Expanding Business from Freelancing

[braddewald]

Has anybody successfully made the jump from doing freelance work to working with several employees? It seems that in this industry everybody wants to go out on their own and even if you do manage to hire somebody that's good it's just a matter of time until they leave to freelance themselves. There are also issues of protecting your digital assets, proprietary scripts, and your list of clients. I've heard a lot of stories of people getting burned but I was wondering if anybody has a success story and if they could expand on that.

[Scott Schroeder]

Well, hopefully you have them sign an NDA and a non-compete (within reason, none of that BS 2 years 200 miles) when you hire them.

 

It comes down to this. You may eventually get burned by an employee. But if you treat them right and respect them as humans, you'll have a great working relationship and minimize their need to strike out on their own, steal clients, etc. You also need to take the time and find the right help. You really do not want to go hire Deadbeat Rob Lowe just because you need help and they are el-cheapo.

[braddewald]

I've always heard that NDA and non-compete's are fairly unenforceable and are used as more of a deterrent. Is that true?

 

It seems hard enough to find people out there with a decent portfolio let alone people who live near me. Is hiring an employee to work remotely worth the hassle?

 

Is it improper to pay an employee a portion of the profit from a project or do you need to offer an hourly rate?

 

Is there a good place to look for employees? Is it best to just post a help wanted ad on the CGA job board, Craigslist etc.?

[Smile of Fury]

You have to figure out what you can offer that will attract the people you want, and you have to manage your own expectations.

 

If I'm already good enough to do work you approve of, why would I want to work for Bradley & Associates instead of being the boss at Ben & Associates? Will your employees be future partners? If not, what does an employee gain from doing potentially equal work for a smaller piece of the pie? (one answer is more work for both of you, smaller piece of a bigger pie) If I'm not good enough to do work you approve of will you provide mentorship and training? Will my lower rate of pay be made up by what I learn under your tutelage?

 

As for the NDA, I've seen them upheld in court, but for big-time $$$. If you're paying someone $15/hr to work for you, how much can you expect to collect if you sue them? Probably not enough to cover the time and expense of the suit.

 

As for paying hourly vs. percentage, I think that depends on your relationship with your employees. If you're asking an employee to take a percentage of profit that's asking them to assume risk more appropriate for a partner. If I'm just an Associate then I'd expect to be paid for the work I do regardless of you being able to sell it.

 

In short,I don't know what any of these answers are! Just bringing up some issues I would want answered.

[braddewald]

Those are definitely all valid points. I guess what I'm looking for is a solution that somebody has come up with. How do you scale a business that is intrinsically more profitable when done freelance-style? No matter what size your business is, what your margins are, and how much work you have it seems like in this industry there is no way to find skilled employees, pay them enough money to keep them around, while also increasing your margins.

[dmitriyyemelianenko]

Unfortunately I haven't enough experience to give any advices, cause I'm just at the beginning of this jorney.

But I think that a lot of people would be happy to work for someone, not everyone wants to mess with clients and selfpromotion, personally I hate this kind of stuff and it gets pretty hard especially at the beginning, I would rather go for some kind of collaboration with somebody instead of working on my own and not everyone wants to work at an office place, so remote employment is very attractive opportunity. As mentioned above, it is all about relationships, it could be profitable for both sides, and there would be no need for other solutions. As for finding right people, I guess that all archviz communities are good for this, I personally always check the job board here, of cource in search of job- not the people:)

 

I would like to add one more thought. I think that in this particular industry, remote work is the only right way, it's the easiest and most profitable solution, which have almost zero downsides. Gives amazing opportunities and experience. And I really hope that the future is in this kind of work/collaboration relationships.

Edited April 16, 2015 by dmitriyyemelianenko

[RyderSK]

Those are definitely all valid points. I guess what I'm looking for is a solution that somebody has come up with. How do you scale a business that is intrinsically more profitable when done freelance-style? No matter what size your business is, what your margins are, and how much work you have it seems like in this industry there is no way to find skilled employees, pay them enough money to keep them around, while also increasing your margins.

 

Very much a questions I have been asking myself for a long time as I've been stuck running a small 4 person studio for quite some time now, not actually being able to scale it, despite having enough work for tenfold of what I do now.

 

I've noticed this quite big division in industry where you have a lot of freelancers, and then this big, "old" studios that range from 10 to 40 but that pretty much started their business in different times, in infancy of CGI where margins were high, and entrepreneurial culture not as pervasive in comparison to classic philosophy of simply finding a job. But not that lot between perceptually.

