The Work Equation states that the only reason someone will pay you a certain sum of money for work is that they will earn back more from you than they are paying you.
The Work Equation is a very important concept, for both those who are employed and those who are self-employed. So this blog series will be an informative read for both. But it will focus on self-employment, because working for yourself as a self-employed freelancer is the area I am most qualified to write about, since it is how make my living on the lovely Planet Earth.
For employees, the only reason you earn, say, €40,000 a year, is because you generate your employer more than this a year. Any less and this is an inefficient business. Coming up with a way to do this, to get a return on investment, is difficult – that’s why the business owner earns the big bucks; they have figured out how to build a machine, a system, a collection of people, capital (money), and equipment that can turn a profit.
For the self-employed, the only reason someone will continue to pay you €50 an hour for graphic design, or €1,000 a month for running their Facebook ads, is that you are generating them more money than they are paying you. Another way of saying this is that you can consistently generate value for a business, where that value is greater than your fee. I was barely earning a living from freelancing before really grasping this idea, and when I did, it helped me to grow my business faster.
Solving The Work Equation
The way in which you solve this equation differs greatly, and it is mostly what makes employment differ from self-employment.
Employment is like being a crewmember on a battleship. You play your one role, and you play it really well. There is team working along side you, and if the captain is good at their job, they will pull everyone together to run a tight, efficient ship. In a business, you don’t have to worry about the bigger picture, about how the business turns a profit; legal will look after issues with the law, sales will keep the customers coming in, accounts will keep the invoices being paid, HR will make sure everyone gets their weekly payslip and pension contributions, the list goes on. You do your own job to a high standard, and if most other people do that too, all is well. The head or heads of the company, will work on solving the Work Equation, every day.
Self-employment is like being a lone fisherman. You’re out on your own. All the problem solving is down to you. You have to get new clients & ensure they pay you on time. You have to run your business in such a way that you turn a profit – otherwise you might not make rent unless you start eating instant noodles and €0.25 cans of kidney beans from Tescos. There is a much greater level of responsibility involved – all of the responsibility in fact. You alone must ensure you pay the correct amount of tax, follow local laws, get enough new clients every month to survive, so on and so forth through every single task one must be on top of in order to be a successful solo business owner or freelancer. You must solve the Work Equation by yourself, every day.
Let’s take my own work as an example. At the time of writing, I typically charge between €1,800 and €3,000 to design, develop, and launch an eCommerce website from scratch. A smart business owner will only pay me this sum if they, having done their math, expect to earn back more than this over a reasonable period of time; weeks or months, not years. Business owners who are not smart will make consistently poor decisions regarding the Work Equation; this is one of the things separates good, smart business owners who are still in business, from bad business owners who have failed at business (though of course some good business owners are thwarted by circumstances outside of their control).
So let’s say this clever business owner has worked out that they expect to earn €5,000 or more a month from their eCommerce store after its 3rd month selling their products online. They deem it to be a good investment. Now, the question is ‘Do I invest my time or my money into this website?’. I.E, do I learn to do it myself, which will cost a lot of time, or do I pay a professional to do it, which will cost a lot of money? There are a lot of good do-it-yourself website builders out there now, like Shopify. But hey, enough business owners are choosing the 2nd option, otherwise I’d be out of my job! The web design market exists because it can be complex to set up a great website that gets you a return on investment. By investing time and money in equipment, software, and training, I can turn myself into a system where a business owner can put in X amount of money, and a larger amount of money, Y, comes out the other end. This is a core principle of freelancing.
Most business owners do not have the skills, or the time needed to learn the skills, required to build their website, make their posters and leaflets, set up their Facebook ads, take professional photos of their products, etc. This is where you come in. Your role as a freelancer is to learn one (or more) of these skills, turning yourself into a value-producing system.
And that really is the foundation that my business is built on. I solve the work equation, and I do so in an efficient, courteous, polite, and supportive manner, so that my reputation slowly builds over time. Put another way, the vast majority of my clients find my work to be beneficial to their business, and they would recommend me to a friend or family member who is looking to get a website built.
How do you solve the Work Equation?
Like it or not, we all have to earn our way in this world. We used to do this by hunting and foraging, but for better or for worse, we live in the Information Age, where instead of being good at a multitude of things (hunting, foraging, crafting, moving through a forest silently, etc), most of us, in the Western World at least, are specialised knowledge workers. So it’s worth thinking about how you currently solve the Work Equation, and what we can do to become more efficient at solving it, hence generating more value.
If you are employed, how can you create more value for your employer in the same amount of time? Can you take a process in the business and make it more efficient? Can you bring in a new client? Can you learn a new skill that interests you in your spare time? If you can show your employer that you have been steadily increasing your worth to the company, that’s a good basis for asking for a pay rise.
There are no shortcuts.
One final note – there are no shortcuts here. I feel this is important to state because we live in a world of instant gratification. Food from any part of the world is available in 30 minutes from Deliveroo. A collection of films and TV shows bigger than every Xtravision put together (remember those?) can be streamed instantly from Netflix. Your friends are a few keyboard taps away; so on and so forth. Two things that cannot be gotten instantly are money and skills. You are going to have to put in hard work for both, whatever way you approach it – that’s why its important that you settle on a skill that you enjoy doing. And that is the topic of the next article in this series.
Do You Want to Work For Myself?
You now have a rough idea of the path that lies ahead of you, if you wish to work for yourself. To give you further insight into this path, you can begin to research what other people’s experience of this path are; read blogs online, watch YouTube videos, find someone in your community who will meet you for coffee and answer your questions about working for yourself.
In your mind, there’s a certain amount of knowledge that you need to have to make a decision. The more real-world facts you can gather, experiences you can listen to, and mentors you can ask questions of, the more equipped you will be to make this decision. Again, we can think of this as a system. Right now, you can ask a question of yourself – Do I want to work for myself – and put this through the decision making part of your brain. The more facts, experiences, questions, and other forms of information that you add to this system and put at its disposal, the more accurate your decision will be. It’s hard to quantify this, but let’s say you have a 40% chance of making the right decision for yourself right now. A total of five hours work gathering new information might bring this up to an 80% chance of making the right decision.
In the end, only you can come up with the answer to this question. Consider that you likely won’t be able to answer with 100% confidence; you only need to know enough to decide if you want to take the leap and start working for yourself. The worst thing that can happen is you give it a go and decide it’s not for you; you’ll still have learned new things, and learned more about yourself, which will help you to make better life decisions in many areas.
- The Information Age has given us the ability to work remotely from laptops as self-employed freelancers (as well as having the lowest amount of famine, war and plague than any other time in our species history. Neat!).
- In order to earn money as a freelancer, you need to turn yourself into a value-producing system that can allow business owners to earn more money from you than they pay you. You do this by learning skills that the business owner either doesn’t want to learn or doesn’t have the time to learn, and that can add value to their business, such as web design, graphic design, videography & photography, content creation, copywriting, etc.
- You must learn more about what is involved in working for yourself, and make a decision on whether or not it’s the right path for you. If you’re still unsure after a few days, consider giving it a go – at the least you’ll learn some new things!
2: Find a Skill That You Enjoy