A while back, I bought a DJI Phantom 2 Vision+ aerial drone and have taken some pretty cool pictures and video with it. Soon after I started posting my work, several people asked if they could pay me to take aerial photos of their businesses and property on their behalf. I also had several people suggest different ways that I might be able to monetize my hobby of aerial photography. One person suggested I try doing some freelance work for a local news station. Another asked if I would do drone photography for their agency. Yet another suggested I try to do photography of school sporting events and try to sell pictures to parents.
Certainly someone could make money doing drone photography, if the FAA would stop dragging its heels on the issue. But, it’s not going to be me. I really enjoy flying my drone and taking pictures with it, but I have zero interest in becoming a commercial aerial photographer. Despite having a really cool camera, I would still effectively be a freelance photographer. I have nothing against freelance photographers, but I wouldn’t ever want to start a photography business or any business where I provide professional services on a freelance basis, such as graphic design, audio production or web development services.
What’s wrong with Freelancing?
You stop getting paid when you stop working. Professional photography is a classic example of a freelance services business. When you’re a freelancer, you get paid a set fee for providing a specific service at a specific time, in this case, aerial photography. That means that you are only making money when you’re working and actively providing services to customers. If you go on vacation or get sick, your business effectively grinds to a halt.
You’re effectively selling your time for money. This is what you’re doing when you have a full-time job. However, in this case, you have the additional administrative overhead of running a business and dozens of different bosses (your customers) to keep happy. Depending on the type of freelance services you are offering, your schedule may be at the mercy of your customers because you need you be available when your customers aren’t working.
There’s limited upside potential to your income. If you were to charge $75.00 an hour providing some kind of freelance services and could book 30 hours of per week of billable work, the maximum that you could ever earn per year is about $115,000 (before expenses). While that’s a nice income for an individual, it’s not all that impressive of a business. In order to get beyond that cap, you would have to bring on team members to help perform your company’s services or reduce your administrative overhead, which is feasible, but comes with another set of headaches.
Freelance services businesses are difficult to sell,because so much of the business’s value is tied up in the relationships that the owner has and the work performed by the owner. There’s a good chance that your customers have a strong relationship with you and there’s no guarantee that they are going to continue hiring whoever takes over your business. When these business do sell, they typically sell for relatively low revenue multiples.
What’s the alternative?
I’m not opposed to the idea of a professional services business (such as photography). I just don’t think you should be the person providing the service directly to your end customers. It might be a necessary evil to do the work yourself for the first couple of years, but your long term goal should be to have someone else or a series of systems and technology to provide the services on behalf of your company. When someone else is doing the work for your company, you are freed up to work on growing your business and tackling the tasks that only you as the business owner can tackle.
My investment newsletter business is an example of a services business done right. While it’s a services business, I’m not directly responsible for providing the service (our daily newsletter) on a daily basis. The daily newsletter that customers pay for is delivered automatically through a series of software systems. Marketing effectively happens automatically through a series of campaigns that largely run themselves and customer services is primarily taken care of by my assistant. While I do have intervene periodically, I’m largely free to focus my efforts on growing the business.
The other alternative is to build a product business, where you build something that customers can buy without you having to sell it directly. This can either be a consumer goods product, a piece of business equipment or even a digital product, like an e-book or an online course. You do the work to create the product once, then a series of systems sell and deliver the product on your behalf.
In both of these cases, there’s an intentional disconnect between how the work is delivered to the end customer and the work that the owner does. As a business owner, your primary efforts must be focused on building and growing your business. That can’t happen if you are directly responsible for producing the products or services that your customers purchase.