Freelancing Won’t Help You to Build Wealth

Guest Post by Patrick J. McGinnis, a venture capitalist and private equity investor who founded Dirigo Advisors, after a decade on Wall Street, to provide strategic advice to investors, entrepreneurs, and fast-growing businesses. He is the author of the new book THE 10% ENTREPRENEUR: Live Your Startup Dream Without Quitting Your Day Job.

The gig economy is here, it’s real, and it’s global. As many as 53 percent of Americans can now be classified as freelancers. While that number includes your (hopefully) friendly Uber driver, it also encompasses a growing number of white collar workers as well, who offer legal, financial, accounting, or design services on demand. This is a direct result of recent instability in once-staid industries like law and finance that has pushed many professionals out of firm life and into consulting roles. As a result, software giant Intuit projects that temporary workers will represent 40 percent of the workforce by 2020. It seems that in the future, nearly half of workers – no matter the color of their collars – will be free agents.

While the rise of the “gig” economy, as the growing dominance of freelancing is often called, has been great for consumers and small business owners, it isn’t necessarily good news for the people providing all these services. Freelancing offers flexibility and a home for workers displaced by the changing labor market, but it also suffers from a fundamental flaw: When you’re a freelancer, there is no company stock plan. You get paid based on the hours you work and nothing more. You have no ownership in any of your projects and you don’t have the possibility of owning a share, even if it’s a small one, of something that can grow in value over time.

Given that reality, how can you make the most of your time as a freelancer in the gig economy?

 Think like an owner

When you’re a freelancer, you are also, in a fundamental sense, an entrepreneur. Over time, you will build a list of clients, expand your network, and assemble a track record of achievements that are your own. In that sense, freelancing can offer a path to building your own firm, so it’s never too early to establish credibility before the wider world. That means taking some time to create a brand, build a website, design a logo, and order slick business cards. Thanks to the sharing economy and inexpensive online platforms, you can accomplish most of these tasks by investing a few days and a couple of hundred dollars. You can also legally incorporate your company quickly and easily with a minimal investment of capital. Even if you’re not yet sure whether you plan to work for yourself over the long term, you’ll always have these resources if you want to moonlight on the side.

Be a 10% Entrepreneur and look for opportunities to earn sweat equity

Don’t restrict thinking like an owner to your own firm. You can also endeavor to own stakes in other people’s businesses as well. Specifically, you can become a 10% Entrepreneur, allocating at least 10% of your time and energy to offering your services in exchange for shares of a company – commonly known as earning sweat equity. This practice is relatively common because most startups have more to offer in the way of equity than they do in cash. As a result, there are many services, such as advising on a business plan or legal documents, making critical introductions, or creating a logo or website, that young businesses will consider as an in-kind capital contribution in exchange for stock.

While it it naturally riskier than simply walking away with a pocketful of cash, getting paid at least partly in equity can be surprisingly lucrative. Take the case of David Choe. Choe is the graffiti artist who took stock in Facebook as payment for murals he painted at their headquarters. Today, those shares are worth hundreds of millions of dollars.

With freelancing here to stay, thinking like an owner, with respect to your business, as well as the businesses of others, can represent a powerful strategy to build long-term wealth. Not every company you work with is going to be the next Facebook, but as you gain experience, you will learn to spot the companies that are poised for growth. Not only will these companies become reliable clients, but if you earn sweat equity, they can also become long-term partners.

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Interview with Halo Top President and COO Doug Bouton (COL ’07)

What has been the most rewarding moment of your career?

If I had to choose, I think the fact that we employee more than 100 people right now. It’s very rewarding to create great jobs for great people.

What do you wish you had done earlier in your career?

Unfortunately, my “career” has largely been Halo Top so not sure I would’ve done anything differently. I went to law school out of college and practiced law for a year or so before Halo Top. My legal background helped tremendously with the founding of and raising money for Halo Top so can’t say I even regret that aspect of my short career.

What trends do you see in your profession or industry?

There are plenty of trends in the food industry. When Halo Top started, it was in the middle of the healthy eating trend that continues to this day, which Greek yogurt largely spearheaded. In that sense, we’ve been fortunate to have the right product, right time – aligning with food/beverage trends like low-calorie, high-protein, and low-sugar. As far other trends, non-dairy/vegan is a big one that will last for a long time. I suspect things like gluten-free are more fad than trend and will pass but time will tell.

What is the hardest thing you have ever done professionally? 

The first few years of Halo Top were really tough, really stressful. I would’ve been easy for my business partner and me to give up. Persevering through those 3-4 years, in hindsight, was probably the hardest thing that I’ve done professionally. I’m also most proud of what we’ve done and what we’ve accomplished because I know personally just how hard and precarious it was. We could just as easily not be here today, Halo Top wouldn’t exist, and I would be personally bankrupt if we didn’t catch a bunch of lucky breaks and keep on keeping on.

What is the best career advice you have ever received? 

If you’re not happy, stop talking about it and make a change.

How has Georgetown shaped you?

Georgetown has shaped me in more ways than I can count. I think the two most important ways in which it shaped me are:

  1. critical thinking (especially as it relates to self-reflection)
  2. holistic education

Georgetown was the first time that I was really challenged to critically think about all of my beliefs and opinions, and the importance of critical thinking – in business and in life – cannot be understated in my opinion. Georgetown also emphasized the importance of a holistic education – focusing on activities, relationships, and social education beyond the classroom.

What was your favorite professor or class at Georgetown?

Professor McKeown – Problem of God

What is your favorite Georgetown memory?

House parties, Georgetown Day activities, 2007 Final 4 trip to Atlanta, pretty much all of my theology classes. Too many to count.

Who is a source of inspiration and strength to you in your life and why?

