How to transition from freelancer to owning your own business and beyond.

Rupert - Validate founder

This is a question that I hear time and time again, amongst co-workers and freelancers. “How do I make the leap from freelancer to agency?”. Well there’s no clear cut answer unfortunately, but I do have some tips and guidance for you based on my experience working with startups.

So who am I?

Before we dive in, you might be wondering who the author is. In addition to founding Validate I run a boutique creative agency that focuses on supporting startups. The way I work is a little different to most agencies. I didn’t take the leap to running a large agency, but instead I took the lean approach. I hire talent per project, which means I have less overheads and can spend more of my client’s budget on the work. Of course there are pros and cons to this approach, but it’s a method that has worked well for me. I founded Validate to solve many of my own business problems, which in turn has developed into a tool to help bring together different industries to solve problems. Our aim is to help our users collaborate and to find answers which they might not find within their own social or academic network. We want to cross borders and increase the likeliness for great minds to cross paths!

Risks and rewards to starting a company.

So you’ve done your time. You’ve had your fair share of bosses, worked the 9-5 and decided you wanted the freedom to make something for yourself. So you became a freelancer/ consultant and things are going well. You’ve managed to get a client or two, but you’re asking yourself “where to next?”.

Before we jump ahead, it’s worth stating for the record that deciding to run a business is very much about risk VS reward. Make sure that you want to commit to the challenge 1110%. Then ask yourself; how much do you want to risk? And what do you want in return?… Is it material; a better quality of life, new car, nice house or perhaps a personal goal, passion project or even a way to improve your status and gain recognition?

Whichever it is, once you’ve established your agenda do your due diligence; research what other founders have gone through and how they achieved success in your industry, make sure to note their failures and pitfalls to avoid.

Think about what you’re offering clients.

This should be much bigger than you as an individual. The main thing that sets aside freelancers from agencies, apart from the size of their workforce, is their understanding of how to position themselves. Now, many particularly talented freelancers or consultants can be represented by an agent or agencies, and to some extent they’ll develop their own distinctive style or approach, much like a solo artist breaking from the band. However, in most cases freelancers just have their portfolio to show. They’re good, reliable and professional to work with. That’s great but this won’t necessarily help them take the next step up. If they haven’t got a brand or a way of positioning themselves to their prospects then they’re likely going to continue trading their skills and time for money.

So the next question would be to ask yourself; what do you want to stand for? This in return will lead to you developing your ‘offering’ and therefore what makes you seem dependable as a business. It’s also a way to distinguish your services from others in your industry. This branding is the beginning of you thinking and behaving like a company with values and a long term vision.

What lifestyle do you want in return?

As I’m sure you’re aware, running a business or a team of people will be a considerable change of lifestyle. You need to be prepared and ask if it’s a lifestyle you want. Do you like having certain freedoms, which might not be possible when you expand? Do you value your evenings and free time more than the success that might come from sacrificing them?

You don’t necessarily need to know the answers as some things are better learned. It’s just worth being mindful of this.

An exercise that might help is to visualise your future, and not just a rose tinted future where everything is blissfully perfect. Visualise some of the more real aspects, like travelling away from friends and family, strains on relationships, less holidays, more responsibility and the likeliness that things will simply travel this trajectory for a while. Speaking from my own experience, I’ve read a lot of articles and watched countless Youtube videos on the subject when I was asking myself the same question. I also stumbled across the video above which I found very useful.

To summarise; running an agency can take you to new heights that you simply can’t reach when you’re going solo – the sky’s the limit, however it also takes a lot more focus and effort to reach those heights and to accelerate above and beyond.

You accept the challenge. So how do you build your team?

For the early years as you expand your team, you’re not necessarily going to be earning more, in fact it’s likely you’ll earn less, both in money and time. You’ll need to cover the costs of your team and the people necessary to manage that team. This comes with overheads like an office, HR department, accountants, legal dept etc etc. These are people in your care and you need to provide for them each month which can be a huge burden and a lot of sleepless nights.

Find the right talent

Hiring the right people early on will make or break your business, it’s imperative. I feel that every founder and industry will have certain behaviour or personality types that they’re more drawn to. Often this might be a reflection of themselves, but this is something to be careful of. You don’t want to hire people who are like you. You should hire people that share your values for the business and where you want it to be. Granted, a good moral compass is something I hold very valuable. So get advice when hiring, ask friends for feedback and try to get a second or third opinion.

It’s not always about experience

Now you might think that you need the best and brightest minds to be a success. Veterans with years of experience and battle scars to prove it. And yes, of course hiring talent is key but the Googles and Apple’s of this world tend to make this hard for the rest of us. Plus, the brightest minds probably know this and so you likely need them more than they need you. This is never a good way to start any relationship. You need to find leverage, for both of you to align on. The perfect balance of what they can offer you and what you can offer them. As a business owner you are obligated to helping your employees develop and grow in your environment. They are under your care, so it’s your responsibility to nurture talent and make your work place conducive to productivity. An environment to breed both good talent and clients to match.

Buy low, sell high

I often look for talent that has potential; potential to grow that can be taught. Wall St will always tell you to buy low and sell high. Whilst I don’t want to compare humans to stocks I think it’s a fitting analogy. Often you just need someone who has the right working parts, and most importantly, the enthusiasm. For me enthusiasm is paramount. Running a business requires a lot of energy and so you need people who have it in abundance.

