Ask HN: In the current crisis is starting freelancing doable?
Hey everyone,
I'm a full stack JavaScript dev in London with 10 years experience, working as a tech lead in a big company. Because of the Coronavirus directly impacting our revenues, we are being put at 80% pay / 80% time.
Do you think in the current climate it would be doable to start freelancing / consulting? I've already got an LTD setup because I used to be a contractor, but would like to look at turnkey work, where I'm given a project for a fixed price.
76 comments
[ 3.2 ms ] story [ 157 ms ] threadThese are uncertain times. A lot of contractors have moved back to permie and competition is high.
You can try to obtain a 6 or 12 month contract if you have a decent stack of emergency cash (e.g. £25k) lying around.
I wouldn't overanalyze it. Try to see your options out there.
If you can get 3 contract offers in 1 month, then obviously you're still fine. If you can get 1 contract offer after trying for 3 months, I'd consider not taking it.
Analyze and feel the market, so you can form your opinion instead of just going based on stories that other people produce. Some people can't find a low-paying job in the best of times. Some people will have plenty of opportunities in the worst of times.
As ever, with contracting you're always taking on some risk when you come to the end of a contract. Much of your ability to get a contract will depend on your network (as well as skills and experience).
A lot of it depends on whether OP is looking to do full time contracting and leave their current job or just fill the 20% of their time they have now. But either way, the best idea is to go and look for the work and see what's around.
The picture seems to be mixed, not just in the contract market. That might mean those out of contract are swarming around what's available, but you only need to land one contract to get started.
Personally, I don't know anyone who's not moved to a new contract for the same client over the financial year boundary, but that's obviously just anecdotal and most of the contractors I know are in the same sector.
Now, I don't know about Freelancing in terms of big businesses and what view their legal departments take, but UK small business doesn't give 2 hoots about IR35.
I read with some amusement a couple of years ago in Private Eye that their freedom of information request to know how many people had been investigated and prosecuted for failure to declare IR35 status had been refused on the grounds that "the answer would undermine the rule of law" (more or less - my memory isn't perfect).
The reason this change is not welcome by the contractors is that many end clients -- primarily large banks and similar corporations -- do not want to bother checking each individual contract; instead they tend to make blanket decisions and declare all external contracts as inside IR35. And being inside IR35 is the worst of both worlds: you get taxed as if you're a full employee, but you're still not entitled to full employee's benefits like paid sick days or holidays.
Too many contractors seem to view lower taxes as one of the perks of being a contractor and in that sense I think the reforms are well-intended though I wont’t say the implementation has been perfect.
It kind of is though? There is a reason why company directors are able to withdraw money as salary or as dividends - their income is less stable, they take more risk, so they are allowed to take more profit in good times but they feel the pain more in bad times too.
Also, as limited company contractors, we haven't received any meaningful support from the government over Corona. Most contractors pay themselves a minimum salary of around £719 / month. The only government support available to such people now is to furlough themselves which gives you £575 / month, which is only a tad above universal credit.
I'm not complaining about that though, its fair enough because we are NOT employees, but thats also why HMRC should stop treating us like employees too.
If you deliberately structure your income to minimise tax you can’t really complain that it also minimises the support available.
Edit since you said you’re not complaining. I understand in-IR35 contracts aren’t eligible for furlough? That’s definitely an example of poor implementation imo.
Thats partially true, but if you look at outside IR-35 contracts, they might go for £400 / day. While the same kind of work but inside IR35 goes for £600 / day. So HMRC are effectively pushing the burden of a flexible work force entirely on the shoulders of contractors and the clients they work for. This is a huge disruption to both businesses and contractors alike, its also questionable if it will even raise enough revenue for HMRC to make the disruption worth it.
> I very much doubt the directors of larger businesses are paying themselves a tiny salary and taking dividends. It seems to be only IT contractors who see it like that.
You're right, directors of big businesses are paying themselves salaries in the 6 figures and taking out even larger dividends. But for myself, I am usually only in work about 6-9 months a year, I've never worked a contract for more than 6 months, when I'm not in work I spend that time learning and up-skilling to invest back into my career and business. I cannot realistically put myself on a salary of £2k / month when its perfectly feasable that I might be out of work for 6 months or more at any one time. The bottom line is that my working conditions and the benefits I receive (or lack thereof) are much closer that of somebody running a "real" business than it is to a permanent employee, so I should not be taxed as an employee.
> I understand in-IR35 contracts aren’t eligible for furlough?
Honestly I have no idea! I've only ever work outside IR35. I would have thought that inside IR-35 would be comparable to gig-economy workers and sole-traders so they should get 80% of their average earnings over the last three years. But again I am not certain of that.
EDIT: If you're talking about people who work the same contract job for 2+ years and are effectively employed by their client despite working through a limited company, then yes I would agree they are cheating the system. But instead of going after those people, HMRC are making the majority of contractors like myself who are genuinely self-employed, pay for the sins of a minority of contractors who are actually in disguised employment.
So far it feels tough, but doable. If I go another month without a good project, I may consider going back to W2.
