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Allan is the cofounder of LessAccounting, loves his family more than breathing and builds weird lamps for fun.

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Should You Grow Your Freelance Business & Start Hiring Employees?

Written by on Oct 7
grow freelance business

There’s a false hope among freelancers that growing to multiple employees will make a person “happier” or feel more successful or make more money. I’m not going to debate the definitions of success or happiness. It’s a common path for freelancers to move from solo to hiring, and most people expect it of them.

Let’s take a deeper dive into what growing a company is like versus staying solo as a freelance business.

Growing From a Freelance Business to Three Employees

When you hire employees, your job changes. Each business hour you’re spending money to pay these employees. As a boss, your job is keeping them busy (billing hours) and working effectively (hitting deadlines) on client projects.

Having several employees means your company has a higher output of work. Your company is completing projects faster, and now your sales cycle is three times faster. This means more sales calls and more contracts to read and sign. As a freelancer, remember taking a sales call once or twice a month? Well now, you’ll need to triple that sales workload. What used to take up two hours a month, now takes one to two hours per week.

Your New Job

Attracting those potential leads is now part of your job. This is done with marketing. Marketing? But I’m a developer or designer! Well sorry, now you’re a business owner with employees. Now you must increase the amount of leads you’re getting through marketing. What’s marketing? Well, you’re going to have to figure that out. Good luck.

Having employees and more projects means making sure they’re working effectively together, so now you’re a project manager for several projects. The new company business model is the employees will do the actual work, and you’ll make sure there is harmony within the client relationship by meeting deadlines and hitting budgets.

Oh yeah, budgets and money. You now have more money coming in, this means you’ll have to spend time doing more bookkeeping, sending more invoices, making sure invoices are paid, and going to the bank more often. Oh and payroll, remember to process payroll this Friday.

More money flowing faster through the company means the expenditure spending is faster and cash flow mistakes happen quicker. With project or fixed-bid pricing, the ebb and flow of cash will be greater. For example: one day you have $20,000 in the bank, a week later, it’s $1,000 and time to freak out. Realize now, with three employees you’re spending $20,000+ per month in overhead. The pressure of paying employees is a burden. Imagine being responsible for making sure they’re able to afford clothes and food for their children. That’s stressful.

Remember when you’d meet with your accountant and the bill was $200 to file your taxes? Let’s go ahead and raise that expense to $1,000+ annually because you’re a big business now. By the way, did you get that new hire to fill out a W-2 form?

Employees means hiring and firing. Hiring is one of life’s greatest joys; firing is one of the worst parts of being a business owner. Having an employee quit turns your life upside down. The client is upset, there’s no one to do the work! Now you have to find someone to take over the work/position. Time to look for candidates and start interviewing. There goes 10-30 hours over the next few weeks. An employee who quits costs you time and money to replace them.

The shift in focus from your craft to running a business is the hardest part. You’ll have hardly any time to actually “do real work.” Your crafts are now sales, marketing and management. Also, staying up on new technology and design trends will be hard since all your time will go into running the company.

Be warned, ego loves to hire people. Your friends and relatives will be impressed you have employees. It’s hard to discern the difference between hiring to create a more solid company and hiring for your ego.

Finally, we’re to the pros of being a boss.

The best part is you should make money even when you’re sick or on vacation. Hopefully, you hired some awesome people that can manage themselves if you want to take a Friday off.

If you’re able to really watch your spending, bring in more client leads, land more sales, and keep projects on budget, you will make more money. Your goal should be 25-50% profit with each employee you hire. More $$$, oh yeah!

Solo Freelance Business

The misconception of being a solo freelancer is that you’re less “successful” than a company/firm. The people around you will expect you to find more and more clients and start hiring people to work for you. That’s what a “successful” company does, right?

This expected path is falsely enforced with the theory you’ll make more money. The reality is in many cases, if a person can stay solo and bill 25-30 hours per week consistently, they’ll make more money than trying to keep two to three other employees busy. I believe it’s easier to do work you’re proud of, become a master, love your craft and make a good living as a freelancer than it is by growing your company larger.

Should you grow your freelance business? I don’t know.

The freelance business isn’t all peaches and cream either, it’s tough work. If you want to grow your company, realize it has its unique pros and cons. Whatever your path, be intentional with your decisions and don’t feel forced to follow the ignorant expectations of others.

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