From freelancer to founder: How to build a scalable business

Are you an independent professional ready to scale?

And no, I don’t mean it the Evan Carmichael way - you know the guy who has “changed and manipulated time” so he gets three times as many workdays every single week.

To the rest of us, his intriguing concept is perhaps more commonly known as mornings, days, and evenings. And also, working 18 hours a day is a sure way to burn out.

No, what I mean is moving away from selling your time, to something more scalable. Maybe build a consulting firm with full time staff, or perhaps launch an innovative startup in your niche.

A caveat upfront though. This article is not for everyone. It’s more than fine not wanting to scale, not wanting to grow something big and shiny.

In fact, for many, NOT wanting to be part of something big and ultimately corporate was the very reason for going independent!

Many, if not a majority, of senior independent professionals left traditional employment to focus on what they love doing: Deliver impactful work that makes a real difference; as opposed to politics, pre-meetings, team management, and career posturing.

If that’s you, that’s perfectly fine. In fact, in my next article I plan to share tips I have picked up from some of our most successful freelancers on how to grow without going down the building a business route.

But for today, let’s focus on how to scale and go for broke (no, not literally). Here’s what I’ll cover:

• Do you have what it takes to build a business?
• How do you validate if there’s demand for a scalable offering?
• What business-building options do you have? 

Should you even start a business?

Before diving into the nitty-gritty, it's essential to understand the profound shift you're contemplating. Transitioning from freelancer to founder isn't just a title change; it's a complete mindset evolution.

As a freelancer, your primary duty is to win and deliver quality work.

But as a founder?

Your plate expands.

Suddenly, you're not just an expert in your field; you're a leader setting visions, managing a team, overseeing finances, and juggling a myriad of responsibilities that come with building and steering a ship.

So, with that in mind, let's delve into the big questions: Is it for you, and do you have what it takes?

Do you have what it takes?

Let’s assume you’ve decided that you want to build a business out of your independent career. The hard question you need to ask yourself is this: Can you pull it off?  

Perhaps you’re an IT consultant, and until now you’ve either been employed as a specialist, or worked as a contractor. In many cases, you might have contracted with your previous employer, or maybe your former bosses have moved on to new companies and hired you.

Building a business, whether a boutique consulting firm, or a more scalable venture, is very different to being a solo entrepreneur.

You must juggle more balls than your average circus artist without losing sight of the core client proposition.

You need to find cofounders, lead and motivate a team, develop an MVP, a go-to-market plan, and not be afraid to ask your contacts for favours and introductions. You’ll need to beg, borrow, or steal to an extent you will probably not be comfortable with. But you’ll still do it.😊

And yes, then there’s the joy of the admin side of business. Whilst you can outsource much of the legal and financial management, it remains an annoying distraction at best or a time suck at worst.

Validate demand

Okay, so you are sure you want to scale, and you think you have what it takes. Great. But how do you know if there is sufficient demand for your product or service?

One of my go-to sources when it comes to product and proposition is Lenny Rachitsky . He recently interviewed 30 successful startup founders and this what they told him when it comes to demand validation:

1. The do-it-manually path: Don’t build anything—solve the problem manually first, for a small number of companies
2. The listening path: First talk to tons of potential users, and then start building
3. The prototype path: Start building a prototype and then co-create it with a small number of design partners
4. Just launch and see how it goes path

Source: Lenny’s Newsletter, 15 August 2023 (paid edition)

I’d like to add a 5th approach:

5. Pre-sell your product

It’s the reverse of “don’t sell the skin until you caught the bear”. What it means is don’t build anything, other than a fancy deck or landing page. Sell, and see if people are prepared to pay for it. If they do, get your skates on and build!

At the end of the day, any validation framework boils down to two questions: "Do they want it?" and "How much are they willing to pay?"

What are your options to build a business?

Consulting firm

If you’re already an independent consultant, or maybe still work for a big consultancy, this may come naturally to you.

The idea is very simple: Sell and deliver more hours by hiring more consultants.

The economics work better than if you are a one-man band as you can go down the traditional pyramid structure, with more junior, less expensive staff, doing a lot of the legwork.

In terms of what kind of consultancy you should build, you have two options: Stay very focused on your own niche and do more of the same, or, go broad and capture more of your clients’ wallets.

Specialised consulting firm or agency

This model focuses on a specific niche or industry. The advantage here is that you can position yourself as the go-to expert in that particular domain, allowing you to command higher rates and build a strong reputation.

