Should I Start a Portfolio Career?
I am currently asking myself if I should start a portfolio career. In order to decide, I am analyzing the different pros and cons of a portfolio career versus alternative way to monetize my expertise.
A portfolio career is a career where instead of having an employment and doing one full time job, you have several part time and often short term jobs. We can summarize the differences to an employment as follows:
1 The Work Alternatives
More and more people are deciding for a portfolio career. In doing, so they are deciding against these alternatives:
● Employment
● Contracting
● Agency
● SaaS startup
For example, I am an expert on productivity and have the following options to monetise my skills:
● Employment as a project manager or Agile Coach helping teams to become more productive.
● Contracting as a project manager.
● Establish an agency that hires productivity consultants and provides productivity consultancy services to big corporate clients.
● Launching a SaaS software that businesses use to become more productive.
● Creating a portfolio career as the expert in productivity and taking on several gigs with different kinds of clients as well as offering an online course on productivity.
It is difficult to decide, as all of these alternatives have many pros and cons. So below we will analyse these alternatives, and their pros and cons.
1.1 Portfolio career alternative
How could a portfolio career look like? There are at least three different types of portfolio career:
● Generalist
● Specialist
● Expert
1.1.1 Generalist
A ¨Generalist¨portfolio career means that a person takes on several gigs in different fields. For example, one gig as a singer and another gig as an English teacher.
Generalists tend to make a lower hourly rate than specialists.
1.1.2 Specialist
A ¨Specialist¨ portfolio career means that a person takes on several gigs but all are within one field. This is thus very similar to a contractor. In fact, the only difference is that a contractor has one or two stable clients while the portfolio careerist has many and often short term clients.
Specialists tend to make a higher hourly rate than generalists.
1.1.3 Expert
An expert portfolio career means that a person has more than one source of income from different types of work, but still focuses on one field of expertise. For example, a clinical psychologist might focus on just psychology but earn money in these different ways:
● Teaching at a university
● Counseling private clients
● Working for corporates as psychological advisor
● Writing books
● Leading online workshops
● Speaking at events
Experts tend to make the highest hourly rates but it is difficult to acquire an expert status.
For me the only interesting portfolio career is an expert portfolio career focused on my field of expertise, productivity. Therefore, in my case, a portfolio career could look as follows:
● Write articles and books, and produce videos to showcase my expert on the subject of productivity
● Consult individual clients on personal productivity
● Consult business clients on organizational productivity
● Provide an online course on productivity
What are the characteristics of such a portfolio career?
Pros
● Location independence
● More freedom
● Potential to become a highly respected and well paid expert
Cons
● Requires marketing and selling
● A lot of admin work
● Expenses to launch the business, spending money instead of earning
● High risk
1.2 Employment
Employment has the following characteristics:
● Get recruited by the company HR department
● Likely full time and long term
Pros
● High financial security
● Many job benefits
● Get a nice work environment
● Possibility to move up the corporate ladder
Cons
● Not possible to become rich
● Dependence on corporate politics
● Less freedom
1.3 Contracting
Contracting is similar to employment in that there is generally a long term relationship with the client, similar to the relationship to the employer. The difference is mainly a legal one, i.e. a business contract rather than an employment contract.
Contracting has the following characteristics:
● Get recruited by the company or by a recruitment agency
● Likely full time & long term
Pros
● More earnings than in employment
● Less dependence on corporate politics than in employment
● More freedom than in employment
Cons
● Less likely to move up the corporate ladder
● Less job benefits and less job security
● Not possible to become rich
1.4 Agency
An agency is one step beyond contracting in the sense that you are no longer selling only your own service, but are starting to hire other people to help you provide that service.
An agency business has the following characteristics:
Pros
● Potential to earn significantly more than employment or contracting
● Potential to make a big impact
● Potential to sell the business
Cons
● No possibility of corporate career, no job benefits and no security
● A lot of sales and admin work, and therefore no focus on main expertise
● High risk of losing money
● Smaller financial benefit potential compared to a SaaS startup
1.5 SaaS
SaaS stands for software as a service. It means that the service that you provide gets programmed into a software, which can provide the service without requiring human work. Since it does not require personnel it has the potential to scale much faster and therefore become much bigger, ideally a unicorn, a multi-billion USD company.