The easy answer is my parents. The values they taught me, the work ethic they instilled in me, and the love and support they have given me are the main reason why I am who I am and have accomplished what I have accomplished.

What is on your desk right now?

Papers, clutter, and more crap than I care to admit.

Who is your favorite author? 

Don’t really have one. I read anything – biographies and other non-fiction, fiction, fantasy, sci-fi, etc. Literally anything.

What are your words to live by?

Pick just about any Drake lyric.

The Number One Thing You Need to Get Started on Becoming Part-Time Entrepreneur

Guest Post by: Patrick J. McGinnis, a venture capitalist and private equity investor who founded Dirigo Advisors, after a decade on Wall Street, to provide strategic advice to investors, entrepreneurs, and fast-growing businesses. He is the author of the new book THE 10% ENTREPRENEUR: Live Your Startup Dream Without Quitting Your Day Job.

In less than a generation, two clear and unrelenting trends have transformed the workplace.

First, traditional careers have lost a lot of their luster. Corporate roles are notoriously less reliable and less lucrative than they were in the past. Even once highly prestigious paths like law, finance, and medicine, have lost their appeal thanks to falling pay, layoffs, and an unwillingness by many companies and industries to change with the times.

Second, even as many traditional careers and companies remain stuck in the past, transformational change is afoot when it comes to how we work and live. In less than a generation, our society has been transformed by technology – it is now deeply woven into the fabric of our personal and professional lives. As such, it is ubiquitous, it is cheap, and it is only getting cheaper.

When you’re carrying around a smartphone, it’s almost too easy to forget the considerable investment you needed to make to run your own business just ten years ago. Building a website represented a considerable investment and telecommunications were expensive. Now, thanks to companies like Squarespace, Skype, and Google, you can basically put yourself in business with an investment of a few hours and a few dollars. The basic infrastructure you to get going, from email to storage in the cloud, is basically free. Once you’re up and running, you can then promote a business with a very minimal investment thanks to social media.

The falling price of technology, coupled with widespread connectivity is a game changer for anyone who has dreamed of doing something entrepreneurial. It’s never been cheaper and easier to start and manage a business, technology focused or otherwise. You need little more than a laptop, an Internet connection, and a smartphone to run the day-to-day operations of a small business. You also probably need very little money or to hire full-time employees to get started. Most importantly you don’t need to punch a clock from 9 to 5. You can make the rules, working when you’re like and from wherever you’d like.

You Can Become an Entrepreneur on Your Own Terms

The decline in the price of starting businesses, coupled with the falling appeal of traditional careers means that a growing number of professionals are opting to become part-time entrepreneurs. Rather than shouldering the considerable risks of leaving their jobs to launch new ventures, they enjoy the best of both worlds. They can try new ideas and perhaps even fail, but they do so without jeopardizing all of the rewards that have come with years of success and hard work in their careers. By spending at least 10% of their time, and if possible their money, working on new ventures, either as an investor, an advisor, or a founder, they can build lasting value – and diversification – for themselves. They are 10% Entrepreneurs.

It comes down to a change in mindset. Full-time entrepreneurship is a terrific path for some, but it’s not obligatory. If you’re looking to pick up skills that will help you at your day job or even put you on a path to the next step in your career, there’s another option. Why not take a more sustainable path by integrating entrepreneurial opportunities into your current career? It’s a simple, yet somewhat radical idea: you don’t have to be an entrepreneur, but you can be entrepreneurial.

 

This new mind-set is based on a completely new set of rules: just because you work at an established company and receive a steady pay check doesn’t mean that you cannot join the ranks of the innovators and the disruptors. As a 10% Entrepreneur, you will search out and engage with projects, drawing on all of the skills and relationships you have built over the course of your educational and professional lives. By leveraging your base of experience and your network, you will develop new skills. Plus, you will be the owner of everything you create, no matter what happens in your day job.

10% Entrepreneurship is All About Mindset

If you’ve never really viewed yourself as an entrepreneur – even a part-time entrepreneur – changing your mindset can take time. When I meet people who are looking for more in the careers, whether in the form of diversification, upside, or satisfaction, I’m often surprised at how quickly they discard the idea of integrating part-time ventures into their lives. Their reasons are remarkably uniform: “I’m too busy,” or “I don’t have any good ideas,” or even “I’m afraid.”

One of the hardest things about exploring new ventures is the temptation to feel outgunned. You might ask yourself why should you, of all people, think that you can start something new if you’ve never done it before. Sure, you’ve got experience and relationships, but it’s natural to feel a little (or a lot) intimidated. when you’re putting yourself out there rather than representing a corporate brand on a business card. As a 10% Entrepreneur, you will need to put yourself out there. You will constantly be pitching to people, telling them what you can bring to the table, seeking to establish credibility based on your past experiences, your relationships, and your vision. It can be intimidating or even downright scary.

I get it. When I took part in my first few projects as a 10% Entrepreneur, I felt like I was walking around in a dark room in search of a light switch. Now 5 years and 20 projects later, I have built a valuable portfolio of investments in startups, real estate, and even a theater production in London. Each endeavor brings new experiences and challenges that assure me that I’m on the right path.

As little as a decade ago, there were plenty of other barriers to worry about if you wanted to start a new venture, but in their absence, mindset is now, in a fundamental sense, the new constraint to entrepreneurship. The challenge today is to to have the courage build something that is sustainable and that will create value, both financial and personal, over the course of your career. So if you’re convinced that part-time entrepreneurship is for you, remember that it’s mindset that will take you you from daydream to action. Also, remember that you really have very little to lose – when you are investing just 10% of your time and capital, what’s the worst that can happen? Even if you fail, you’ll have learned something. And when you succeed, you’ll see the world from a new and far more entrepreneurial perspective.