As freelancers we mostly sell work hours. The income is directly affected by the amount of work we put in. Is there a better business model? Something that will gradually grow into a stable passive income from the work we already have put in?

I'm a Software Developer, mainly building custom web, mobile and desktop apps for businesses.

Things I've tried:

  • Hosting - Too cheap and requires a significant number of clients.
  • Support - Clients prefer to pay only when the problems arise.
  • 2
    Hey Michael, welcome to Freelancing SE. Here's a suggestion: I'd consider adding more details when asking questions. As you can see, the answers so far contain questions that should ideally be clarifying comments to gather more details so the answers are more targeted and less discussion-oriented. I'll leave this question open for now, but we do oftentimes close questions as "too broad" or "unclear what you're asking" when they lack significant details to give a solid answer. Hope this helps. – jmort253 Dec 24 '13 at 1:56
  • @jmort253: I've added more details. – MichaelS Dec 24 '13 at 8:07
  • I have to say I do use hosting to provide hosting, which has actually give me a fair amount of success. When I started I used a expensive reseller hosting plan, but now I simply use a good VPS with Cpanel and I make a decent return which pays the bills without an hours taken in to account. A free 6 months free on Twitter when you retweet is a great way to go about it, after the 6 months every single one has renewed. – tim.baker Dec 25 '13 at 14:58
  • Also if you add your industry we should be able to help a bit more – tim.baker Dec 25 '13 at 15:00
  • @tim.baker: Thanks for sharing your experience. I don't work in a specific industry. I develop all kinds of software. It can be a static website for a shop, a Trivia mobile app, enterprise app etc. – MichaelS Dec 25 '13 at 17:23

Whilst not truly passive, if you are a web developer then offering maintenance/hosting is a great way to boost income and build up a stable monthly income.

Another great way is to create a product. For designers and developers the likes of codecanyon and themeforest can be very lucrative.

Edit to answer a few points:

Hosting - Too cheap and requires a significant number of clients. - why does it have to be cheap? I charge significantly more than my clients would pay elsewhere but they like having everything in one place so don't mind paying that much extra.

Support - Clients prefer to pay only when the problems arise. - this is where you need to be a salesman. Make your "emergency support" or "hourly support" quite high to make it worth your while and explain the value of taking out a monthly support agreement to your clients.

  • +1 for both of those suggestions. A product for me and all clients on my hosting gives a very nice passive income – tim.baker Dec 25 '13 at 14:59
  • Great answer, especially on support. Several of my customers pay for flat rate monthly support from me, which is 25%-33% of my annual income. Customers like it because it means I prioritize their work when it comes in. Also, I will look at it after normal business hours. And I include answer questions and sometimes research in my support contract, which for some clients is a benefit as well. – Avonelle Lovhaug Dec 29 '13 at 22:02

If you want to focus on passive income while simultaneously working on other projects, I would recommend you take a partnership with some trusted client of yours on a project.

I have many clients of mine who offers a partnerships on the projects. In turn, I develop the requirements for a cheaper rate. Since there are trusted source, I am in a win-win situation long-term.

This enables me to focus on other projects or develop my own product.

I would suggest you to have some trustworthy clients and offer them cheaper rates of development in exchange for a small percentage of the overall profit. The percentage of profit could be around 20 to 30% minimum.

Hope this information was helpful to you.

As a developer freelancer as well I would recommend two things, first think of a product or service you can make once and then support and sell, as that way you can scale. Things like support do scale but can also swallow time that you were not planning, and like some of the other comments say can often be a hard sell.

Second with your product or supporting a service as you first suggested go after a vertical market or two and then tie down what they need and automate as much as possible. If you can automate it but sell it as doing the full work you are saving your self time and so profit.

This was some advice I was given for digital products. As an idea a lot of people have is write an ebook on a technical subject, but writing books is hard for the price you get. Start in the middle of this ladder of products and then fill in the steps. As the best way to sell one product is have a companion product that people can choose to spend more or less on.

 | ^ |
Custom training/consulting
 | ^ |
Seminar
 | ^ |
Speaker
 | ^ |
Webinar
 | ^ |
Video
 | V |
Audio
 | V |
Book
 |   |

So if you wanted to write a book, start with running a 2hr - half day training seminar for 4-10 people. If you can get them to pay a days pay to attend all the better, if not just video yourself to camera, or do it as a free trail and get recommendations from them to run it paid again with other people. Product 1. As talking to people is the most natural and you can just go with the flow and get their feedback its much easier than writing (ok so maybe you write notes first).

With that pay a friend or company to video you, edit and sell this Product 2.

