
Ask HN: Evolving from freelancing gigs to a consulting company? - kashifzaidi1
	I feel like i am stuck in a loop, I see a lot of folks struck in this as well, I started a freelancing account on upwork&#x2F;freelancer&#x2F;similar site, a year or two later, I have an established profile, I want to build a company instead of getting gigs as an individual (because of the securtiy net &#x2F; the prospect of getting paid even when i can&#x27;t work etc). But the gigs I have as yet, don&#x27;t convert as they insist I be the one to write the code instead of someone I hire. Any advice on people who have been through this problem? how should i address it?
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canterburry
I spent a decade both as a "gig" consultant and as a "real" consultant. Here
are the differences I saw between the two.

"Gig" consulting - You are a skillset for hire or the client is simply short
on ppl to do the work. You are selling labor. While you have skillsets, the
client needs you for a very specific project/product and they manage you in
context of that project. You are two hands on a keyboard with bonus points if
you have a brain.

"Real" consulting - You come in with a "solution" which the client needs or
think they need. You are selling knowledge. They don't even know how to begin
and you are the brains of the operation. You are hired less on your skillset
and more for the IP you bring with you. The IP may be a process for how to get
from A to B or training materials along with work sessions with a team etc.
Yes, development may be part of the engagement but it's not what's actually
being bought nor is it what you sell.

To be able to hire ppl who do the work, it's very important to disconnect the
"who" is doing the work from the product itself. If you are selling a
skillset, the "who" performs the work quickly becomes a sticking point. If you
are selling a final product, an outcome...the who is less relevant.

While many "real" consultants bill hourly, many of the bigger consulting
companies sell "projects" and then make money on the margin. You can charge
more for knowledge than labor because knowledge is harder to valuate in $ than
an hour of labor is.

I.e. a friend of mine would sell white papers on particular topics within his
expertise customized to the clients use cases. So, $200 hourly for coming in,
meeting everyone, taking notes on needs, use case, meeting with CxO levels on
concerns and goals etc. Spend 5 hours updating a pre-made template with most
of the boiler plate info plus client specific stuff and charge 20K + hourly
billing for the finished paper of maybe 20 pages. Usually these would support
whatever agenda some CxO at the company wanted to push and needed "industry
expertise", "best practices" and "market research" to back it up.

Selling a product vs your billable time makes consulting scale better in terms
of revenues.

------
welder
How about charging more for your service so it's more worth your time to write
the code?

Also, I can recommend reading this blog post series on consulting for general
advice:

[https://kirubakaran.com/blog/consulting-
outline/](https://kirubakaran.com/blog/consulting-outline/)

As for creating a contracting agency, it becomes about sales and marketing.
You can market yourself as a premium dev shop if you find other senior
programmers to work with you. You have to get good at reaching out to
companies and offering them your services. Upwork isn't a good place for that
imo, but you could think of Upwork as just another channel for your sales
funnel.

------
Mz
_I started a freelancing account on upwork /freelancer/similar site, a year or
two later, I have an established profile, I want to build a company instead of
getting gigs as an individual_

Generally speaking, your freelance profile through an online service is going
to only get you more gig work through that service. Their contract typically
stipulates that outright. If you want to transition away from that, you will
need to set up your own website elsewhere and figure out how to get consulting
work through a different pipeline. You probably need a website and a portfolio
of some sort, plus a payment mechanism, description of services and means to
start promoting yourself.

All of these other things are additional business skills you will need on top
of whatever central skill (like programming) that you are actually selling. If
you can figure them out, great. If you can't, you might have newfound
appreciation for why the service has value.

I am doing this as a writer, not a coder. Having my gig work via a service is
my bread-and-butter and security to fall back on while I develop more
lucrative stuff that I enjoy more, like polishing resumes.

------
debacle
You're going to find that your abilities don't scale - the people who do what
you do as well as you need them to to be able to provide good service cost too
much for you to effectively arbitrage their labor.

~~~
OtterCoder
That is patently untrue. Otherwise, agencies wouldn't exist.

~~~
gt2
In my experience and close friends, the agencies hire consultants to do the
difficult work, and are not good at managing that more difficult work.

------
jayec
Keep doing what you're doing and get case studies and testimonials from your
clients to prove that you solved their problems. As others have said, clients
want their problem solved, not someone to do xyz. Prove that you can solve
problems and progressively apply for bigger gigs until you're in a position
where you need to put someone on to help you complete the project. If you do
great work and progressively take on bigger challenges then eventually an
agency will fall into place.

