Benchmarking is bogus

For tiny businesses, benchmarking is bogus. Most freelancers are tiny businesses.

It doesn’t matter what freelancer A is charging. It doesn’t matter what net profit ratio freelancer B is making.

You shouldn’t set targets based on what other people are doing.

You should set targets based on what you can do and what you want to do.

I imagine that most freelancers are pretty unique in how they run their business. Some prefer longer projects with more security. Others like lots of projects on at once. Others like to grind low level work. Some like to outsource as much as possible.

As freelancers, we are dealing with a tiny tiny sample of the market. When the economy goes bad, most of us are working with too small a sample to have any real say on what is happening. At any given time, we might be working with 1-15 customers. The market size at any given time for a specific area is absolutely massive and orders of magnitude greater than what we are working with.  The normal ebb and flow of freelancing offsets any data we might think we have. (This is why, freelancers that do the same thing as us are rarely competitors.)

When you combine the tiny data set and the different personal preferences between freelancers, it turns out that benchmarking numbers is next to useless.

What is useful, on the other hand, is learning from other freelancers. Ask, what is this freelancer doing that could also work for me? What techniques or documents or strategies fit my personal goals?

Answering these questions is much more helpful than questions like, what should my net profit ratio be? What should my charge out rate be? These later questions give answers that are useless without also knowing the reasoning behind them.

Limitations for freelancers are placed from the inside, rarely the outside.

Related posts:

• The difference between good freelancers and bad freelancers
• Charging more for your freelancing
• Outsourcing for freelancers
• “Specialize and thrive” or “Generalize and thrive”
• Charging the right price: Price optimization for freelancers