Learnings from my first 1.5 years freelancing in data

0. Ground Zero:  Learning the Mindset

 Your cost of opportunity is an employed job.

Your worst case scenario is getting a job. Basically, if you fail, you’re still ending up in a pretty decent place. Such, it’s worth taking a risk and trying freelancing if you think it might be for you.

 

Do it now, not later.

From my observation of people saying the above, if you do it later, you have <20% conversion rate in the first year.  If you do it now, you have 100%. Stop delaying. Your cost of opportunity as a freelancer is your hourly rate, which would probably translate into 2x your salary (unless you make 200k).

Once you have become a freelancer, you will look back and ask “was it worth paying 5K/month to stay in that job instead of having extra freedom and responsibility?” The answer will be a definite no.

I know it’s hard to see it that way without living it first, but try to put yourself in the freelancer’s shoes.

 

Value:

Don’t doubt your value or have impostor syndrome. Good workers are worth their weight in gold. A typical freelancer can be much cheaper than employees because he’s bringing in the right skills at the right time, slashing through company’s cost of delay. Also, many freelancers become better professionals due to the various exposure, and they end up being worth it even as salaried employees at those rates, because typically the top 1% of the workforce in salary has very different salaries anyway. Value based pricing in data, in the context of organisational change that brings a 20-40% revenue growth, would be worth millions for many companies. Your expertise is key in making that happen and your hourly rate is peanuts in comparison. Keep in mind that world – scale asian companies are sometimes paying millions per year as a salary for the data scientist they want – all is good as long as the ROI is fantastic, and it typically is for those companies with the scale to make it matter.

 

How to start:

Starting well is key to the first year survival. If you want to keep your transition to freelancing easy and without risk for  large gaps in your monthly pay,  consider the following tips:

1. Starting: Be able to take a freelance job.

The vast majority of freelancing gigs get filled relatively fast (<1 month), because freelancers tend to have short projects and are able to take on work more often. Such, it is ideal that you are able to start work on a new project on short notice, ideally <2-4 weeks.
There’s a few ways to be in that situation:

a) Be in an easy to leave job

If you just started a new job, are in probation period and it turns our to be different than what you wanted, you can look for a freelance project and jump ship quickly. If you’re stale in a job with 3 months quitting time, quit, start looking for a project and if you cannot find one and cannot afford the unemployed time, just take another job (maybe look in parallel).

b) Get fired.

Myself, I was in a situation where I could not work because the futility of the work was so clear, and the requirements so hazy, that I was unable to produce anything that wasn’t nonsense. I had a boss that dictated ‘Sql Only’ because that was the best he could do. He personally checked the code on pull request of each of his data team. He re-wrote everything himself, and only left the bugs to the others to worry about. He believed he invented ‘truncsert’ (truncate table and insert from a view in the db), a form of non incremental data loading where you still have to maintain ddls in database and deal with migrations (the worst of both worlds). I was in a team mixed  competences including brown nosers that kept their mouth shut and collected bonuses and promotions. I wouldn’t be a part of that and I got fired. Getting fired gave me 2 ‘paid’ leave months. It gave me 1 month to recover from the experience, after which I started looking for freelance projects. My girlfriend at the time (now my wife) supported me to stick to what is important and not jump into another job. Two months from being fired, I was already starting my first project.

I said ‘paid’ in quotes when referring to the unemployment, because in hindsight the unemployment help was too small to be relevant, and it was rather a mental comfort more than any significant financial contribution. Frankly, if you can afford it, don’t wait to get fired. Just quit and save yourself the hassle. In the long run, your cost of waiting is higher than the unemployment benefits.

c) Not have a job in the first place.

I have met quite a few freelancers that started as freelancers during university and never took a employed job, and have been freelancing since (years). Wherever you are in your life, if you are not currently employed, that’s already a step in the right direction. Get a project instead.

2. Find a freelance job.

Agencies and freelancers are your best friends. Connect on Linkedin to agencies (try big ones like Hays or DIS AG for Germany rather than those typical recruiters), and they will let you know every time a large client is looking for work. Work with agencies that specialize in freelancing, the others are optimized for jobs and don’t have freelance opportunities (or get them late). Ideally, do not work with amateurs – If they are flaky or scammy, avoid them at all cost.

