Getting laid off showed me how to succeed working for myself

Late in 2019, I was laid off from a full-time job I’d started just 10 weeks earlier. Even with a few weeks’ severance to get into the new year, the layoff was psychologically devastating.

I’d been recruited into the position after successfully moving my way up at my first professional job for four years, and I was excited by the opportunities my experience seemed to unlock. The layoff was a blow to my confidence and a reminder of how fickle employers can be.

I used the network I’d built over those four years to quickly pick up freelance writing work and earn income once my severance ran out. My earnings at first totaled about half of the paychecks I’d gotten as an employee, but I was too busy with freelance work to dedicate time to searching for a job. I knew something had to change, but first I had to figure out exactly what wasn’t working.

Changing how I valued my work

I realized quickly how much I enjoyed working for myself as a freelancer, and I abandoned the job search after the first week or so. But it would take another two months for me to shake the thought of myself as an employee — an image that was hamstringing my income.

Early on as a freelancer, I chose work based on criteria that would make sense for an employee: I found one client who needed me to work 20 to 30 hours per week and thought I’d hit the jackpot. That filled over half my roster! The problem? I also gauged the hourly rate they offered based on what I’d earned as an employee.

This anchor client paid $30 per hour, a little more than the $29 per hour my full-time salary had added up to. My first mistake was not factoring in the payroll taxes, health insurance and 401(k) contributions my employer had paid for on top of my salary — costs I’d now be responsible for. That’s why conventional advice tells you to charge at least double the hourly rate as a contractor that you’d ask for as an employee.

My second mistake was letting one client provide the bulk of my work. That approach helped with my transition from full-time employment, but it locked in a lot of my work hours and left me inflexible to make the ongoing adjustments necessary to calibrate a viable freelance career. It also left me just as vulnerable to the whims of a single company as I’d been when I was laid off.

My biggest mistake was thinking of my pay in terms of an hourly rate. As an employee, part of my job was simply showing up (physically or virtually) and being available for my team for eight or nine hours of each workday. My salary reflected that 40-hour-per-week expectation.

As a contractor, I don’t get paid just for being available. I get paid for the tasks or assignments I complete. When I charge by the hour, I actually get paid less as I become more efficient at completing that work — penalized for getting better at my job! Over my first couple of months as a freelancer, I noticed how much easier it was to earn from the few assignments I picked up to fill in around that anchor client, because they paid per assignment rather than per hour. I could effectively earn $150 per hour for the same work when I charged for the value I provided instead of the time I put in.

By shifting away from hourly work and charging by the assignment, I doubled my freelance income in my third month. In that first year freelancing, I out-earned my previous full-time salary by $6,000, and in my second year I went on to earn $163,000 in revenue working just three days most weeks.

Breaking free from my employee mindset

Changing the way you charge is simple advice for freelancers — but the real shift I needed to make in those early months was away from an employee mindset.

I took the job with the company that eventually laid me off because I was ready to move on from my previous job. In hindsight, I knew I was joining a mismanaged startup, but I was so ready for a change and could only imagine finding it with a new employer. So I overlooked red flags. When I was laid off, I was sure I needed to find another job quickly to reclaim stable income.

That early transition into freelancing helped me see that I could find stability without an employer and then adjust my mindset to fit independent work. I had to change how I evaluated clients to charge for my value rather than my time. And I had to let go of the feeling that one big client was more stable than multiple smaller clients.

Getting laid off was the push from the nest I needed to make this transition. Without it, I might have continued to rely on ever-changing employers for satisfaction and stability in my work. The layoff forced me to figure out how to succeed as an independent worker, and I was able to develop the mindset and skills I’ve used to support my family through self-employment for the past five years.