A SaaS business has the following characteristics:
Pros
● Potential to earn significantly more than an agency and 100x that of an employee or contractor
● Potential to make a huge impact
● Potential to sell the business
● Potential to get outside investors that limit the personal financial risk
Cons
● Development time of the software and money cost before you can launch the business
● High risk: only a small percentage of SaaS startups succeed
● No corporate career, no job benefits and no security
● A lot of sales and admin work, and therefore no more focus on main expertise
● High risk of losing money, if no outside investment
2 Evaluation of the Work Alternatives
Above we have seen the characteristics and the pros and cons of the alternatives to monetize our expertise. But as there are many different pros and cons, it is hard to say which alternative is the best. For that reason we have to establish evaluation criteria and then look at the different possibility outcomes.
2.1 Evaluation criteria
We need to evaluate the alternatives according to the decision criteria that people generally use, which are:
- Financials
- Risk
- Contribution
- Fun at work
2.1.1 Financials
Financials is the amount of money or monetary benefit you can earn either as a salary, or as a contractors fee, or as income from an agency or SaaS business.
2.1.2 Risk
Risk is how likely it is that you will reach success, and how much you might lose if things do not work out.
2.1.3 Contribution
Contribution is how much you feel that you are contributing to a better world.
2.1.4 Fun
Fun at work is how much you like the work and your work environment. This includes things like:
● How much freedom you have
● How much you like your work mates
● How many job benefits you get
● How nice the office is
2.2 Evaluation table
We can evaluate the work alternatives according to each criterion on a scale from 1–10 as follows:
2.2.1 Financials & risk
There is a clear inverse correlation between financials and risk, the higher the average financial return the higher that risk. That means if you want to gain a lot you also have to assume a large risk of not attaining that goal or even worse losing money.
In terms of financials contracting and employment have the lowest value as the upside is limited. Employment is slightly better even though most contractors earn significantly more than employees. This is because employees are generally considered first for a promotion and are more likely to move up the corporate ladder and become senior executives. Therefore, the risk is higher, as you will generally earn less than a contractor but only if you are very lucky become a senior executive and make a lot of money.
For portfolio career, agency and Saas business the financial gains if things do work out can be significantly higher; but only if you succeed. The chances of success are highest for a portfolio career, lower for an agency and lowest for a Saas business. However, the potential gains of succeeding in a SaaS are much higher than for an agency and for a portfolio career.
2.2.2 Contribution
An agency and a SaaS business have the largest potential contribution to the world happiness as they are potentially creating many jobs and making thousands or even millions of clients happy.
A portfolio career is a one person business so has a much lower potential contribution than a ¨real¨ business. Still in case you become an expert and can shape the way people think and act, you can have a higher contribution than being a contractor or an employee.
2.2.3 Fun at work
This criteria is very subjective as it depends on what the person is looking for. A portfolio career could rank a little bit higher as it means more freedom but is potentially less stressful than an agency or a SaaS business as you are a one person business.
2.2.4 Conclusion from the evaluation table
From the above it is clear that if you value security a lot, then a traditional employment or contracting career is the best option.
However, if you value financial gains and contribution to the world a lot, then a real business with employees, either an agency or a SaaS business is the best option.
Only if you are somewhere in the middle, you are eager to make an impact and financial gains, but not quite prepared for taking the risk of a real business, is a portfolio career the best alternative.
2.3 Evaluation graphs
Let us look at how the option looks along a graph. The graph serves to illustrate the risk and the various possible outcomes. In the graph we measure the benefit, which includes financial as well as non-financial advantages, on the y-axis and the possibilities of outcomes from best to worse on the x-axis.
Fun at work and contribution are hard to put into a graph. For that reason I am adjusting the benefit values, the value of the y-axis, according to these assumed non-monetary factors.
2.3.1 Comparing employment to contracting
The graph below shows the difference in benefit between employment and contracting depending on how positive the outcome is, i.e. how competent, hard-working or how lucky you are.
Both options are low risk as you always earn money.
Under most circumstances you will have more benefits as a contractor. However, if things are really going badly, for example the economy crashes, your outcome will be better as an employee. Also, if things are really going well for you, and you move up the corporate ladder to a senior executive position, you will have a better outcome as an employee.
2.3.2 Comparing agency to SaaS business
The graph below shows the difference in benefit between agency and SaaS business depending on how positive the outcome is, i.e. how competent, hard-working or how lucky you are.
Both options are high risk as under most circumstances the business will fail and you will lose money!
However, if things do work out you will make a significant amount of money as well as get many non-monetary benefits, especially for the SaaS business.
The risk you are taking with a SaaS business is slightly higher than the risk you are taking with an agency, but the payoff if things do go well are also substantially higher.
2.3.3 Comparing a portfolio career to employment and contracting
The graph below shows the difference in benefit between employment, contracting and portfolio career, depending on how positive the outcome is.
The portfolio career can give you a negative outcome if things do not work out, as you incur expenses, especially marketing and sales, in a similar way as if you were building an agency or SaaS business.
