[HeyLaughingBoy]

I worked in a team management/IC role at an engineering services company that tried to do staff augmentation, custom software/hardware design and their own products. I found that to be the worst of all worlds since there was a constant struggle for resources between those three "worlds." You'd get a client who had a project that was big enough to need three people, but because two of your guys were on a 1-year contract at $BIGCO, you either couldn't take on the project or had to tell the client they'd need to wait a year. At the same time, you don't make that much profit on the staff aug. to be worth it (IMO). The main attraction to staff augmentation is that you have a steady stream of income for a year or two from that placement.

However, when we stuck to our core competency in wearables/wireless devices, we had lots of return business and could complete projects more efficiently.

What I learned from the experience is that providing engineering services or freelancing can be very profitable, but you really need to specialize. Specialization allows you to become expert at doing a few things, which leads to more accurate time/effort estimates while being able to charge the same price or more (can charge a premium for being fast) as it takes you less time to complete a job. Trying to be everything to everyone, OTOH, means you're constantly churning while figuring out a brand new technology.

tl/dr:

Specialize and don't charge hourly.