Having worked in the service industry for many years, earning my living on an hourly basis, I am happy to say that I have done reasonably well.
Though notably some of it was also attributed to the fact that I worked in my own businesses, benefiting from the labor of others, as well as the equity value of the businesses when I sold them.
With this in mind, I thought it might be of value to list a few positive and negative aspects of hourly earning for you to consider before taking the plunge into this type of business or career.
The benefits of working on an hourly rate, especially when starting out on your own, is that it is usually somewhat easier to get started.
As long as you have a saleable (and provable) skill set, it can be done.
The cost of setup is minimal and so you do not need a lot of money to get started.
In some cases you can even start on a part time basis and build your way from there.
More often than not people starting out on their own will also already have a potential customer base in place, and depending on your industry, getting potential customers might be as simple as placing an advertisement in a local news paper.
The last though not the least of the benefits, are the margins.
For most hourly billed service type business (where you are the only one working) the margins are fantastic.
People pay you for your time, and so the input cost is usually minimal.
So you are able to stick most of the money you earn, in your pocket.
The problem with this however is that time is a finite resource.
There are a limited number of hours in a day, for perhaps 5 or 6 days a week, that are suitable for earning.
Accounting that, if you worked really hard and did 12 billable hours a day, the absolute maximum you can earn for, is 72 hours a week.
And not doubt if your rates are high enough, this makes for a pretty decent living, making it possible to even retire pretty well if your investments and planning works.
But it will take time, and it is unlikely that you will get exceptionally wealthy.
Another downside is that the cost of your resource (time) will prove particularly expensive if you wish to expand your business.
Any persons you hire may need to have similar skills to you.
And though it can be profitable to offset hourly rates against fixed salaries, the margins on expansion will go from 80% down to 15%, maybe up to 25% if you are lucky.
And of course when there is not enough work, you have overhead to cover irrespective.
And since maintaining overhead that does not earn is very expensive in this type of business expanding is difficult, expensive, and require a very strong financial position before you even start.
One of the biggest (yet simplest) personal challenges for me was the fact that taking a holiday cost way more than the cost of the holiday.
The reality is that every day that you do not work (or earn) results in lost revenue.
And since expenses do not ever go on holiday, you need to make enough extra money to carry your expenses for at least the period of your holiday, or just not go on holiday.
Certainly tough if you like spending time with your family.
As they say: "When things are going well you do not want to go on holiday, and when things are not going so well, you cannot afford to go on holiday" Morbid as that may seem, the reality of this type of work is that no doubt it can earn you a decent living.
But likely no more.
It is often hard to maintain, and equity value is limited even if it is your own business.
But it may be the thing to get you started in your own business because of the various benefits.
So when thinking about this type of business, just do it with a plan, and make sure that you have an escape route in mind, unless of course this will satisfy your needs...
I wish you all the best with your ventures and invite you to share your comments and stories here.
Cheers!