 

Skilled labour in fields that are self-sufficient in entrepreneurial manner are in my opinion, unemployable, unless they have personality that aligns with employed lifestyle, ie. don't care that much about scaling their profits, being initiative/risking, but instead value the assurance of work and steady pay. This crowd, by gaussian curve obviously consists of more less skilled people than those deemed excellent, leaving the only choice to recruit high-end people to train them up from ground. Find people whose personality is very much anti-entrepreneurial with enough affinity and capacity for learning and teach them. Top people might come from time, but they will also go. Waste of time and effort in trying to tame them.

 

Talking with a lot of smaller studios around Europe, this is what they pretty much all of them told me they do. And exactly what I keep doing. Rather slow, not very flexible process, hardly leading to exponential growth.

 

Of course, there seem to be niches as well. One interesting model was Hayes Davidson which now seems be partnership group rather than hierarchical structure. But the studio has 20 years long history so they probably know what they're doing and might not be easily replicable. Also, too early to tell how it will go. But I see this models as having good potential to attract high-end people since they will share ownership and profits. Not as good from entrepreneurial point, it will hardly lead to bigger margins if it's going to be scaling in sharing as well. But this might just as well be the future.

 

The other is small, super high-end companies like MIR. They hired for most part, already very successful people who could very much run their own business themselves, probably to bigger profit margins as well. But I guess they exchange it for capacity of working on more high-profile projects, one they couldn't do themselves, or wouldn't be able to get to. The attractivity of projects, brand, team culture might be interesting enough to exchange for more entrepreneurial pursuits. But it might also again come down to their personality.

 

tld;dr: Everything depends on the people you find/choose. Better to search for people who align with your goals, rather than compete for the same.

[braddewald]

Excellent reply, lot's to think about. Might I ask how you handle your four-person studio? Do you all work on the same project at once or do you work on separate projects? Do you each have your own set of clients like the "co-op / profit sharing" scheme you described? What's keeping them from splitting off and starting up their own studio?

 

Another thing I'm wondering is if anybody has had any luck outsourcing a certain aspect of a project - modelling is the obvious thing that comes to mind.

[dmitriyyemelianenko]

The outsourcing of a certain aspect of a project is a common thing. Personally did a lot of modeling/texturing stuff for different studios, the project I'm working on right now is preparing models/textures for ue4 interior walkthrough, no lights,no renders just modelling and uvs.

In my experience, you often meet people with good skills but with just another vision of how the final product should look like, the matter of taste and style, but it doesn't mean that you can't use their help.

[Justin Hunt]

many moons ago I was going into partnership with another guy. It didn't work out between us, but he went on to grow and become quite a force in the industry here in Oz, he now runs 3 studios.

 

So yes it is possible to grow from freelance to a large studio, it just doesn't happen over night.

 

As for hiring people, I think the most important consideration is personality. If they dont play well with the rest of the team, it doesn't matter how skilled they are.

 

An other success story is my father, although not CG related. He and my uncle started an office furniture manufacturing firm 30 years ago. It is now has 3rd generation employees. As with all businesses it has had its ups and downs, periods of expansion and shrinkage. It takes time and a lot of dedication.

[Francisco Penaloza]

I also hope that what Hayes Davidson works, for the way I am it would be a perfect fit to me, I don't mind to share the wealth, and I don't have aspirations to be the only boss making big $$.. well after all I am doing Arch Viz right

 

I have tried doing half half partnership, or co-work with people about my same skill levels, and the experience its been more pleasing than when I "hired" some one to do part of a project. When outsourced I actually offer better percent of what they usually charge, in the spirit to make the deal more interesting for both parts but, as Juraj mentioned working with a lower skill level artist produce an extra layer of investment for you as "owner" that need to be carefully planed if not it can turn in a big disaster, wish I think is what happens to many people that outsource in the very last minute when they get large project.

My freelancing work is not that constant, since I have a full time job now but still kept my "old clients", I would be very interested in work in a small studio with evenly shared income or at least divided by experience and responsibilities.

Even though we are all artist of Arch Viz, not all of us are good sales person or have management skills so in a Hayes Davidson environment I think each one of them will find their sweet spot but still keep the equality and energy to make the best for the studio.

