Someone just emailed me saying he was looking to leave his job as a Ruby on Rails developer and team lead and become a freelancer and asked for advice. This is what I wrote:
I would say just register an eenmanszaak (sole proprietorship) at the KvK and get a business bank account so you can keep business and personal expenses separate (I use Rabobank but they’re quite expensive). An accountant isn’t absolutely necessary but I find having one makes my life a lot easier, especially when you’re starting out and need to learn about BTW (VAT) and what can be deducted as an expense and what can’t.
Beyond that, just setup a one page website saying what you’re good at and giving examples of clients and/or projects. People will Google you when seeing your email address or after they meet you in person, so just a simple site is really useful. Also, I am a big believer of attending tech meet ups, both to keep up to date on tech developments and to network and hear about jobs. I keep a pretty exhaustive calendar of what’s going on in the Netherlands: http://www.bubblefoundry.com/dutch-tech-meetups/. However, I know some people aren’t into networking and going to events, so that’s one thing that I can bring to things as their agent.
In terms of going cold turkey, it definitely makes sense to have work lined up before you quite your job. I know a lot of people who when becoming freelancers start with their past employer or previous clients as their first customers. This makes sense because they already know and trust you and you won’t have to learn about their project at the same time as you adjust to the life of a freelancer.
However, if you can’t or don’t want to do that, it can be tricky to line up work before you leave your job. Looking for work takes time, and it is hard to setup meetings with potential clients or even to start work if you have to work around a normal full-time job.
Beyond that, freelancing involves a lot of ups and downs, with long stretches spent looking for work and then times when you’re overwhelmed with possibilities. Of course this is the key area where I can help, smoothing down the peaks and valleys into something a bit more sane. However, you do need to know that it’s just how things work and plan for it, both financially and emotionally – sometimes it just takes several weeks to find the next gig!
Because of the ups and downs of freelancing and because you have to pay for a lot of things that you didn’t have to as an employee (accountants, office supplies, various government taxes, etc), you need to charge a much higher hourly rate than your equivalent hourly rate would have been as an employee. You need your hourly rate to cover both the time working for a client and the time looking for and landing the client. Most experienced developers I know in the Netherlands charge between €60 and €80 an hour. A few charge more, while younger, more inexperienced ones may charge anywhere from €40 to €60.
Because bread-and-butter clients who give you lots of predictable work remove so much uncertainty, you can afford to give them a (perhaps significant) discount on your normal hourly rate. You may make a bit more from 4 projects with 100 hours of work at €80 an hour as from one client paying you €60 an hour for 40 hours of work each month, but the latter is a lot more predictable! Of course, some people (like me!) often prefer doing lots of different gigs in order to learn more and meet more people.
Speaking of charging, in general you’ll want to charge an hourly rate. Clients understandably want predictability and a fixed budget, but those are hard things to guarantee as a freelancer, especially when starting out. You don’t want to make promises you can’t keep. And you’ll find that things often take a lot longer than you excepted, both in calendar time and in billable hours, often because of no fault of your own (i.e. because of the client! ;-). Once you have developed some specialties, ‘products’ (whether just things you’ve done a lot and have bits of code you can reuse or even real products you sell) that you can easily sell without much additional work and/or do with a very high degree of confidence of the amount of time required, become very attractive.
Clients love flat rates and if you get it right you can even have more margin than you would in your hourly rate. More to the point, it frees you from the time=money equation, meaning increasing your income becomes decoupled from working more hours. Especially as no one pays you to go on holiday, this is very attractive for a freelancer. And, assuming you’re ambitious and like making money, it’s the only real way to scale your total income beyond a certain threshold.
Oh, and getting out of the house is good. I have a few friends who are perfectly happy to work every day from home, but most freelancers I know either go to a cafe every once and a while to get a change of pace or rent a desk in an office. That’s also good for meetings. As for me, I have an office in the Volkskrantgebouw that I share with 4 other guys. We’re actually trying to get the small space (25 m2) next to ours to use as a community room and coworking space, which you’d be more than welcome to use if it all goes through!