So there will be more competition for less bread. But you can try.
I wonder if the best way to get started in a niche is to just start cold-emailing with a service.
Uhm, you want to check the fine prints. If you've been furloughed, which is typically what people on "80%" are, then the Treasury is paying your salary, but you're NOT supposed to work AT ALL. If you are actually working, you and your company are effectively committing benefit fraud.
> Do you think in the current climate it would be doable to start freelancing
Everything is doable with enough grit and enough resources; IR35 is a big concern though, because it has cut demand significantly by scaring companies away from contractors - even if the postponed changes are postponed again next April, HMRC will keep the finger on the trigger.
This said, this is probably not the right time to sell in general; it's the right time to buy / invest / build while prices are rock-bottom.
> would like to look at turnkey work
That's not a great move at the best of times, unless that "turnkey" is highly automated (in which case it's likely to go away soon as somebody starts selling the fully-automated version). Fixed-price is a recipe for getting screwed.
The 80% rate of the furlough scheme does seem to have prompted a lot of companies to think this is a suitable rate for a hard times haircut to give thier staff generally though, even they are still working 100%.
It seems to be a figure that a lot of companies settle on as a significant cost savings in the aggregate while not being such a big cut that (most) people can no longer afford to pay their bills or otherwise feel forced to just walk out the door.
In my view, these companies can fuck right off. They're not paying their workers more when they have a great quarter, so why should they pay people less when things aren't going well? I suspect the companies that cut pay / furloughed a significant amount of workers will have a hard time hiring when this is all over.
And what they pay is driven by market economics, in good quarters and bad.
You will not be lured into massive fixed costs and start with the absolute minimum and required, which you can scale up when your business start flying.
As long as you start tight, you will stand a good change.
As a 'buyer' of these services myself, full-stack JS dev contractors are in one of the most oversaturated parts of the market and many in my network are attempting to find full-time work at the moment. Those that aren't are having to compete on rates in a way they never have before, definitely a buyers market.
The other side of this is how much more volatile contractor work is than before, many companies with a mixed full-time/contractor team see their contractor pool as the most 'expendable' when cuts need to be made. Many people in my network have had existing long-term contracts ended with little to no notice.
I've also seen limited evidence the pushing back of IR35 to next year is changing the policies towards contractors at large corporates, where (by volume) most contractors get their contracts.
In short, I don't think it's the best time, but: if you do make the jump, make sure you have contracts SIGNED before you make any big decisions. Not a hand-shake or an email, a written contract. If you can get that, then you'll be in a good place.
OP, if you can get something on the side then go for it but it seems very risky to go full-time at the minute. That said, you have a lot more experience than me.
I was in London last year and got the impression that it's a pretty lackluster market - high cost of living, average earning potential. I did some back of the napkin math and realized it only made sense if I worked remotely and occasionally visited London (once a month, twice a month maybe?).
What do you think is the going rate in London for short-term (up to 3 months max, preferable 1-1.5 month contracts) freelancers that don't live there but can occasionally visit for meetings and such?
Day rates of £400-1000 a day for FE devs were common before COVID, now I’d expect ~20% less than that but YMMV.
Remote and visiting occasional is getting a lot more common for contractors these days, so you could detonate it work.
My two current clients in Germany are heavily invested in the automotive industry. They have everything on stop for the manufacturing and their software department is not working their full 100% capacity. On the other side, I hear lots of good news from people who are bringing physical services to the web. The digital revolution is just starting here and people have to keep up with more and more demand.
So yeah, I think there is lots of opportunity. It really depends on who you are aiming for as clients.
What does that mean?
I really struggled with the sense of betrayal from that and it’s a big data point in the “ask more questions” strategy I’m trying to cultivate.
You can’t fire a customer when they are your only customer. At the very least, no matter how things get on any contract, save some time an energy to keep courting new revenue from other sources. That’s a big part of the job, and one I don’t think we as developers have enough perspective on.
Find at least one client before you quit, though. And make sure you have at least 6 months of savings so that even if that client fired you on day 1, you’d be okay.
* You have an accountant
* You are not afraid to draw up a contract
* Have a skill that has higher demand than supply and will remain so for a foreseeable time
* Have worked on paid side projects a few times
* One existing customer is interested in hiring you for 3 months (worth of money) or more
Ensure you set aside 50% of which 2/3rds for tax and 1/3 for bad times. Maybe you pay less tax in the end. Yay! "Free" money! Never get in the reverse situation.
If you don't have customers: don't do it. I have been making a lot of contacts in the 15 years+ I have as a professional and it's still hard to find work right now. If you're good for a few months then we're out of the pit in terms of demand for sure.
Drawing up a contract, similar, but here I would certainly mention that you can also consult a professional if needed, like a business consultant or attorney. You can also write a letter contract and communicate well enough that contracts don't matter that much in the end, which is the case for a lot of freelancers, guessing the majority.
Knowing what skill has high demand is less important than finding a team or business that likes you and needs you. If you are in tech, someone probably needs your help. Many times they will find a way for you to stick around anyway, if it's a good psychological complement.