------
cweagans
Stop using freelance sites. They aren't worth it.

~~~
gt2
What about for people who have no contacts and can't find clients?

~~~
cweagans
If you can't find clients without a freelance site, that's the skill you need
to develop first. And if you have no contacts, you haven't been working in the
industry long enough, IMO.

------
akulbe
First, let me disclaim IANAL.

Depending on the wording in your SoW/contract (You _DO_ have a written
contract, right??) you may not have to disclose that someone else working for
you are doing the customer work.

It may also depend on the structure of your business. I'd talk to a lawyer
about it. I am in the same boat as you, and I formed as an LLC, so I've been
working on getting other work that I can sub out.

~~~
leepowers
A contract will not necessarily inoculate you against a charge of fraud.

It's legally dicey to represent that you personally will be performing work
and then sub-contract to another person. Usually the client won't care. But if
things go sideways (especially on a big contract with a lot of money at stake)
you are opening yourself to a large amount of legal risk.

Always be upfront and honest. And always negotiate in good faith. The best
legal strategy is to never engage in behavior that will require a lawyer to
defend.

~~~
akulbe
Going back, rereading what OP said. It wholly depends on the nature of the
contract. (Which we don't have here.)

Please don't attribute anything untoward to me. Reputation is _EVERYTHING_ in
this industry. I would _NOT_ suggest someone do something fraudulent, ever.

When you hire $PLUMBING_COMPANY to come fix a leak at your house, you don't
care _WHO_ does the work. You want your problem FIXED. YESTERDAY.

So... is it fraud if they send someone who is less experienced than the owner
if it's his name over the door, if your problem still gets resolved? No, not
at all.

So not knowing OP's details of the contract with $CUSTOMER, you can't assume
either way.

~~~
leepowers
Fair points. I was being a bit hypercritical. It all depends on what you
negotiate up-front.

------
zapperdapper
It sounds like you need to 'productize' what you were doing before. You didn't
say what you were doing but I will assume 'developing'. There have been quite
a few threads on this, but you could perhaps look to capture your knowledge in
a training course or e-book. Have a look at IndieHackers for more ideas.

------
leepowers
An agency is a middle-man that primarily adds value via management. It
abstracts away to costs and headaches of managing a project. As with any
successful middle-man your agency will need to position itself in a nexus of
supply and demand.

First, you need the demand. Ideally where the demand for your type of services
is above your current capacity to deliver. As in you're literally declining
well-paying work with reputable clients because you simply don't have the time
to build all the projects yourself.

Second, you need a supply of talent. A network of other developers who are
dependable who you can call up on demand or hire outright.

If you lack either of these the agency is going to have a rough time, and
probably going to fail.

Third, as an agency you will make money on the margins. Revenue will flow
through your business and you will capture some percentage of it. This is very
different from consulting where you capture almost 100% of the revenue, less
some minor expenses.

The reason for this is simple: labor.

Let's say your rate is $100/hr. Since you're a consultant operating in a
global free market that $100/hr is competitive within the market, and is
mostly inelastic - there's not much room to go up or down. Another developer
with your same skill level is going to cost $100/hr.

So where's you're margin? You can find margin by hiring a less-skilled
developer at $75/hr. But then the quality suffers (and so can your reputation,
reducing demand). Or you can attach a $25/hr "agency fee" to every hour
worked. Or you can find a sucker who doesn't know the true value of his labor,
and underpay and overwork him. (This last option is how most agencies
operate).

Instead of making $100/hr consulting you're making $25/hr for each hour your
sub-contracted developers work. This can work out nicely if you have a high
level of demand, and if your developers are responsible self-starters who
don't require a lot of management work on your part. But you would need some
multiple of your current workload to earn the same amount of money.

My advice is to _not_ fold your current consulting into an agency. Instead,
start an agency as a side-project, incorporated as a completely separate
business. An agency needs to be marketed very differently than an individual
consultant. Find other developers and marketing people you can partner with,
agree on a compensation structure, and see if the company can land some big
contracts. You can even sub-contract the project work to yourself individually
at your normal labor rate.

It will be difficult to find partners who are comfortable with this. It's very
difficult to work on a margin basis when your partner is working on a labor
basis. But if you can earn $100/hr on the open market why would you work for
your own company for less? This is one reason why many consultants end up
making less money when they start an agency - they undervalue their labor
because it's their company.

~~~
akulbe
Have you set up an agency before, Lee? Just curious what your experience was,
if so.