[RyderSK]

Excellent reply, lot's to think about. Might I ask how you handle your four-person studio? Do you all work on the same project at once or do you work on separate projects? Do you each have your own set of clients like the "co-op / profit sharing" scheme you described? What's keeping them from splitting off and starting up their own studio?

 

Another thing I'm wondering is if anybody has had any luck outsourcing a certain aspect of a project - modelling is the obvious thing that comes to mind.

 

I had easier start than other freelancers might, simply by having girlfriend to join me. But from then on, I decided what I call "factory" model, where the project is fractured into parts where I rather end up doing the lighting and overall look, and rest complementary work for me so I can reach that stage faster, and do it in bigger detail. That's quite beneficial for the type of work I do most, where we often work for months on select big-scale developments.

But it has too many caveats as well, there can be a lot of downtime where nothing really needs to be modeled or prepared and I end up with too much rendering to do. In those moments, I wish the team was more self-sufficient, but that's a circle, for them to get better, they need to practice, but they can't practice on stuff that is required by clients to be on level only I can do. Too much work, and you simply end up moving along..

 

But this is the path you will begin as well the moment you outsource a modelling. So it might perhaps be called rather "super-charged" freelancing, than genuine expanded business.

 

Regarding a splitting thing. The gf is bit obvious :- ) but the other two: Asset modelers don't start their own studios, they basically accept that role of specialist will always be part of team being employed, and for the other, a generalist, no guarantee. I talked with few small sized studio leaders from Germany who meticuously invest up to 6-12month of time during which the new guys(and girls) don't do any commercial work, and yet they often leave..

 

For sake of fun, but it has a bit of good reasoning in it, I will cite a friend, who now runs a successful software (rendering) company ;- )

"Hire people who are shit-scarred to run their own business". Again... personality thing.

[RyderSK]

 

An other success story is my father, although not CG related. He and my uncle started an office furniture manufacturing firm 30 years ago. It is now has 3rd generation employees. As with all businesses it has had its ups and downs, periods of expansion and shrinkage. It takes time and a lot of dedication.

 

It does.

 

Yet it's not as easy to compare more traditional industries where companies rely on individual differentiated expertise of multitude of people forming collaborative environment. Even in VFX, each person is mere 'cog in a wheel', texturing artist who runs away, does not start a whole new Pixar.

Whereas in archviz, and similar, it's generally a collective of individuals with self-sufficient skill-set independent from each other for most part. What holds them together, isn't necessity to function in such environment. Therefore it is harder to create, and sustain such collectives.

 

If we look at similar industries, like photography, we see that "big photography studios" almost not exist. At best, it's group of agencies employing varied photographers, but it's really a commercial syndicate at best, one that's growing into obsoleteness as well in age where self-marketing is far more easier for individual freelancers.

Edited April 16, 2015 by RyderSK

[Nils Norgren]

Not sure if my perspective can be much of a help here, as we started back in the "Old Days" when things were different (as mentioned by Juraj). One thing I remember, when we started (3 of us), it was never, "lets freelance, see where things go..." It was always, "We are starting a company to do what we love" before we had any clients, we incorporated, wrote a business plan, researched potential clients, networked, did analysis on competition, and planned to take whatever work we could find that we felt we could handle (and a little bit more), we did engineering presentations, random photoshop work for interactive companies, 3d scenes for a local book publisher, mostly we did thousands of dog-and-pony shows for architects, engineers, developers, anyone who would have us.

 

Again, the mid 90' were a very different place, and finding employees is still one of the most difficult parts of the business, but now there are a generation of people who see this as a real career, (it didn't exist back then).

 

One thing I would say is be careful for what you wish, growth is not more secure, it is less, growth means dealing with employees, lawyers, accountants, IT, service providers, facilities, landlords, banks, life insurance, liability insurance, eventually human resources department, and most of all, demanding clients who negotiate hard, then often pay slowly.

 

Managing cash flow, accounts receivables, sales pipeline, employees who (rightly) expect raises, rent always increases, the cost of healthcare only goes up, every year just staying afloat costs more, which means that you need to either raise prices or sell more work without adding more people. All of these things are challenging problems, and most of the time I don't miss being in the trenches working on renderings, like the old days.

 

I would say, the best decision we made was to do it all-in with a strong partnership (with good partners), which includes strong partnership agreements (legal), key man insurance, business plan, contract and writing skills, and an understanding that all responsibility rolls uphill, and in the end - for the greatest reward, you take the greatest risk, and the risk is real, people can and do lose everything when they overshoot.