If no one can pay you for three months worth of money, you get to decide how long you hang in there. Personally I found a veteran graphic designer who was excited to work together and started sending work immediately. Within 3 years of that I was turning down more work than I was accepting. But there was never any promise of income.
Setting aside 50% would have been impossible due to medical bills at the time. I was lucky to have free rent via the in-laws and a wife who was working as well. Still, when freelancing picked up the problem quickly became burnout and setting boundaries. This has been the same with many of my peers. Many of us went through 2008 and even the dot com crash together. Demand was never really a problem except at the very start, but the perception of an urgent need to hustle for every last client can easily break you.
Contracts: I really suck at them. I rarely do them. I got lucky so far, perhaps 2 clients that managed to pinch me but then again assholes will be assholes with or without contracts. But hourly work is easier than fixed price. Especially when it goes sour.
> Knowing what skill has high demand is less important than finding a team or business that likes you and needs you
True. I'm a specialist in mobile remote communication solutions which should be somewhat sought after right now but I can't find matching clients. I should have networked way more the last years than I did, and I don't consider myself a bad networker.
> Still, when freelancing picked up the problem quickly became burnout and setting boundaries.
The worst thing that always happens that after a slump in work I'm going basically YES YES YES YES YES YES to all work and I've never been in the situation that when one job finally came through at least two others I've YES'ed came at more or less the same time.
So going from 0 to 60 hours per week for a few weeks. Which after a week or four really starts to turn into 30 hours worth of productivity while being behind your computer for 70.
This is true for a _lot_ of people. :-) "basically free". It made me smile because it's usually not "saved me megabucks," but rather "their work allows me to focus on other things and that's worth something to me."
But also a US$1500 bill that never was paid by a customer by going over bills vs the business bank account's movements.
Having had to take legal action against multiple clients, I assure you that it really does matter in the end.
I see what you mean, but given the context I wonder if there might be some projection at work here, since your experience with law is so deep--so tell me what you think of this clarification: I could also recommend lawyers and accountants; however not so much with the current discussion context in mind--that being the case of a beginning freelancer working in tech. For such an individual, getting sued is typically way out of the immediate area of concern and almost certainly game over, at least in energy expenditure if not financially.
Case in point, one meeting with a business attorney and the time he spent drawing up only a contract _for working together_ resulted in one of my business partners receiving a bill of almost $3K. He told me, "I'm so glad I never bothered retaining an attorney until it was absolutely necessary."
To a brand new freelancer, building a professional team is often an anticipated risk, but it's still a risk; they are often slow to move in that direction while building capital and reputation. I think rightly so in many cases.
Given your business though--you've clearly "made it"--congratulations and I wish you all the best with all the trimmings, etc. ;-)
My thinking is that too often freelancers think "I'm just a freelancer" rather than "I run a business" and it is important to make the mental leap because of the key word you said above - risk. We need contracts because they give all parties clear expectations of what is expected to happen, but also what will transpire in the event things don't go the way we expect. Without a well-written legal contract in place, both parties are at the mercy of each other acting in good faith, and unfortunately that's not always how things actually go. As a freelancer too, we often have a lot of personal skin in the game, which to my mind makes it even more imperative to have professional advice from accountants and lawyers, because we have more to lose personally. On the accounting front, I see a lot of people who make mistakes that cost themselves a lot of money because they didn't spend the relatively modest amount to get good professional advice. As another commenter stated in this same thread, the amount accountants save you pays for their cost.
Run of the mill lawyers generally bill between $200-$300/hour, so $3K might work out to ten hours of work. For many freelancers with basic needs, resources like Nolo or your local SBA office might be more affordable and get to the same goal - we're still getting professional advice, just in a different form.
I don’t have any accountant, no contract. They will either pay me or it’s back to my side project.
There were quite a few contractors during the dot com days that were like this too--I remember some had a policy of hearing "let me explain why your paycheck will be late" and just walking out right then. Others would say, "I'm staying for a while, because I'm living off of money I made 3 months ago." And others would go right to the co-founder or COO or marketing lead and start a new business with them on the spot...something different, but comfortable since they already knew they could work together.
Also, make sure you setup the contract with short milestones as some companies will slow in paying.
Things to make sure of: make sure your rates take into account your overhead. You're going to have to pay for your own insurance, pay withholding taxes, business licenses, account for some time off/sick days, etc.
After years of freelancing, attempting to set aside money for taxes and never paying into retirement, I started using an app called https://www.catch.co/ to track all of this and it allowed me to focus more on freelancing and less on the overhead.
I expect more companies are going to be using freelancers for projects and tasks to minimize using employees since everything is currently uncertain.
I wouldn't recommend using online services to find projects. Reach out to your network (outside of your employer/co-workers) to find projects.
Research what to charge and how to manage your freelance projects.
Now could also be a good time to use your 20% time to build up an audience for future info products or start stair stepping from products to a SaaS (Rob Walling, see below).
You might enjoy StartupsForTheRestOfUs.com podcast, start in the archives with episode 1.
Build Your SaaS is a great podcast as well.
Good luck.