Freelancing gives you the freedom to grow your own business and decide where you want to focus your attention. But as that freelance business grows, you may reach a point where you just can’t keep up with the demands. At a certain point, you simply can’t take on anymore clients because you have a finite amount of work hours in your day. Recognizing you’ve outgrown freelancing and choosing your next step, whether that’s hiring people to work for you or turning to consulting, helps you scale your business.
The Basics of Freelancing
As a freelancer, you’re not considered an employee of the companies you work for, and you often have multiple clients. For example, if you’re a freelance writer or editor, then you work for clients with writing or editing projects, but they do not offer you employee benefits. If you’re a freelance tutor, then you probably work for students or parents who hire you on a short-term or renewable basis. Freelance caterers take short-term assignments in the food service industry. As a freelancer, you spend your days doing hands-on work in your field, and you might take on a variety of gigs based on pay or your interest level.
The Basics of Consulting
Consultants are big-picture people who get paid for their expertise. You use your expertise in your field to advise others on how to work more efficiently. Businesses hire consultants to provide solutions for a problem. You can sell your consulting services by emphasizing how much time you can save your clients over them learning your strategies on their own. An experienced editor turned consultant can advise a client on how to set up and manage a publishing workflow. A tutoring consultant can help an educational startup with curriculum development. A catering consultant can advise a restaurant chain on revamping its menu. If you have experience handling social media for companies on a freelance basis, you might offer consulting services to advise businesses on how they can improve their social media presence.
Making the Change to Consulting
If you have a few years of freelancing under your belt and you’re ready to expand your knowledge in your field, it might be time to move into consulting or building a company with employees other than you. As a consultant, you have to narrow your specialty area even further and learn more about it. For example, as a web developer, you may move from building various sites based on client specifications to consulting on projects using one specific framework. If you decide to expand your freelancing into a company with employees, you can continue your workload, but you also take on a managerial role and can delegate some of that workload to your employees.
Knowing when to switch and what direction to take depends largely on your goals and the growth of your business. If you’re feeling burnt out on your freelance work or you feel like you can make a larger impact as a consultant, it may be time to switch. If you like what you’re doing but can’t keep up with the workload, it might be time to add to your team.
You can look for certain signs your freelance company is ready for a change, such as the following:
You Can’t Give Your Clients Enough Attention
As a new freelancer, you may have just a handful of clients vying for your attention at any given time, so you can devote a great deal of time and energy to fulfilling their needs. As you gain experience and clout as a freelancer, your customer base expands. That’s great for business, but it can limit how much time you can give to each of your clients. Those clients may start feeling neglected, which can hurt your reputation.
If you don’t have time to meet with your clients — or even return their phone calls — it may be wise to consider hiring additional employees to ease the burden. Not only can additional employees take on some of the tasks that maintain customer satisfaction, but their very presence can add a touch of professionalism to your business. They can also handle last-minute emergencies and requests. In the long run, you may even be able to increase prices to help counterbalance the cost of hiring your new teammates.
You’re Turning Business Away
Although new freelancers are often willing to accept any assignment that comes their way, more seasoned workers find themselves turning away business from time to time. Sometimes you reject work because it doesn’t feel like a good fit. Maybe it doesn’t pay enough or it’s a project that just doesn’t interest you. But if you’re turning down work because you just don’t have time, it may be a sign that you’ve outgrown freelancing.
You have a few options in this situation. If you want to continue as your only employee, you may decide to increase your pricing structure so you can increase your income without taking on more clients. If you’re open to expansion, you can hire additional staff to help you complete some of the work. Those additional hands help your business grow and allow you to take on a growing number of clients. You may also decide to switch to a consulting role within your industry. If you have so many clients that you need to turn down work, you’ve already positioned yourself as a successful freelancer. Becoming a consultant lets you share that knowledge with others.
You See an Opportunity in the Market for Expansion
As a freelancer, you often have a unique window into the current state of the marketplace. Not only does this view allow you to anticipate changes and developments, but it also enables you to take advantage of emerging opportunities. For example, a freelancer who focuses on search engine optimization (SEO) may see a prospect for expanding services to include social media marketing. Hiring an employee who specializes in this area lets you expand beyond freelancing to build a business. If you see an opportunity in your market, hiring team members can help you take advantage of it before someone else beats you to the punch. Expanding in this way can also make your firm more competitive because clients can get multiple services in one place.
You Can Handle the Legal Requirements
Hiring new employees offers a number of benefits, including the chance to expand your product and service offerings without current clients paying the price. But expanding your team has some drawbacks as well, not the least of which is dealing with additional legal responsibilities and requirements. If you don’t have one already, you need a registered payroll number (RP). You also need to comply with provincial and local hiring laws. Once you hire an employee, you need to withhold taxes, contributions, and insurance premiums. Your accountant can help you figure out these contributions and any tax implications of hiring an employee.
You Can Afford a Short-Term Drop in Income
Ultimately, adding employees to your business or switching to a consulting model should increase future profitability. Hiring employees allows you to take on more projects and clients while freeing yourself up for larger growth initiatives, and consulting lets you specialize and charge higher fees. Still, you may take a brief hit to your profit levels.
When adding employees, along with dealing with the added costs of the workers’ salaries, you may have to pay for benefits, payroll taxes, office space, and other expenses. Before taking on new team members, make sure you can afford to lose a little money until business ratchets up to match the capacity of your new workforce.
If you decide to go the consulting route, you may also have a brief dip in your profits. It may take some time to establish yourself as a consultant and fill your client roster. You can minimize the slowed income by gradually transitioning to consulting. You might start mentioning the consulting services to existing clients or within your networking circle. As you gain consulting clients, you can drop freelance clients until you’re 100% consulting.
How to Move Into Consulting
You can find clients for your consulting services in the same network that you used to build your freelance career. Some of your previous clients might be the first to hire you as a consultant. Notify your existing clients about your move. If you haven’t already done so, ask them to write letters of recommendation that you can use on your website, your LinkedIn profile, and other marketing materials. Depending on how you want to structure the rest of your transition, you can simply add a new page to your existing website announcing your consulting services. If your goal is to put freelancing on the back burner, then change the information on your homepage accordingly and link your consulting page in the first position on your website. If you plan to focus on just marketing your consulting services, then you should also get new business cards.
Freelancers work independently, but consultants are often directly supervised by the company that hires them. The shift to a new work role might also involve a change in tax status according to the Canada Revenue Agency (CRA). Your tax status can impact your eligibility for employment insurance and the Canada Pension Plan (CPP), so check with the CRA and your local guidelines first. Freelancing and consulting are different, but one role is not necessarily better than the other.
Deciding Which Route to Take
While there are various signs you’ve outgrown freelancing and should consider hiring your own team, one of the biggest indicators is the way you spend most of your workday. If you’re focusing on day-to-day tasks rather than overall business strategy and customer acquisitions, it’s probably time to get some help. By delegating less crucial assignments to your team members, you can concentrate on starting a business you can grow for years.
Assessing your freelance business can help you decide if you’re ready for a change. By looking at your financial records in your accounting software and projecting your potential growth, you can decide which direction to take your freelancing business. The QuickBooks Self-Employed app helps freelancers, contractors, and sole-proprietors track and manage their businesses on the go. Download the app.