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As a service-providing business, freelancing is a powerful way to position yourself for building a strong company. But, I did it in the reverse order: first launching a marketing firm and then freelancing after shutting it down in 2014. My new model flips it around. Not being interested in building another marketing company has quickly illuminated how perfectly positioned I am to do so. And, it’s given me a glimpse into how I should have approached this from the beginning.
But first, let’s back up and explore my mindset and approach to growing my small marketing business, which I launched in 2007.
My technical background in video production provided me the unique opportunity to produce a behind-the-scenes video for a construction company sponsoring “Extreme Makeover: Home Edition.” I used the deposit to buy a camera, and I was in business. Shortly thereafter, I recruited my cousin, my wife and an intern to join the business. Then the oscillation began, seeking out new work and fulfilling projects. Up and down the roller coaster we went.
While I should have systematically grown the business beyond our collective capacities and then expanded, I instead expanded first and worked to pay for these additions by finding new paying clients. It’s a stressful way to approach business growth.
As a result, I was playing catch up and reacting to situations instead of proactively building a long-lasting business foundation. As this played out poorly over time, it got to the point where we had to sell the next project to fund the labor for the previous one. Eventually, a generous client fired us, freeing our company to change this cycle we were trapped in.
Building a business from weakness involves carrying the consequences of our past into the present. But there’s another way: one of strength, in which we leveraged the accrued value from the past to ensure future success.
Debt and savings as a contrast to strength and weakness
To appreciate the difference, let’s explore debt and savings. When we buy something before we have the money (with debt), we’re at a severe disadvantage to our contrasting option, where we are prepaying (from savings) for that same item.
For example, my wife and I are on the tail end of a 10 year journey to pay off our student loans. Together, we borrowed $95,000 for college. That’s a lot of money, and we didn’t have it before we started, so we had to get student loans. Guess how much we paid to borrow that money? Fifty-nine thousand dollars in interest, over the course of 10 years. Most pay it back over 30 years, making that dollar amount much higher. For every dollar the school charged us, we also paid the bank 60 cents. Ouch!
On the flip side, if we had paid for our schooling beforehand and made wiser choices on where and how we went to college, we would have graduated with no debt and only opportunity in front of us. And that same money invested would have yielded thousands of dollars, instead!
This is the difference between building from a position of strength and from a position of weakness. When we start and grow our business, the same choice lies in front of us: with an advantage or disadvantage.
Growing your business from a strong foundation
As a freelancer helping small businesses grow, I’ve stumbled upon this alternative scenario. I began freelancing in 2014 and by the end of 2015, I hit my peak capacity for the number of hours I was working. As I got there, or close to it, I very easily could have hired more people to delegate work to, but I wasn’t interested in building a company. Instead, I chose to increase my hourly rate, so I could earn more without spending additional time working.
This continued through 2016, but then I faced another dilemma with my clients. My capacity was full, but my clients wanted more of my time. They had more needs than I was able to support. They wanted me to hire people, but again, I wasn’t interested in expanding beyond freelancing.
So, I reached out to several of my freelancing friends and proposed to my clients that they hire them. My role would shift toward that of project manager, and we would operate a virtual marketing department. The client would pay them directly, but otherwise, we’d operate as a cohesive team on the project.
This quickly progressed in the same fashion with several of my clients and soon, I was building and managing virtual teams. As my hourly rate increased, this allowed me to give freelancers opportunities to fill in the gap while also providing a cost savings to the business.
With freelancers across various client teams, I was now positively positioned. If I wanted to build a company, I could roll up those freelancers as staff in my theoretical new company and have the businesses pay me directly for those clients. I’d then arrange terms with the freelancers to work with me part or full time as staff. I could continue to work with other freelancers who I couldn’t hire or didn’t want employment as projects necessitated.
Eventually, I’d peel off more of my responsibilities and be able to run the business as opposed to running client projects. I’d also pace this transition in such a way that both the business and myself personally would have a nice financial cushion to absorb the up and down oscillations that come with running a business.
In a nutshell, the key is to maximize demand, grow a business, increase profitability, test out team members by working contractually, and build a financial buffer personally and professionally. Once in place, you can then begin to transition from freelancer to full-fledged business owner, with your now (nearly) pre-built company.
Or, like me, you may just realize its much less stressful and more profitable to stay a solopreneur on your own.