However, as things do work out, moving to the left in the graph, your benefits increase substantially and it becomes a better choice than employment or contracting. In fact, there is a 30% chance that you will be getting more benefit than under the same circumstances in employment or contracting.
2.3.4 Comparing a portfolio career to an agency and a SaaS business
The graph below shows the difference in benefit between an agency, a Saas business and a portfolio career, depending on how positive the outcome is.
Under the majority of circumstances the portfolio career provides more benefits than either an agency or a SaaS business. However, if things do work out, both an agency and a SaaS business provide huge benefits, while the increase in benefits for the portfolio career is only moderate.
2.3.5 Comparing a portfolio career to all other alternatives
The above graph illustrates that if things are going really badly, you fare best with an employment, and if things are going really well, you fare best with a SaaS business.
If things are about average then contracting is the best alternative.
The portfolio career is the best alternative only for a tiny subset of outcomes. This is because while you are able to make more money than with employment and contracting, you have to build a business and there is a good chance that it will fail. And if it does in fact succeed then you would have been better off building a ¨real¨ business like an agency or a SaaS business.
2.3.6 Saas business with investors
In the graph above we see that a SaaS business can offer enormous financial gains. However, we also see that the chances for success are extremely low.
As SaaS business has potential of huge returns, it is possible to gain investors even before launching the business. If you take on investors, you can reduce the risk as the expenses will not be borne by yourself and you can actually pay yourself a salary. This can make a SaaS business less risky than an agency and a portfolio career but still which much higher gains if things do work out.
In the graph above we see that if a SaaS business does not work out, it still gives lower benefits than employment or contracting. However, as compared to a portfolio career there is both less risk and a much higher potential return.
We can compare the alternative of SaaS business with investor to a portfolio career as follows:
We can see that a SaaS business with the backing of investors always seems to be the better alternatives to a portfolio career.
2.4 Considering individual preferences and strengths
Besides looking at the general criteria we need to look at the individual preferences and strengths.
2.4.1 Strong preference for freedom
If you have a strong preference for freedom then a portfolio career might be for you:
● If you are employed or contracting you depend on one employer or client, and thus you have to comply with the rules set by your employer or client, which limits your freedom.
● If you have an agency or a SaaS business you are not dependent on a single client but you have employees, or even investors that limit your freedom.
● If you have a portfolio career you have many clients and thus are not dependent on a single client. Also, you are free to choose your clients and can drop them if they limit your freedom.
So, as a portfolio careerist you have the maximum freedom.
2.4.2 Incapability to build software
We saw above that if you can build a software to deliver your skills and get an investor, you have a better outcome than with a portfolio career under almost any circumstance. This however assumes:
● That is it possible to put your skills into a software
● That you are able to build this software
● That you are skilled in building company, especially in managing people
If you do not have the skills to build the software or to build a company then you should not start a SaaS business.
2.4.3 Incapability to manage a team
If you do not have the strength to build a software you still might set up an agency. However, this also requires you to manage a company and run a ¨real¨ business. If this is not your strength, then stick to employment, contracting or a portfolio career.
2.5 Portfolio careers as a start to other alternatives
A portfolio can be a great way to get started in other alternatives.
2.5.1 Portfolio career to find a great contract
When you are looking to do contracting and are waiting for a great long term contract to appear, you could in the meantime take up a portfolio career, working on smaller, short term gigs. As soon as a great long term contract comes around, you can leave the other projects.
2.5.2 Portfolio career as a launchpad for an agency
When you want to start an agency it makes sense to first do the work yourself and gain experience from many different clients. Once you have relationships with many clients and understand their needs it will be much easier to launch your agency.Thus a portfolio career can be a great start to an agency.
2.5.3 Portfolio career as customer development for SaaS business
When you launch your SaaS business you need to understand the clientś precisely so that you can build the software according to their needs. This knowledge can be gained by having a portfolio career. Also, as a portfolio careerist you might build a position as an expert which would help to sell your software.
Thus there are many reasons that a portfolio career makes sense as a start to other alternatives.
3 Conclusion for Myself
For myself, looking at the above analysis I come to this conclusion:
● On the one hand, a portfolio career is more risky and challenging than an employment or contracting, as I have to launch a business investing in marketing and sales.
● On the other hand, a portfolio career gives me much less benefits in case the business does work out than an agency or a SaaS business. A SaaS business is risky but I can limit the risk by getting an investor on board early on.
● Nonetheless, the portfolio career option, in the form of becoming an expert in the field of productivity, and working on gigs related to it makes sense even in my case as I can understand my SaaS clients better and use my position as an expert to sell the Saas Software.