Many early stage companies like hiring contractors as they can be hired when the times are good, but cut loose when they’re no longer affordable. They’re an expendable extension of the team. They will likely charge higher rates due to this, but you have the flexibility to hire per project which can be very useful. With the new IR33 rules in play across the UK, businesses have to make sure that they aren’t bending the rules and blurring the lines between contractors and full time PAYE employees. This has had a huge effect on the industry.

Types of contract and their benefits for a startup.

  1. Full-time PAYE
    PROs: Much cheaper since you pay a salary.
    CONs: Potential risk that you invest time and effort in training them and they decide to leave OR you lose an account and you’re locked into a long term contract.

  2. Part-time
    PROs: Probably your safest bet. Affordable and you’ll benefit from economies of scale as you work together. Great way to ease into being a boss and also gives you the flexibility.
    CONs: They might be more likely to get snapped up elsewhere depending on the situation and circumstances.

  3. Freelance/ Contractor
    PROs: Professional, will likely get work done to a high standard.
    CONs: Will charge slightly higher rates and will require some guidance and time to familiarise themselves.

Make it official

Even as a freelancer with one or two clients it can still be a good idea to register yourself as a Limited Company. This doesn’t mean you have to make the leap to becoming a fully fledged ‘agency’, but it does give you a lot more tax benefits. Granted, if you’re not earning more than £30k then it may not be worth doing so.

Tide is a UK bank that are actually offering to manage the whole process for those wanting to register with Companies House. The best part about Tide’s Business Registration is that they’ll even cover the sign-up fee and set you up with a business account all in one go. Now I’m writing this as a UK resident, so this will vary slightly, but I imagine the fundamentals will be the same across most developed countries. The only thing that requires more of your time is the admin. You have to file statements to declare the status of your business and your revenue. This is actually a lot easier than it sounds and the cost of an accountant is nothing in comparison to the savings you make from deducting your business expenses and paying yourself in dividends.

Build up your client list gradually.

So you’ve set yourself up as a business and you want to offer more services. I’d suggest starting by reaching out to friends and colleagues in your network. In addition there’s a multitude of online platforms to help outsource some of your services if you can’t find anyone available. Now it can sometimes be hard to find quality professionals on platforms like Upwork and People Per Hour. You need to ask the right questions to really filter the talented from those that are there to make a quick buck. However these platforms are often a great way to bridge the gap and help you gradually offer more services.

If you find that you have a steady stream of clients knocking on the door then perhaps it’s time to get someone part time. This way, you can grow iteratively and test the water before committing to hiring a larger team. It can depend how quickly you want to expand but this is often the natural progression to growing your business.

The all or nothing approach

If your successful with your business then you can hit the big time. Like I said earlier, it’s risk VS reward. You want to try and do this in the way that reduces your own financial risk as much as possible. Now in order to get to a point where you have a full-time crew, you can go about this in number of ways:

  1. Fast and steep. Get investment, either from a bank or angel investor. This means you’ll have the cash to hire your talent. BUT, this doesn’t secure the work you’ll need to bring in. You’ll need to sell your new found services like crazy and let everyone know you’re now a professional business, so you can win trust.

  2. Go up a gear. Reduce your own salary to hire a skeleton team, even part-time. Before doing so, try to get a contract in place with any existing clients, to make sure you have a constant flow of work for the foreseeable future. If you tell your clients you’ll be offering them a better service, then why they wouldn’t they want the same? – Always try to find the benefit from their angle as well as yours.

Getting your business up and running will require a lot of effort, whichever approach you decide. So before making the final decision remember to consider your work/life balance and the sacrifices you’re willing to make.

Find a mentor

This maybe shouldn’t be so far down in the article, as it is very important. Surround yourself with people you trust and respect. Having someone at hand who’s older, wiser and more experienced can be invaluable. There are so many questions you’ll have along the way and so a big brother figure can often be a rock.

Always network and touch base with old colleagues

It’s a bit of a no-brainer, but it’s always helpful to be able to pull in a favour or two. When you do want to reach out to people it can be handy to keep a good list of warm talent available. It also means you can dispense with the formalities and get straight to work when a project comes in. So warm their seats and stay connected. It’s also good to get advice and share tips with fellow entrepreneurs. Granted, some of us aren’t natural born social butterflies, however it’s good practice.

What are your thoughts and experiences?

I hope this article was useful. Please feel free to share your own thoughts and comments, whether you agree or disagree with some of the points. I want to make sure we always provide accurate and valuable information so please chip in! It would be great to hear your views.

We’ll be writing many more articles in the future, aimed at helping remote workers achieve their dream job. Thanks for reading.

  • Avatar

    Aw, this was a very nice post. Spending some time and actual effort to produce a great
    article… but what can I say… I put things off a whole lot and don’t manage to get anything done.

    • Rupert - Validate founder

      Thanks for you reply Immobilie. I really appreciate the kind words. We’re a new platform, but we hope to be writing more articles on a regular basis. Don’t worry you’re certainly not alone. I procrastinate all the time! A method that works for me is to write down everything I need to get done and then put these into time slots on my Google calendar. If I don’t complete tasks then I set them re-occur each week so I can’t escape them. A little reward doesn’t hurt either. Good luck! 🙂

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