When one of my coachees first asked me “What should a new freelancer know to get started fast?” I remembered that episode in South Park where Stan, Kyle, Cartman, and that Kenny who always gets killed in every episode, needed to learn about corporate takeovers? They encountered the Underpants Gnomes who had seen a massive business success by collecting underpants from people’s drawers.
The only problem was that their business plan seemed to be missing something. But, initially, it looked like a perfect match where the boys needed to learn about business and the gnomes seemed to know all about it!
– Stealing underpants is biiiig business!
– Business… wait, do you know anything about business?
– Sure, that’s what gnomes do!
In a freelancer context, replace the gnomes with random people and you have the plot of this article right there. Most freelancers seem to be looking for business advice in all the wrong places. And never pay for it. 😉
If the Underpants Gnomes don’t ring a bell, check out this short clip. (And please note the song, it’s catchy!)
In this article, I show you why people lose thousands of dollars because of not getting help at the beginning of their freelance careers.
Business plans: Theory & template
We all can google this, can’t we? We know what a business plan is. Yet, why is it that many don’t even try? And some seem to make lame excuses like The Dog Ate My Business Plan.
The so-called Lean Canvas is a simple way to structure one’s business plan without going too technical about it. Although how to start a startup business might feel like not belonging to the context of freelancing, I’d say it definitely does.
In my case, as I was a startup cofounder before going solo, Lean Canvas was a familiar tool for me from the start. And things went forward pretty fast because I had the elements of my business figured out!
Here’s the original Lean Canvas.
The traditional Lean Canvas for defining all parts of a startup business.
Actually, with a tiny adaptation, you can use Lean Canvas for defining a one-person business quite easily. The rest is exactly the same! Here’s what Lean Canvas looks like with freelancer adaptations.
A Lean Canvas for freelance businesses.
Here’s what we can change compared to the original:
- Instead of a Product you’re selling a Service
- Instead of 3 problems and solutions, you can focus on just 1
Additionally, you don’t need to think very much about your Cost Structure or Revenue Streams unless you plan to have subcontractors or multiple revenue streams from the start. Most freelancers start with one revenue stream and zero subcontractors. And that’s perfectly fine. (But please note that some concepts such as Customer Acquisition Cost should not be completely ignored even if they cost you mainly time, not money!)
Simplified Lean Canvas for freelance businesses.
Also, the Unfair Advantage is slightly different. With startups, we try to define a strong intellectual property (IP) in a way that other companies cannot easily copy and outcompete us even if we have a head start in implementing a completely new revolutionary product.
For freelancers, we can think of Unfair Advantage like this: What is it that your skill set is able to deliver better and faster compared to almost all other freelancers in your field? This part might be unclear and seemingly impossible to define because you might think “I’m a web developer, and there are so many other web developers, so I cannot possibly have a truly unique competitive advantage”.
But actually, you can. And there’s an easy way to do it. Simply put, you map the skills you’ve accumulated so far in your previous career, and figure out where that combination of skills makes the best possible impact!
I’ll show you an example.
My example of combining 4 major steps of my background into a competitive service.
Why startups were the obvious target for my CTO-as-a-Service is because I was in the startup scene in my previous job as a startup founder. I built a product, my business partner sold it, we won pitch competitions, chased investors, and all that stuff.
A startup CTO usually builds products from scratch which is something I learned in my first job back in Finland ages ago.
Ambitious startups, especially in the area where the most ambitious ones are based, e.g. Silicon Valley, want to have that strong IP to start with. Therefore, a CTO with scientific background with 25 patents and invention disclosures in his track record looks like the best possible guy to hire!
As the startup grows from the initial stage past being just a small team of founders, managing teams becomes an essential skill. The CTO typically takes care of product development, all technical management, and hiring the tech team from the start.
This is where my 4-year career at a Fortune 300 company comes into play. It gave me full project and research program management training and several years of experience of being a team leader. Budgets, resourcing, company-external collaborations, patent portfolios, hiring needs, and all that for a team of 15 people.
So, all the major career steps have a role to play in my CTO-as-a-Service offering for startups.
