Hi David. I appreciate the math and the perspective, but I’m not sure how well this applies to freelancing. All but the very cheapest/offshore freelancers will always be more expensive to hire when compared to using existing employees. So if a company had the expertise to do the job in-house, they would only ever hire a freelancer for that job if they had overcommitted and needed help with the overflow so their employees could focus on other work.

What really defines a freelancer’s value is not how their price compares to in-house person-hours (because they always lose that comparison — unless they’re not very good at their craft and therefore charge way too little). A freelancer’s value is measured in ROI for the client based on their work.

You’ve rightly pointed out many of the reasons that companies hire freelancers (and I’ll add a few more):

1. They don’t have employees with the skills or experience to do the job well.
2. The job is too small to justify hiring a full-time employee, and it’s less risk to hire a freelancer for a one-off gig.
3. They don’t even understand the requirements of the job, and they need someone to walk them through the whole process.
4. They care about quality more than anything else, and they can get a freelancer more skilled in their speciality, even if it costs more than doing it (worse) themselves.

In none of these scenarios is the decision to hire a freelancer based on how their price compares to internal person-hours/days/weeks/months. In reality, that price comparison rarely exists.

Unless you deal in dirt-cheap freelance marketplaces, in which case it IS all about being low-cost. But that’s not the kind of freelancing anyone wants to aspire to.