Freelancer woes: cash flow issues

Freelancing is not all rosy and smooth sailing at all times. There are risks associated with it and one of the more common ones is getting paid on time.

At the beginning of my career, I faced the issue of not earning enough. My income dropped below the salary that I used to earn and had to face a few hardships due to depleted income. But within a couple of months my income came up to the level of my previous salary and then it went even higher.

Though there was a drop in earnings, I still had the money coming in on time. So I still managed to make the critical payments on time.

But his month I faced a serious problem of not any money coming in at all. I haven’t still got paid for my work last month. And I haven't got any money left in the bank right now.  Already I am overdue for my CC payment and on the verge of getting interest charged for the delayed payments for my mortgage and the lease.

The reason for the delay is my client has not got paid in time by his client. Technically though it is not a problem of mine, I have had to accept the delay. Our current working arrangement does not include any penalties for delayed payments.

To be fair by the client, he offered me to his CC number in case if I can make any payments using that. He also offered to pay for any interest or delay charges levied upon me.

I do trust my client and have had a very trusting relationship with him. I have worked for him for over an year now and he is a great client to have. No two words about it. I think I could have averted all these headaches had I built a emergency fund. But by undertaking a refurbishment of our home, I had dug into all my savings and even went into additional debt. Luckily I have repaid most of that debt.

I think this is an eye opener for me. I need to immediately start building that emergency fund as without it I’m walking a very fine line and living month-on-month payment. That is worse than living paycheck to paycheck, as my monthly income ha the potential to vary. A significant decrease may put me in another quandary.

Outsource your life aka I need help

I think I have reached a stage where now I can outsource some aspects or tasks of my day to day life. I have too many things going on and I find it difficult to male things happen. And as there are a million things in my head I find it really difficult to concentrate on the task at hand.

I think the most parts of where I can use some help is getting things done with respect to the application ideas that I am working on. My applications are getting pushed to the back burner and the the prospects of them seeing the light of the day is getting delayed as I am concentrating my energy onto client projects, which I need to do to pay my bills.

But if I can find help, that costs me less than what I earn from my clients, and also for the skills that I do not posses or am not an expert of, then I can actually get more done and move my projects to completion. But in order to pay for these services without taking a dent in my income I will need to put in more hours into my client projects and earn the cost of outsourcing.

Cost of opportunities

I hold another gig as a consultant to a local IT company apart from my usual gig as a freelancer for foreign clients. I took up this gig as it gives me an opportunity to get out of the house once in a while and interact with local colleagues and business people. I didn’t want to alienate myself completely from the local IT industry. Let’s call this company LIT.

I am working for them as a project consultant for LIT. When I signed up, my estimate was that I would put in about 5 hours of work for this company for a week, and in return I didn’t ask for a regular pay, but negotiated a percentage of the profit form each project that I worked on.

Some opportunities are opening up for LIT. With each new opportunity, requires someone to work on them, create proposals, forge partnerships, do a bit of pre-sales. As things stand now, I am the one who has to do all that work. All these opportunities come to me as project consultant and it is my job to bring them to the stage where the deal is inked.

I AM exited about these opportunities. For starters it gives me a chance to interact with some of the top people in the industry and in business and public sectors. I am the deal maker and the negotiator. The financial prospects of these opportunities are also pretty good. In the event of them working out, LIT stands to make millions. And and per my agreement, I also tend to benefit.

But this money will realize for me only when LIT makes money, which is sometime down the line. I was not planning on making expense money with LIT. The money I make from LIT was going to be my bonus money. And I was planning on only putting around 5 hours of work into it.

Taking up any additional work would throw some spanners into the work that I do for my regular, expense earning clients’ schedules. I don't want to antagonize them too much as without the income earned from them, I would be in a major fix, without the means to meet my monthly financial commitments.

This made me realize that I am more of a freelance employee, who depends on a monthly paycheck, rather than the entrepreneur who works on building a business so he can move away from the daily grind of the business operation and look for more investment and business opportunities. That is where I want to be, and for that I need to work on a strategy to create multiple, recurring income streams that are not directly dependant on the time that I spend on them.

Getting back to the LIT opportunities, they are high value projects and as such, tend to drag over for sometime. Specially the projects involving the public sector are not swift. I have been working on a couple of projects for the past ten months and as we are about to close it, something happens that will drag the project for another month. There were two elections alone that resulted in a delay of 6 months. Also, there is a degree of uncertainty and an element of risk associated with these opportunities. Sometimes they may never work out, the government may cancel the project or they might run out of funding or there maybe a change in the government and the projects may take a completely different direction.

If I wasn’t dependant on the number of hours that I put in for my foreign clients to cover my monthly expenses, I would work on these opportunities without any hesitation or a wink of an eye. I would rather spend my time on opportunities that have the potential of giving me a higher return, rather than putting in hour after hour for an income that has a ceiling. But right now I can’t afford to do that.

The key to me breaking the cycle of dependency will also come from these opportunities currently at LIT’s door and from the other application ideas that I am toying with. These are the opportunities which has the potential to earn lump sums or earn an income which is not going to have a direct link to the number of hours.

Right now I am weighing the cost of all the opportunities on the table. While I am not free to choose the opportunity with the greatest return I am trying to engage all these opportunities as much as possible, at the expense of all the time I have, day and night. My hope is that I would be able to break free from the employee pattern and move to an entrepreneurial pattern.

Ideas galore

My mind has been a flush with new ideas lately. An idea for a new product or service has been dawning in mind at the rate of one per week.

These ideas have been keep me awake at night and I have been spending g quite a bit of time going through them, refining them and designing them in my ideas book. This makes it seem like I am working forever.

The problem with all these dawning at this rate is that it is next to impossible to bring them to realization. I have started to work on one such idea and it is shaping out quite well. I have set a deadline to get a beta version out.

But with my regular gig which is an hourly gig, also flush with work these days. The client is giving me more and more projects to handle as well as additional responsibilities. I have become an important cog in his machinary and I am puttin up 40+ hour weeks for him.

It seems to be a season of high brain activity for me. I need to either find funding and work full time developing these products with a team. Or I need to put lean start-up ideas into practise and run through them as fast as possible.

I need to find a couple people to team up with me to take care of specific areas. I need to team up with a graphic designer with an eye for clean design. Then I need another person to take care of social media marketing.

Why Engineers Hop Jobs

Interesting post: Why Engineers Hop Jobs

I can quite relate to it myself. As a twenty something software engineer I used to change careers almost at a regular cycle of two years. Only once did I change the job for pure monetary reasons. I had a dick of a boss who went to great lengths to not to raise salaries of his staff so he could get a fat bonus at the end of the year.

Twice I changed jobs (thrice if you include the above as well) because I didn't quite agree with the management style of my bosses. One guy (not the above) was the #1 a%% of all time. The other time the boss of my boss could not properly evaluate my contribution because I didn't graduate from the same university as him. He could only see value of graduates from his university or school, and I was from neither.

And once I changed the job because I was really bored and was seeking a bigger challenge. (The challenge was great but the boss ended up being the a%%)!

So now I am working for myself. Luckily managed to find clients who are great to work with, who appreciate my contribution to their businesses. But the most liberating factor is I am not doing a job. They are my clients. Don't feel obligated.

Now the only thing I have to worry about is when one day I grow into a company, I have to make sure I don't act the way those bosses acted!