The last thing is the substance. The type of startup companies. As all the career steps I took after leaving Finland related to Virtual Reality (VR) or Augmented Reality (AR), including my Master’s and Ph.D. theses, a public scientific track record, and the product for my first startup, it was obvious that those technologies were the focus of my clients. And they still are.
So, by understanding who needs your skill set and what unfair advantage it produces for your clients, you can get pretty far already. Then, it’s a rather easy job to figure out how to find and meet the right kinds of folks and what your sales channels need to be.
No wonder some of the first international clients I got were exactly those kinds of ambitious startups. One of the first ones, from Silicon Valley, even benefited from my scientific background in developing technology that founded the company’s IP in the form of this fast-track patent!
Getting your bearings right from the start is not so difficult but it does require your conscious effort and an understanding of your industry. Lay it strong from the start and you’ll see success sooner rather than later.
And later, you can use the same formula to level up your freelancing by becoming a solopreneur who can get bigger projects and build teams as needed.
The paradox
I hear many freelancers, even senior ones, saying “I’m not so good in these business things” and every now and then, they end up taking work that leads to nowhere but getting barely paid. Fortunately, though, all these business things can be learned!
The obvious way to learn business is to get a business mentor. You know, the kind of guy who has succeeded his/herself and has managed to help others too.
The problem is if someone invests time in helping you, what’s in it for that guy? Especially when there are others like you asking for the same thing (for free, of course). This is usually the situation where money is involved. That business mentor would not be cheap. The freelancer would need to buy the help he/she needs, in a way.
But, this is where the big issue is for most people.
The basic paradox for a freelancer is always the same: You cannot get a business going because you don’t have money to buy business-building support. And you cannot get money to pay for the business-building support, because the business isn’t making enough money yet!
This is the stupidest state to be in. Seriously. All you have is your time that you can spend banging your head against the wall time after time until… make it or quit altogether. So many people end up in this limbo state for years without ever getting out of it. And this is why a big portion of freelancers take the easy way out and get back to doing their old day jobs, instead of learning enough to make it solo.
The key is getting a freelance business to speed is to make a strategic investment. Get that mentor. Use your savings with a firm belief that the mentoring process will return your investment multiple times over. You’ll learn a skill, a business skill, that will improve your business permanently.
Get someone who can look at how you do things, suggest new ways you could try, and provide objective feedback on your progress. Others see things differently than you do, so you won’t get stuck in your thinking when doing it all alone.
But you might suspect that it isn’t worth it. So, here’s a simple calculation:
- You work for $30/h and you get random gigs here and there. On an average month, you get 80 hours of paid work, and spend the rest of the time hunting clients. So, you make only 80 X $30 = $2,400
- What if a mentor could help you build a process where you find more clients easily? Even a small increase, say another 20 hours of paid work in a month, would be worth 20 X $30 = $600. This being a permanent improvement in your process, you could pay your mentor even $1,200 without thinking about it twice, since you’d get Return on Investment in just 2 months. The rest is profit!
- Or if the mentor could help you raise your rates for good? Instead of $30/h, you’d be getting $40/h by focusing on a better niche, for instance. Now, without working a single hour more, you’d be getting 80 X $40 = $3,200 every month. That’s an $800 increase compared to the original $2,400. You could pay your mentor the whole sum of $800 and get the return on your investment in just 1 month. The rest is profit – for life!
When you do these kinds of calculations, this whole thing gets trivial, doesn’t it? Use whatever savings you have to get your business going properly.
Unfortunately, most freelancers don’t have this kind of “business genius” mindset and therefore suffer for years while working for peanuts until one day they wake up wondering “Why the hell am I not making more than this even though I work like crazy and all my clients like my work?”
What should a new freelancer know really?
These business things are not rocket science. The steps are simple. Yet, many fail in the execution. There are several rather obvious reasons:
- The lack of true understanding of the industry
- The lack of defining your unfair advantage over your competitors
- The lack of basic business skills
- The lack of objective feedback that leads you to imagine you got it right
Get it right from the start. Invest. Anyway, you’re betting your career on becoming a freelancer so holding back these things is illogical.
Go for it at full speed and get the help you need to accelerate fast!
