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I am changing from freelance software development to working in a small new consulting group. As part of the transition I may be moving my freelance work (for one client) under the umbrella of this group. It is a small group of developers each working at an hourly rate. Compared to my freelance rate of $80/hr I will only earn $35/hr (of course it's apples-oranges considering taxes & benefits). Still, as I continue to work freelance (for the time being) I realize I will not have much incentive for transitioning these projects to be under my new employer.

Naturally there are benefits to working with a small team (more business coming in, more support, benefits, taxes simplified) and that's why I've taken the position. But after adjusting for taxes & benefits, the value of an hour worked on my old projects will still be quite a bit less. My freelance rate was pretty cushy.

So I'm tempted to keep both lines of work separate unless my new employer can offer some sort of compensation acknowledging the business opportunities I'm bringing to them, and the pay cut I'm immediately taking despite the fact I am essential to the project (my client specifically wants to work with me).

What kind of business arrangements would seem fair to propose to my employer? I am really not savvy on the business side of things and I don't want to be greedy, and I think it is new territory for my employer as well, but just seems that some sort of commission, or stake earned, would be in order if they took over the contract(s) with my client. Any ideas?

  • Are you part-owner of this group - or are you essentially giving your new employer your freelance clients for free? – morsor Jan 24 at 13:00
  • I'm not part-owner though there may be that potential down the road. Or maybe up front that could be how my "stake" is introduced. But yeah if I just questioned nothing, it sounds like they'd be getting these clients for free. – Josh Sutterfield Jan 24 at 21:26
  • You sure you're doing the right thing? Long ago, I made the reverse move, from an employee of a consulting company to an independent contractor. Never looked back. Way better overall compensation as an independent. But you do want a substantial financial cushion to fall back on when on the beach/bench. As long as you've got that, and aren't living hand-to-mouth, I'd recommend carefully re-thinking and re-calculating your decision, to make sure it's clear in your mind exactly what the expected outcome is most likely to be. – John Forkosh Jan 25 at 5:16
  • I'd imagine becoming part-owner only happens when you have leverage - which seems to be now and not later. – morsor Jan 27 at 7:46
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Are the other group members also handing over their clients? If so, then maybe that's a necessary part of building a viable cooperative and you'll benefit in the longer term.

Have you discussed a hand-over with your client? It might be that they are not OK with it anyway.

I'd personally not jump into handing them over. With the cut in rate, you might appreciate having some side income as part of the transition. That rate comparison sounds like comparing apples to smaller apples, rather than apples to oranges.

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  • Yes indeed - at least the 2 owners pooled together their freelance stuff, of course they're owners. But that's the case they made is that they're all in the same boat pretty much and nobody so far has gotten commissions or anything for bringing in business. Yeah keeping my client on the side is an option at least for the time being. In the long term my employer doesn't want my focus divided too much but in the long term a lot will be clearer. – Josh Sutterfield Jan 30 at 23:23
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Is it safe to assume that the other members all bring different experience to the table? Could they help you provide more services and value to the client, even if you don't get all the money?

This may help for increasing your bus-factor, which should help land larger, long-term clients. Having 2 or 3 professionals handling an important aspect of their business is better than 1 for the client - more collaboration, more ideas, and the ability to let YOU take vacation and not worry.

It is a trade off, and you must ensure you TRUST the people in the partnership. You need to make sure you get a seat at the table, and compensated nicely. If you're charging $80/hr, and getting paid $35 plus benefits, that is a steep decline, for sure. But will the business provide better insurance? Benefits? Vacation/sick time? Pension?

If it's not too late, negotiate with your potential new partners. Unless you know for sure it won't last.

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  • Right - better situation in terms of what we can do together, and at this point I'm missing the teamwork aspect. I think I found a good group of folks but yeah it will take some time for trust and just seeing if it works out. Benefits are not so hot, but it's a work in progress. For instance they're all doing their own healthcare until they can find a group plan that works, but they do have paid leave. – Josh Sutterfield Jan 30 at 23:34

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