Freelancers are best met face to face. Look them up on Linkedin and ask them for a breakfast/lunch/dinner. Be prepared to travel – it’s you that wants something. Form a network, get remembered, and you will have work coming in. Not just data freelancers, but any freelancers from intersecting domains. Data? Don’t forget tech, finance and marketing freelancers.

Hiring managers are also a typical customer. CTOs, founders, team leads. These guys sometimes need something done well from the first try, so they bring in expertise to build and hire. Sometimes, they just want a replacement to fill a gap left by someone that changed position, quit or went on parental leave/sabbaticals.

Be flexible with your requirements and don’t be too fussy as long as it’s in your field of expertise/specialty. It’s best to start off OK rather than not start off at all. Even OK freelancing is better than employment.

3. Do a freelance job.

Once you found a job, interview as usual, come to work as usual. You’re basically an employee, so you are expected to perform at the level of seniority you were hired for. Whatever you do, you’ll be fine as long as you have been honest about your ability.

Get your accounting sorted. If you’re into this stuff, do it yourself, else, an accountant is TOTALLY worth it. Your time and peace of mind for correct accounting is worth more than the accounting fees, and good advice will bring you further financially. A skilled tax accountant will often save you significantly more than you pay them. If you’re a Berliner, I recommend Suat Göydeniz or Firma.de.  Definitely find someone you are comfortable with and that answers your questions quickly.

My original choice for accounting was felix1, which turned out to be horrible. Felix1 overall took me 5 months to get my money back from, only after reaching out to a C level of theirs on linkedin to ask if these are their business practices or if I fell through the gaps… repeatedly. They were unable to start performing the service I paid for 2 months after first call and payment. I almost lost a client due to them. Don’t compromise on a decent accountant.

Set aside money for taxes. Find some way to approximate how much income tax you will have to pay in real-time (I use a google sheet with the brackets in a formula) and make sure you can afford the year end or tax pre payments. As a rule of thumb, if you save 50% of what you bill for taxes and health insurance, you should be fine.

Learning 1:

There is always more work. It’s like in a job – every day there’s something that needs done. Finished your main project goal? Your client will often find more uses for you.

If you’re hired by a team, they will give you as much work or nice to have things to do as they have budget for. Why not? It’s always nice to have a senior helping hand.

If you’re hired by a business owner, you’re typically in for a lasting relationship as long as your ROI is positive. In data speak, this is either when the client is big enough that your output optimizations are  worth your pay, or until they get data-mature to the point where most things are already optimized.

Learning 2: Vacation is different.

You know the joke about freelancers not having employer paid medical leave? “Freelancers don’t get sick.”
Of course you do, cos you’re human. And it’s OK to have unpaid medical leave because you deserve the best care you can afford: you are your best workhorse and it is only through good health that you are able to perform. Don’t mistreat yourself for money. Besides, you don’t have to feel bad about missing work – your client is cost- free for this time, so it’s even more relaxing than paid sick leave.

Sick leave aside, don’t end up calculating your vacation’s cost of opportunity. 40 hours/week *100/h*0.65 net rate = 2600 in your pocket and that’s not actually relevant to you enjoying your life. Remember why you are freelancing and imagine what happens if you advance 5 years into the future and you’ve done nothing else in your life but work. Don’t forget, your goal is to live the way you want, not to earn bank points. Take a week off if you feel the need to connect with your inner self, learn something new, spend time with your loved ones, follow a hobby, find divinity in the ordinary or go fishing.

You’re the youngest you’ll ever be, right now. Don’t sell that.

Learning 3: How to fail.

Freelancing and entrepreneurship are not the same.

Ask any data (or tech) freelancer if they would ever take a full time job again. They will tell you Definitely NOT! Whatever reasons they have (family, time, money, learning, culture, life), taking a job would be detrimental in almost every way. You’d halve your pay, let your skills get rusty, let company politics get to you, get stuck with all the poop, miss out on vacations and life, surrender control over your time, etc etc. Same recipe, different taste.

Except…

Except for the ones that are struggling or who struggled and sank. How do you sink? From my observations there’s two easy ways:

a. Charge too little.

Discount 50% for remote. Don’t charge toilet breaks. Don’t charge travel expenses. Don’t charge client calls. Don’t charge travel time for in person meetings.

This is a surefire way to make your effective rate lower than what you’s make in a job, but with much more extra hassle and stress. Don’t do this to yourself. Keep your opportunity cost in mind.

b. Building a product upfront.

If you believe you can sell  product, don’t build it upfront. Find a client and build it for them, while charging them for the work.

