder than you’d think.
Good luck and Godspeed! :-)