 

my 2¢ - Nils Norgren, Neoscape

[heni30]

Whew! Thanks for that brutally sobering post. Maybe working as an employee/freelancer isn't so bad after all. :-)

Edited April 18, 2015 by heni30

[artmaknev]

Very interesting info, I am a freelancer, I really like being a freelancer, like a free bird fly from one place to another, from one country to the next, not being frozen by one place. I have worked in a number of companies, big and small, in USA and now I work in Europe. And the story is similar to what Juraj described, very often I see people leave companies to pursue their interests, sometimes it comes like a shock, because those people seem to really like working at that company and then one day they are gone...

 

I guess I had similar situation when I decided to become freelancer, I always wanted to have my own schedule, I didn't see the point of coming to work from 9am to 6pm, I think once you know the deadline for the project you must do whatever it takes to finish that project by that date, but there is no point to sticking to a schedule or office routine, its an older model that sometimes works sometimes doesn't (it works for insurance sales people).

 

Sometimes I can accomplish more work at a coffee place, sometimes the weather is so nice that I just don't want to work for 2-3 hours but just to relax and then come back to work, unfortunately with a company you cannot do that, this company routine structure is an old model, I think employers of creative people should allow their employees some free time and the freedom to reorganize their own schedules, creative people need that personal freedom, away from the established office structure sometimes. I think best way is to let them earn that freedom, lets say they complete project ahead of time, so give them some free hours, instead of 1 hour lunch, give them 2-3 hour lunch, don't ever just put them immediately on a new project or make them help somebody else...

 

I really enjoyed working in companies that treated each employee as part of the team, and not just an employee, doing team activities (fun / learning) is also very important to build a better relationship, so its not just a 9-6 job. I loved working at the companies that had lunch-and-learn thursdays or something similar, where they would all eat lunch and learn something new in 3d. Playing counter-strike or any other computer or physical game was a great plus for any company I worked at, it was fun and a great mood elevator!

 

Of-course, a real company is not about having fun, free time, and playing games... there are many things and difficulties that I don't really know about when it comes to maintaining a real company and thats what scares me to start my own company with a partner. It would be nice to split 50/50 profit and share, help each other with the projects, it would be a great help for me, sometimes I wonder if I should start looking for a partner but then again, right now I am my own boss, with a partner I will be 50% boss, and thats like marriage...and I heard marriage doesn't always work out the way you planned.

[notamondayfan]

 

Another thing I'm wondering is if anybody has had any luck outsourcing a certain aspect of a project - modelling is the obvious thing that comes to mind.

 

For me, this is how I see my first step to growing when the time / project allows. I have a lot of local connections with other freelancers that I trust and know their work, so I wouldn't have any worries outsourcing work.

 

I'd say though outsourcing isn't as profitable as an employee, but the flexibility and low initial investment needed can be a huge advantage.

 

 

I've always heard that NDA and non-compete's are fairly unenforceable and are used as more of a deterrent. Is that true?

 

Is it improper to pay an employee a portion of the profit from a project or do you need to offer an hourly rate?

 

Is there a good place to look for employees? Is it best to just post a help wanted ad on the CGA job board, Craigslist etc.?

 

Firstly, I think proffit sharing is brilliant, and a model I'd use for sure. Offer shares in the company, the employee then sees their hard work being rewarded. If shares aren't an option, a paid bonus on completion of projects would also work.

 

As for looking for employees, ask around, ask people, but you'll be suprised how much junk / time wasters are out there, but you'll soon quickly appreciate the good ones!

[Justin Hunt]

there have been a number of studies that show the paid bonuses only work in the short term, after a while people either decide that the extra effort just isn't worth it. What does work is showing appreciation, respect and workplace flexibility.

[juliakovalchuk]

I've recently launched an architectural outsourcing company in Eastern Europe. I'm not sure about the situation in the UK, but in Estonia (as sell as in Ukraine, Russia, Belarus) it's not a problem at all to hire a freelancer or even experinced architect. Most of them have no idea how to promote their business and search for clients (especially on foreign markets). Therefore, outsourcing business can't be successful without a manager, who can define growth options, communicate with clients, plan time and monitor the whole process of cooperation. This rule works for architectural studios as well: not all talented arch viz are good managers to run their own business