Ask HN: Being a Freelancer vs. Starting a Company
Hello,
Just seeking for advice from others who have made similar decision.
I am running currently quite succesful software consultation (ERP software) business of one person. Basically I am a freelancer and I have couple of customers that I provide services for.
However I'm thinking of starting a proper company, hiring people, getting more customers etc.
I get interest from both customers and potential business partners from time to time but I can't make up my mind which is better.
Downsides of proper company is that I can do less hands on development and would have to manage people.
Upsides are that its more scalable, possible to take on larger clients, share responsibility etc.
Has somebody else been here and what decision have you made and how are you satisfied with this decision? Moi? I believe there is a difference between: - Freelancer - Contractor - Consultant The point being, if you believe you are currently positioned as freelancer (i.e., effectively highly replaceable) then perhaps first work on morphing to Contractor or Consultant. If nothing else, this would likely mean an increase your rates. Also, before you add someone similar to yourself (i.e., doing hands on ERP work) outsource as much of your back office ops as possible. Once you start to manage others, you'll want to focus on that, and clients as much as possible. Finally, "a proper company" will likely require some marketing of some sort. It's very likely you'll want to outsource this as well. Marketing is one of "The Human Behavior Arts" (e.g., leadership, management, etc.) that is too often easier said than done. Can you figure it out? Yes, of course. Do you want to have help doing that? Yup! Probably. This doesn't have to be a binary of decision and move. You have morph along a spectrum to some eventual goal, whatever and wherever that might be. I think I am more a consultant. I am already running my own limited company and doing my own marketing, i.e posting in linkedin, blogging and talking in conferences and organizing events in the space. Good point about outsourcing the back office stuff. I need to do that more. My pointing is, if you are a consultant, then make sure everyone else knows what as well. You don't want anyone thinking you're some disposable, generic, freelancer. What is your motivation for growing in this way? More money? More status? More interesting projects? I would personally be very reluctant to start hiring employees if I was already successful on my own. You say that one upside is “share responsibility” but I would argue that is not true. It’s your company, you alone are responsible and you’re now not just responsible for your salary but the salary and livelihood of all your employees. I think its a mix of more status and more interesting projects. It is true about the salary and livelyhood of the employees and that is a frighting thing. In my experience: Freelancer = revenue is mixed up in normal income and you pay the tax bill from your "personal" account. If a debt is incurred your house/assets are in the firing line. Some businesses won't touch freelancers for legal purposes. Contractor = offers same services as Freelancer but operates under another legal entity to protect their assets (umbrella company; limited company). Any debts incurred only impact the company not the individual. A contractor might join a team as an "external" and perform the same tasks as a regular employee. More than 50% of my colleagues fit this description, usually employed by a large-scale "body shop". Consultant = someone who offers specific niche services and operates under a limited company. I think by this definition I am a consultant. I run my own limited company and operate under that. You can build an ERP company with me: https://carbon.us.org Sorry but the last thing needed in the world is another ERP in my opinion. There's plenty of software available that has been in the market for 30+ years and are robust and works very fine. I think the business is in implementing these softwares and customizing them. Thats what I'm doing.