This way, your worst case scenario is if you cannot find a client. Such, it’s better to not find a client and lose the time spent looking for a client, than to not find a client and lose also the product building time. Your best case scenario? Still better at the end of the build with a client, since you have your payments early.

Learning 4. About going to Asia

I have heard from 2 clients so far that they had another freelancer but they went to Asia (Thailand, Vietnam) and never came back. You can imagine my deja vu the second time I heard this. When I told this story, I heard another about a freelancer (not data this time) that went to Vietnam while working remotely, and decided to stay and open a bar. Apologies if I am getting any of the 3 mixed up.

Regardless, you can go to Asia, but keep in mind rates are lower – so if you’re gonna take a pay cut, rather take a vacation and enjoy travelling.

Go to Asia, or wherever you wanna travel to, and enjoy.

Learning 5: The ideal client

The ideal client is a different one depending on what you are trying to achieve. In a perfect world, the perfect client is someone who is not price sensitive (you don’t want to argue about discounting a train ride to the office), who always buys your work but at the same time doesn’t depend on you.

However, while you’re not in control of what clients exist on the market, you are in control of how you develop your relationship.

Maintain a healthy long term relationship, without becoming a crutch for your client. You want a client with whom you are honest, and consult them on what’s best for them, even if it isn’t in your direct interest.

A smart client can understand the value you are able to bring, and will always have a place for you, or a recommendation. A successful freelancer is someone who is competitive in the workforce (read: a professional that doesn’t stop learning), and such workers are often rare and add more value than the average worker. Such, a smart client will have no issue paying for a freelancer rate either until staffing, or for the duration of a project (and often after if budget is there). Of course, know your strengths and weaknesses and tackle the projects you can take with your client, and don’t jump on things you cannot do well.

A smart freelancer will manage expectation, to keep their client informed and able to take good decisions regarding ROI.

Learning 6:  Work ethics

Having met various freelancers, I can confidently say most of them are nice and have good work ethics. In fact, it’s more common that freelancers will bill a little less fussy about the details (read: charge less than they should).

However, there are bad apples out there. Every forest has its stumps. Don’t be one of them.

Your work ethic should be solid. Be always honest with the client regarding your relationship, bill fairly, and don’t double book. Why? Because without values, all you have is a racket.

What if you are reselling code that took you hours to do the first time around? There’s no rule for this. I have seen the following:

a) Bill nothing extra, just bill for the time.

I am currently doing this but am having second thoughts, as I feel it’s counter productive to bill 2h for implementing something that might take a week to build.

b) Bill implementation + fraction (up to full) of the hours it took to first build.

Agencies do this. They fill in a config and suddenly hundreds of lines of code are  hard at work in your codebase.

c) Fixed price project

Here, I would stay away unless you know your client – you might end up with scope creep and those 50h budgeted that were supposed to be 20 for implementation  suddenly become 100.

Learning 7: Hourly or daily? Fixed price?

I bill hourly, rounded down to the nearest 10min increment, with the exception of short projects where I round up to the hour because of overhead and cost of switching.

I would advise to go for hourly billing. Why? Because sometimes work days are over 8h. More often, the work is finished after 7:30h for the day, and warming a seat for 30min is counter productive for both you and your client – so just call it a day then. I found I work an average just under 8h, if I there’s no pressure,  and just under 9h on the heavy load days/weeks. Another freelancer recently told me they switched from daily to hourly, and is now billing 20% more. Others told me how important it is to be able to come in 2h late when you have some other life appointments, without worrying how to make up for the time. Hourly = bill what’s fair.

The pros for daily rate is that depending on your client, you might get peppered with small requests. Such, charging half day or a full day for something that takes 10min but blocks you form other stuff is fair – but you can do this with hourly too, as long as you are upfront about it. Or, you could charge small clients on a daily rate and large ones hourly.

Fixed price? I feel this is a gamble. Usually those that advocate for fixed price, inflate the average price by something like 5x to give themselves plenty of wiggle room and high profits if accepted. Otherwise, they would be doing hourly and save themselves the headaches of scoping.  As a client, you should also be aware that any time estimate you receive does not take into account blockers on your side, since they are unknown to the external.

 

Author: Adrian B

I'm a Business intelligence professional working in the tech scene in Berlin, Germany. I'm currently freelancing. If you'd like to check my services, visit http://adrian.brudaru.com