Full-service consulting firm

This model offers a wider range of services, catering to various needs of the clients. While it allows capturing a larger market, it requires a diverse team with expertise in multiple areas.

If you’re an accountant with an exceptionally strong standing with let’s say SME CEOs and CFOs, you could try to capture their consulting spend across financial, legal and operations by expanding your team with such skills. This approach, however, means you will compete with both big, full-service brands and specialist boutiques, so it's not for the faint-hearted.

For most independents, it makes sense to stay sharply focused on your niche, at least in the beginning. However, do consider adding skills in closely related areas, especially where the buyer is one and the same person.

Examples could include:

• HR Consulting & Corporate Training:

If your niche is HR consulting, maybe adding corporate training or leadership development programmes make sense.  

• Website Development & Digital Marketing:

If you're an expert website developer for SMEs, you might find that clients often need additional services like UI/UX, SEO optimization, content creation, or even paid search and social media marketing.  

• Developer & Agile Coaching: 

If you're an expert developer, in our experience the CTO is more often than not also looking for agile coaching support.   

❓But what if you're done with a business model that relies on selling hours — whether just your own, or for a team of consultants❓

Startup

Enter the startup world! The dream of creating the next big thing and making it to the cover of magazines. I’m still holding out for that Times feature by the way. 

As an independent professional, you already have a wealth of experience and insights into the challenges faced by your clients. This can be the foundation for your startup idea. Two examples to get your juices flowing:

Legal Consultant & LegalTech

If you've been a legal consultant for years, you might have noticed the tediousness of certain processes. Why not develop a LegalTech solution that automates contract reviews or streamlines patent applications?

Graphic Designer & Design Platform

As a seasoned graphic designer, you might have struggled with sourcing assets or collaborating with clients. How about creating a platform that bridges this gap, offering tools tailored for designers?

The origin of Outsized is not dissimilar. The idea came when yours truly was in private equity, trying to find good quality external support for our portfolio companies. 

The initial proposition was to match insurers and banks to boutique consulting firms with deep execution experience. The problem was that the proposition was very service-heavy: From delivering scoping workshops with clients, to running RFPs, and writing recommendation reports. 

It was great fun and profitable, but not very scalable – which sharper minds would have spotted much earlier. 😊  

But, as I've been told many times, if you haven't got it in your head, you must have it in your legs.

Like so many other startups before us, we pivoted. In our case it was to a marketplace model for highly skilled independent professionals, where we could leverage technology to a much greater extent, whilst keeping the human element where it adds value.  

So, before embarking on a startup journey, remember that building startup companies is quite distinct from consultancy.

Building a startup is not just about capitalising on your expertise; it's about forging new paths and disrupting norms. It’s about switching from offering services, to creating scalable solutions. It means you'll need a new plan, be ready for more risks, and adjust to what the reality tells you and a constantly changing business world.

Joint Ventures

A final example of going from independent to building a scalable business is Joint ventures (JVs).

They are the sophisticated elder sibling of partnerships. They involve two or more businesses coming together to achieve a specific goal, often bringing their unique strengths to the table. For an independent professional, JVs can be a fantastic first step to test scalability, without shouldering all the risks and responsibilities alone.

Consider these scenarios:

• Architect & Property Developer: An architect with innovative designs might partner with a property developer to bring those designs to life in prime locations. The architect brings the vision, while the developer brings the capital and resources.
• Data Analyst & Marketing Agency: A data analyst with expertise in consumer behaviour could join forces with a marketing agency to offer data-driven marketing solutions. The analyst provides the insights, and the agency crafts the campaigns.

When entering a JV, it's crucial to have clear agreements in place: Who's responsible for what? How are profits (or losses) divided? What's the exit strategy?

And, crucially, who pops out mid-afternoon for the double espressos?

Conclusion

So there you have it, from freelancer to founder, and every twist, turn, and potential espresso run in between.

Remember, scaling up doesn't mean you have to trade in your t-shirt and comfy slippers for a tie and shiny CEO shoes.

It's about finding the right fit for your ambitions, whether that's building a skyscraper or just adding a fancy new room to your existing house.

Whatever path you choose, just remember to enjoy the journey, laugh at the bumps, and always keep a stash of your favourite coffee on hand.

Cheers to your next adventure! 🚀

Until next time,

Niclas

PS. Don't want to build the next unicorn? Next time we’ll take a look at how to grow your independent career without the need for building a new business...