Ask HN: $2k to $3k a month part time, but is it sustainable/ethical/scalable?

[mntwiddler]

Skip to the tl;dr below if you want the short version.

For the past 10 months I have made between $2,000 and $3,000 a month (Gross Profit). I do this part time (nights and weekends) as I have a full time job. My business model is simple. I complete digital projects for local small business’s using freelancers. I make money by placing a margin on what the freelancers charge me.

For clarification I do NOT do software development. It is pretty much restricted to web development (editing and creation), graphic design (marketing materials, labels, logos etc.), and white hat/lite SEO (article creation, keyword optimization, etc).

I bill myself as an ALMOST all inclusive digital services provider. All of my clients completely understand my use of freelancers and are fine with it. I have only had 3 clients during the 10 months and am currently only working with 2 of them. I have connected with all 3 of these clients through word of mouth. No marketing has taken place. Hell I didn’t even have a website until a month ago and even now it’s just a landing page with an email capture on it.

Here is my overall question. Is this a sustainable/ethical/scalable business model?

Obviously if I can get the clients I could do this indefinitely but will other companies buy in to my use of freelancers? How do I market to businesses aside from just knocking on doors?

Is using “outsourced” talent and then placing a margin on it unethical because I am so greatly undercutting local talent?

Can I scale this? I have run the numbers over and over and the more people I hire the smaller the profit margin gets. Finding other people with the knowledge, skills, and dedication that I have to “replace” myself will be a significant challenge.

Should I quit my job and try this full time?

TL;DR I started a business using freelancers to complete digital projects for local small business’s. Should I quit my job and do this full time?

[cmckay]

A better way (in my opinion) to ask the question of whether or not your business model is sustainable/ethical/scalable is to ask the question: are you adding value? I think in this case, the answer is clearly yes. Dealing with freelancers (and especially international freelancers) can involve a lot of time and effort; you're taking care of that end of things. It's clear that your clients could go out and find and hire their own freelancers, but that involves work they would rather pay you to do.

As far as scalability is concerned, consider raising your prices. Don't think of it as rent seeking; think of it as providing a valuable service (managing a team of outsourced talent), and price accordingly.

[byoung2]

It is completely ethical, and is the foundation of many business models across different industries (think general contractor for construction hiring subcontractors for plumbing, electrical, or tile work).

It is scalable as long as you are not the bottleneck. For example, if you are the only one meeting with clients and drawing up contracts, you will find yourself stretched pretty thin doing that. Imagine 50 clients all asking for status updates at the same time.

I would explore the possibility of standardizing your services and prices, and making it a self-serve model so clients can sign up and manage their projects through an app or website. Then you can free yourself up to just do marketing.

[mntwiddler]

I really like the idea of standardizing my services and pricing and it is something I have thought about. However, I charge my clients on a time and materials basis. If they come back 10 times with revisions because they are going back and fourth on a decision I don't want to eat that time.

The bottleneck is what concerns me the most. I would have to hire someone else, pay them a good salary, and train them to do what I do if I don't want to be the bottleneck. Finding a quality person and training them doesn't concern me as much as paying them. My margin % is pretty good but I am not billing out at $100 an hour. So that worries me.

[richsin]

Your business, as many people have assured you, is completely fine. It's actually a great service for some businesses.

Find bigger clients, this will allow you to keep your billings high if your worried about bottlenecks and hiring. Look into https://elasticsales.com/ for cold calling as a service.

Why not do both versions of the business? Create a separate brand and package together services, flat pricing and slap on a healthy markup to offset your advertising and marketing. PPC, Social Media, etc would be great for this.

Get that monthly revenue up and then build a team around your processes. Hiring will always be hit or miss - just make sure your hiring them for what they know and not what they can learn - if you want to save time.

Best of luck!

[celticninja]

dont tell people you are using freelancers, as far as they are concerned it is your "design team", make no claim to in-house people. they are coming to you as a one-stop shop so they dont need to deal with a graphic designer, web developer and SEO, they have a single poitn of contact and you are getting paid to project manage the freelancers.

whether it will scale is another question, but if you dont try you wont know and worst case scenario you drop back down to evening and weekends and little extra $$ in your pocket

[startupstella]

It sounds like you are just great at sales for creative work. If that's the case, perhaps you can make more money doing BD for a dev shop or creative agency? I think the question is what the end goal is: if it's to make a lot of money, you'll have to model out the time, resources, and clients you'll need to make X amount of money and weight that vs the opportunity cost of doing BD for someone else. If it's the autonomy/owning your own business, that's a different set of analyses.

[mntwiddler]

It is definitely a wanting to own my own business thing. I wouldn't say I am great at sales. Actually part of my fear of doing this full time is that I won't be able to generate enough revenue. I really just don't know the correct process to hunting out and getting sales from business's.

[grumps]

Essentially this is how some web/digital agencies work. They higher people and contract out the work. I see nothing wrong with it ethical.

That just depends on your ability to market yourself. In reality I would suspect you'll just evolve into hiring people to reduce risks associated with freelancers.

I assume you have some legal contract that you put in place with your clients. I would ensure that it says you can subcontract out work.

[sharemywin]

Time is money your researched and found talent that business what to use. So ethical yes. Sustainable probably. In business trust and dependablity are as important as price. Your providing a layer of that. If the contractor doesn't deliver you chase down the solution untilt he customer is happy, that adds value. Ask for referals, do more networking at small business functions get more clients before you quit. Get business cards hand them out to everyone you meet. PWC, E&Y all offer consulting services and they are billion dollar businesses. Will you get in an incubator probably not, but who cares. I would take about 20% of you profits and invest them in new marketing methods until your big enough to fund/work on a product or Saas(if you want a scalable business). Also, look for ways to sell reoccuring services to your clients with a markup(Hosting, backup services) Ask your clients where their pain points are and find more thigns to sell them. Build a service business then automated the most time consuming tasks.

[wikwocket]

I would echo everyone who has said there is nothing shady or unsustainable about this. You are managing people with skill-sets to complete work of business value for customers. This is essentially how most of the world's companies run.

As for whether it is sustainable for you, you might want to get another few customers, to see if your pipeline is repeatable. You may also wish to accumulate enough savings to live on for 6-12 months. That way you'll have some runway to ramp up your rainmaking, and figure out if you want to do this for a living, or go back to a day job.

[driverdan]

This is exactly how many creative agencies work. They have some artistic talent in house but often farm out dev work to freelancers. There's nothing wrong with it and yes, you can make good money doing it.

[Piskvorrr]

IMNSHO not sustainable: copycats are likely to spring up, narrowing your profit margin.

[patmcc]

Is there a market/business model where that isn't true? The key to sustainability isn't to be the only person doing something, it's to keep improving on how you're doing it.

[sharemywin]

Not if you learn how to sell. If they are happy with your work you should be able to keep them as clients. Every once in a while throw in an extra for them(doesn't have to be expensive). Would that cheapo shop down the road do that for you?