With the video cut off the visuals and check the edit again as an Audio mp3, Product 3.

At each stage you can find the price and demand and see what your customers like, finding new ones or selling back to the old.

With the audio you can pay someone to transcribe it with a cheap paid service or on your own. This will then give you a draft of a book you can work with. All for the work of prep + half day + video edit + audio edit + transcript (much of which you can get someone to do for you) Much less work than a year of writing a book.

You can then choose if customers want to start at top or bottom of the ladder and offer speaking or custom consultation on top of it or using the experience to do a new product and sell back to them.

Be interested how you get on, which ever route you choose. I am trying a SaaS app as a 20% of my time project. Then write and talk about it as I go

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    this is pretty solid advice..the chart especially it sums the route most people take...Unless they get hired by company that does these things. – Muhammad Umer Jul 18 '14 at 8:50
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    In a word "leverage". A nice summary, thanks. – Matt Tester Apr 20 '15 at 22:37

I've been a freelancer (both hardware and software design) for 35 years and am well aware of the ceiling you can put on your income based on the maximum hours one can work per week.

You mention that you already build mobile apps. So write an app for the iPhone, iPad, or Android based devices, and sell it on their stores. A while back I designed a hardware dongle for the iPhone, and had to get a Mac Mini to test it with. I bought a used one off of eBay. So along with my iPhone/iPad, I know have everything I need to write apps. I'm currently learning Objective C in my spare time so I can do so.

Several years ago I wrote a shareware application for the PC. After doing some beta testing, I believe the first version I put up for sale was 1.03. By the time it got up to 1.07, it was stable and I never got another bug report or had to update it again. Meanwhile it just keeps producing income, not a lot these days, but without any effort on my part. When someone purchases it, they are sent to a PayPal page which collects the money which then goes into my PayPal account, and I get an email informing me of the purchase. All of the website software written in PHP.

As far as making people aware of my apps (there are, for example, nearly one million or so iPhone/iPad apps), I have acquired about 50 domain names over the years -- some of which are specific to the products I plan to develop, and some will be used to develop information portals which will dispense free time-sensitive information on a variety of topics based on the user's zipcode. On these info sites, instead of running Google ads for example, I will run my own ads pointing to my product websites. These links will also help my Google ranking.

Something else to consider which has already been mentioned is writing an eBook and selling it on Amazon or elsewhere. I was amazed at the number of eBooks some authors are selling. There is currently a post on the eBook Stack Exchange discussing income, and one best-selling author that was surveyed says she sold just over 100,000 copies of her eBooks in 2012, and 370,000 copies in 2013. They sell for $0.00 to $10.00, of which she gets about 60% of the selling price. So do the math. Wow. The free ones are of course to get people interested in her work, and then buy the others.

Her eBooks are not technical (they are in the romantic suspense and paranormal fields) but I had no idea anyone was making that kind of money selling self-published books. If one could sell just 4000 copies of a technical book at $10 apiece, that would be nearly $25k/year. This is way more than you would get from a traditional publisher that typically pays a 10% to 15% royalty. You wouldn't want to pick a subject that is rapidly changing though or you would be constantly updating it.

It's hard to give specific answers without knowing what field you're in. I can give some examples...

As part of my course we interviewed the founder of a small "boutique" design agency — although not freelancers, they had the same issues of variable income depending on how many projects were coming in. They had a number of things they were doing to try and offset the problem.

  • They designed an app (they contracted out the development).
  • They started selling products: t-shirts, skateboard decks, quirky signage. Some of those were by-products of client work, some they made specifically for selling.
  • They did some projects with startups on an equity share basis. This is obviously not the safest of investments but if you can afford the risk it could pay off handsomely.

A different example is that of a web agency who take a regular retainer payment. Similar to what @user319940 proposes, that can cover hosting, maintenance, minor updates, CMS support, etc up to a certain number of hours per month.

If you have a website or a blog, running ads can bring in some extra cash, although that's highly dependent on bringing enough people to your site on a regular basis.

As I mentioned a dozens time here, utilize "retainer contracts" as much as possible. All large companies do this. This way you have passive income for the next X months whether you work or not.

One person suggested creating your own project. That is good in reality but your own project takes time and since you want to get as much money as possible from it, you will need constant updating. I built my own software as well and for years I have been hiring a full-time person to maintain it. And this person is busy all the time. So having your own product is not as easy as you think especially if you have to support yourself by doing projects for clients.

  • create a product based on your knowledge, such as an eBook or SkillShare course.
  • as others stated, monthly retainer agreements
  • create something small that can be resold, such as a WordPress plugin or theme

I listed some other product ideas for freelancers here.

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