A Case for Freelancers

I’m a freelancer and I’ve often wondered why companies are generally so opposed to hiring freelance, work-at-home types. Sure, it probably doesn’t make sense to have all of your staff be freelancers but, as I hope this data shows, Corporate America could make a lot of people a lot happier and, at the same time, make a lot more money.

Files

This looks better in the saved-as-html Excel version.
Or – just download the Excel sheet and play.

Data

One of the fun things a company I freelance for does is hold “boot camp” for newbies. One of the speakers at boot camp was one of the owners… who’s getting a PhD in Economics and (along with the two other owners) is genuinely a great guy. Moving on… his talk showed how they make money off employees. Taking those numbers I drew a rough comparison of the cost/benefit of hiring freelancers.

The data is pretty straight forward. Hours per year * billable rate * utilization is how you figure out how much money the company is bringing in before expenses … this assumes you’re billing the client 70% of the time… which is what the company I freelance for estimates is average for employees. Overhead covers rent, computers, all the costs it takes to run a company.

Note – these numbers are examples… not necessarily what I get paid or what I’m billed out for…

  • hours per year: pretty self explanatory 40 hours * 50 weeks (about).
  • billable rate: rate the company bills me out at
  • corp tax: tax company pays on total billable hours
  • benefits: corporate welfare… someones got to pay the backwards medical industry
  • overhead:: rent on building, computers, all that paper for people who like to print the internet (print http://*.*.*) …
  • utilization:: according to the owner this is about the average utilization for a full time employee. He said, once you start going over 80% people start quiting. As a freelancer I’m 100% billable (except for meetings they call me into which aren’t project specific, which is rare). In other words… they’re not paying me for water-cooler-gossip-time.

Pay special attention to the analysis numbers!. Per billable hour the company makes 47% more off the freelancer. That’s huge. Even if I’m really off on something this leaves a lot of wiggle room. Also note that this is a % of billable hour – so, if I work 10 hours a year or 2080 the results are the same!

Pie charts are always fun

Profit for the company as a % of a billable hour is in GREEN

Full time


Profit is in green… easier to see here

Freelance


Profit is in green… easier to see here

Wrap up

So, why don’t companies want to hire us freelancers? I think there’s a perception that freelancers, and people who work from home most of the time are:

  • lazy: Maybe… but so are lot of corporate-cube-dilberts. Freelancers are A LOT easier to fire once you find this out though.
  • not team players: Maybe. I spend a fair amount of time with my team though (about 10% of my time is in-office) and I’m constantly emailing and IM’ing with them. But, the jobs that make sense for freelancers are things that can be done largely solo. I’d counter this by noting that someone who’s not boxed up with everyone else 40+ hours a week is also a lot less likely to get in arguments, etc.
  • too expensive to manage: I believe this is project dependent. You don’t give a project that’s dependent on tons of employee interaction to a free lancer… if you do, then, yes, management is going to be a nightmare.
  • not there when you need them: Again, very project dependent. I should also note that, the company I freelance for is 6 miles down the road and I can be there in 20 minutes. They regularly call me in on short notice and it’s not a problem.

But let’s look at the benefits for the company

  • I’m never burned out: I work when I want to (within reason), on what I want to (again, within reason). If I’m falling asleep at my keyboard I go off the clock and take a nap. If I need to take some time off or can’t face a computer (happens to the best of us)… I do it, instead of going crazy.
  • I’m optomized: Within reason I work when I want to. Everyone has good hours and bad hours. What do you think the chances are that that’s 9-5 for the majority of the world? I wake up at 3am everyday and crank out 10 times more code than I can in the office… I don’t know why… that’s just the way it is. And I know a ton of people in this boat. If I’m hung over or having a “bad brain day” then I don’t work… instead of going into the office and distracting everyone else with my A.D.D. that day.
  • My office kicks ass – FOR ME: I have 6 computers, tons of monitors, a kick ass kitchen, I can blast my stereo without a political science class, my desk is the way I want, I have the light the way I want it, etc., etc…. I can fart whenever-I-feel-like-it :) I’m not “stuck in a fucking cube” which is something you’ll hear from 90% of corporate america. This allows me to kick-ass when I’m “on”
  • No peak hour commuting: When I go into the office I generally do so off peak hours (meetings at 10am… not generally 9am). This is good for all of society.
  • you get the point…

So, in summary, I’m stumped why these positions are so hard to find. I’ve asked every person I’ve interviewed with for over 15 years and have never had any interest. Every company I’ve ever worked for has tons of projects that’d be perfect for a freelancer and yet almost none of them go this route. At worst, they hire contractors and bring them in-office, full time… which I’d argue is the WORST thing you can do. Contractors are notoriously horrible, unhappy, left out of anything “team”, over paid, hard to train, etc., etc. Usually these projects just don’t get done (which might or might not be a good thing). At a company I recently left these projects include – “ability to analyze data for marketing”, “a way to find research that they’ve spent 10K+ to develop”, something as simple as “a way to log and track customer complaints” and, virtually every R&D idea that’s been proposed.

I lucked into my freelancer position but I really don’t understand why this isn’t at least 15-20% of any company. Enlighten me readers.

2 Comments

DadMay 6th, 2006 at 4:39 pm

Hard to find a hole in the logic. The answer to your primary question is that managers need to control, and if they can’t glare at you once a day, they’re not earning their keep. The most common excuse I’ve heard is that they don’t know how many hours you’re really working. The second is “if they let you work at home, then they’ll have to let everybody work from home”, which is equally stupid.

I’m not sure where you could find the statistics, but I’d be willing to bet that more people than ever are virtually working, especially since the recent meltdown. Also, 90% of the way Hollywood (the movie people) does business is through consultants, with very few direct hires.

Also, not everybody wants to work by themselves. For a lot of people, the socialization aspects of work are one of the major benefits (hard to complain about your asshole boss when you’re talking to yourself).

TobiasMay 6th, 2006 at 5:05 pm

Ok my humle point of view here. I can come up with many reasons why freelancers wouldn’t work but here is just one main point. I think that a lot of work could get outsourced to freelancers but it’s hard to define which kind of work.
You need to have a core team that understands the application and how the business works – freelancers wouldn’t work. The core team interacts closely with business management and sales to create the best product based on customer feedback. The core Dev team needs to hear from customers directly as well so that they can create a better product. I don’t see how freelancers could overcome this hurdle.
So the question is outside of the core group which pieces of the work can get outsourced to freelancers.