Millionaire Freelancer: Myth or Fact?
Is it really possible to become a millionaire when you are self-employed or are a freelancer? You bet. Below are 3 tricks that work.
First things first: If you quit your cushy day job because you wanted to strike it rich as a freelancer, then you're in for a rude awakening. To succeed as a solopreneur, you need a pinch of faith, a dash of luck, and about ten tons of determination. Only hard workers need apply, and loving your work is the first prerequisite for success as a freelancer.
In short: if you're in for the money, then you might be out of luck. You want to make a million bucks? Go climb the corporate ladder! (One word of advice: lately, that old corporate ladder has been pretty shaky, so be careful where you plant your feet, and make sure to grab one of those nifty golden parachutes, just in case…)
Can you really earn a million dollars as a rank-and-file freelancer? The answer is Yes.
On the other hand, if you love your work, if you're full of passion, and if you value independence above all else, then you were born to be a solopreneur. And there is no reason to think that you cannot find financial success and earn a comfortable living working for yourself.
But a million dollars? Sure, we've all heard the stories of entrepreneurs striking gold and cashing in at just the right moment—these stories always seem to start with two guys in a garage—but can you really earn a million dollars as a rank-and-file freelancer?
Well, sure, why not? Your services are worth whatever the free market is willing to pay for them, and you can work as many hours as you like, so there is no external limit (beyond the limitations of your body) keeping you from earning more. But, as you might expect, it takes a lot of work, a ton of luck, and a savvy business mind to make a million dollars on your own.
Doing the Math, and Making the Most of Every Contract
The two things holding most freelancers back from breaking the million-dollar mark are (1) the number of billable hours in a year, and (2) a per-hour billing rate ceiling that even the most successful freelancers find it difficult to break through.
If you want to make a million dollars billing by the hour, here are the numbers: Working 50 weeks a year, you need to earn $20,000 every week, or $4,000 dollars a day, Monday to Friday. Assuming you are working 8-hour days, that means you will be billing clients at a rate of $500 per hour. Unrealistic? A little. There are plenty of freelancers who charge $200 or $300 per hour, but any higher than that and you risk alienating your customers.
Bottom line: You will not get rich rich through the billable hour.
What then? Here are a few ways around this problem.
1. Project Billing. If you can come up with the right deal or project, you can and should bill clients by the project instead of by the hour. Big projects can create bu-coup bucks.
2. Residuals: Depending on the nature of your work, you can also do a deal that includes residual payments, that is, you build into the contract ongoing payments. When an actor does a movie, he can get residuals for years every time that movie is shown.
For the freelancer, this means creating work where, when people make money off your work in the future, either by reselling it, using it to attract advertisers, or incorporating it into a larger project, they will need to pay you a percentage of the earnings. That is your residual.
Similarly, you can create a product that can be sold over and over again. If you write a white paper on, say, “How Freelancers Can Become Millionaires” and sell it on your website, that five hours it took to write can create residual income for years.
The primary benefit of a residual payment model is that your income is theoretically unlimited. So long as your work continues to have value in the marketplace, you will continue to earn residual income.
3. Hire underlings: In a law firm, the firm hires young associates to do the grunt work. Maybe they are paid $50 an hour. But the client is billed $150 an hour. After taking into account overhead, the firm probably makes $50 an hour every time an associate works an hour. Tht employee doesn't cost them money, he or she makes them money, a lot of money. Employees like these are a profit center.
For the self-employed, for the freelancer and solopreneur, the most reliable way to make a million dollars is to do the same.
You need to become a true entrepreneur, which means building a business that can manage projects that you alone cannot do and in which you hire staff to do under you. By hiring sub-contractors, you can accumulate billable hours without having to complete every task yourself, and if you can find a way to “farm” your services by selling your business model, or by licensing a product associated with your brand, then you greatly increase your earning potential.
Your sub-contractors become your profit center.
The bottom line: if your goal is to make seven figures as a freelancer, then you need to think beyond your own direct hourly production, and you cannot limit yourself to the number of hours in a day.
Have a great story about how you made your first million while self-employed? Consider making a contribution to The Self-Employed Blog today!