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):
- They don’t have employees with the skills or experience to do the job well.
- 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.
- They don’t even understand the requirements of the job, and they need someone to walk them through the whole process.
- 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.