Switching to Freelance with Pete Keen

One question that I get a lot is how I made the switch to freelancing. More often than not I just shrug and say it just happened to work out this way. I’m not trying to be a vague jerk, I just honestly don’t remember all the details and emotions of the switch.

This is why I recently had a call with Pete Keen, author of Mastering Modern Payments, who just made the switch from full time work to freelancing work in the past couple of months.

Sidenote: I’ve helped a ton of clients build their SaaS apps. The successful ones were the ones that thought about payments from the beginning. If you’ve never built billing code into your app you should definitely check out Mastering Modern Payments. It relaunches October 15th.

Here’s what you’ll learn in this podcast:

If You Want to Listen to It

Transcript: Making the Switch

[Ryan notes: The transcript below has my commentary inserted like this.]

Ryan Castillo: Hello everyone, this is Ryan here. I wanted to follow up with some of you.

I usually get questioned a lot regarding switching from a full-time job to a freelancing or contracting, and I decided to do an interview with someone who has recently made the switch. He’s a good friend of mine.

His name is Pete Keen, and he wrote a book on “Mastering Modern Payments.” Here’s Pete.

Pete Keen: Hi, I wrote a book about a year ago. It’s all about integrating Stripe with a Rails application.

The Stripe docs are really good, but they don’t really walk you through the whole process. The book is about going from a blank, brand new Rails app to having a functional Stripe integration in a story format.

It goes all the way through individual payments and subscriptions and marketplaces and everything. It’s sold really well.

Ryan: Cool. Pete, to clarify, when you were writing this book, you were still working full-time, right?

Pete: Yeah, I had a full time job while I was writing the book. I had a bunch of personal life issues. I got married, I had two relatives die. I moved across the country and I had a full time job, so there was a lot going on in addition to just writing the book. It was almost a distraction from everything else that was going on.

Ryan: Oh, like a productive, healthy distraction.

Pete: Right. But yeah, it was all happening during that. I started in April, 2013 and launched pre-orders July of last year in 2013 and then launched the actual book on August 15th.

Ryan: During that process, was there any time where you thought to yourself, “Hey, this book is going to really take off. Maybe it’s time for me to switch from full time work to working purely on the book”?

Pete: No, not a single moment. It was always like, my expectations were extremely low. My expectation was, if I can make $1,000, I’ll be satisfied, and if I can make enough money to pay for COBRA payments — for those of you not in the US, that’s health insurance payments — for a whole year, I would be ecstatic. I have far surpassed both of those goals. But it took more than a year.

Ryan: OK, cool. Then, what made you switch? I mean, what made you decide, “Hey, I want to stop full time work and go into like a kind of lifestyle where I’m my own boss and work”?

Pete: Sure. I switched jobs in July of 2012 and I worked a Rail shop for two years. Right when I started, it was kind of, I kind of felt like, this is a great environment and all the people are really nice, but it’s not really the job for me. Pretty quickly I was looking for other jobs and then I got sick. I actually got diagnosed with cancer in November of 2012 and that put life on hold. I couldn’t switch jobs because I couldn’t have a gap of insurance. I didn’t want to switch insurance at the time, so I just stuck with that job. Then, I got better and I went into remission in April of 2013.

Ryan: Glad to hear it. Yeah.

Pete: Thanks. Then, I was like well I still don’t want to be here, but the possibilities of changing jobs. It’s a big leap to even change jobs, so I stuck with it and worked on this book. Then, all that other stuff happened. Then, I launched the book and it did really well. Then around the same time, I was reading stuff by Brennan Dunn and reading stuff by Amy Hoy, all about consulting and doing products and I figured well I could do that.

That doesn’t seem that hard and it became real, a real possibility starting earlier this year.

Ryan: OK. For those of you that don’t know, Brennan and Amy have this path to products where you might start off with full time work and then you transfer to another job that’s higher paying then you do some side freelancing and then you make some transition into more consulting based roles. Then, privatized consulting and then maybe actually product stuff. [Ryan notes: Amy  actually had an excellent article that describes how to invest in the future with products. It actually gives steps to improve your situation if you’re working full time, freelancing, or consulting.]

It’s the whole product spectrum that I can’t remember who had talked about it, but someone had written a blog post about that recently. [Ryan notes: the product spectrum article was written by Sacha Grief. It talks about the steps and skills necessary for making the jumps from full time work to running a product business and how some jumps are harder than others.]

Pete: Yeah. I don’t remember who wrote that. We could probably look it up and put it in the show notes.

Teaching and Writing to Position Yourself as an Authority

Ryan: OK. Yeah. It seems like you had flipped that on its head. In stead of going straight into freelancing and consulting as a part time profession, you went into the product stuff and you were somewhat successful with that. Do you feel like that’s given you some sort of an advantage with starting out freelancing or consulting?

Pete: Yeah. Before I wrote this book, I had read “Lean Startups” and then “Start Small, Stay Small” which I believe is by Rob Walling. Is that correct? [Ryan notes: It was by Rob. You can find it here.]

Ryan: I’m not sure.

Pete: I think that’s by Rob Walling. Anyway, I read those books and then I read a book by Nathan Barry called “Authority.” Authority goes through, it’s almost a meta book in the same way that my book is meta. Authority goes through the process of launching a book or really a product of any type, but he focuses on eBooks. I bought it as an eBook and it was inspirational.

Like, Nathan could do this whole thing. He could write a book and launch it successfully and this is the process he used and I followed his process and it worked really well. I’m not the most successful of the people that he’s profiled or readers he’s profiled that have gone through the whole thing. It works really well.

The main thing, to go back to the question, the main thing that has been useful for is I was able to go from full time job, nobody knows who I am to well I wrote a book about this topic.

I am the only one so far that I know that has written a book on this topic. If someone needs help with Stripe and Rails, then, they can approach me and I can say, “Well, I wrote this book. What can I do for you?” By writing a book, you could have gain instant authority in a particular topic. I definitely think it was an advantage and continues to be an advantage.

Ryan: OK, let’s talk more of that a little bit then. Did you realize its advantage right away?

Pete: No, it was sort of in the back of my mind that it could be good. As I was writing and as when I went through the whole launch process. Then, I started getting consulting leads. I didn’t have any time because I was still working full time.

I have to reject or pass them on to other people. I think now, it’s been super helpful because I get call contacts at least once a week about people who wanted to do Stripes stuff.

Ryan: That’s really cool. Instead of you, actually having to build a lead pool, your book has actually provided that for you.

Pete: Yes, I’ve actually had not to contact anyone. I haven’t had to, like try to get a lead yet. I’ve been doing consulting part time since May.

Planning for the Uncertainty

Ryan: OK, let me see if I can try to paint a little picture and you can tell me if this is true or not. You came out with a book, your book did better than you expected. You are still working full time.

Then, the lead started coming in, but like you said you were busy. You built some confidence and potentially going into consulting.

Then, one day you said to yourself, “Hey, this is something that I can really do and I feel really feel confident about. I can make this switch.” Do you think would you call that a true statement? Or would you call that a false statement?

Pete: Partially true. It mainly centered around my confidence. I wasn’t and still not entirely 100 percent confident if this whole thing’s going to work out.

The nice thing is that, I’ve built layers of back up plans that first level back up plan is to just wait. Then, when the money runs out, then I get a full time job.

I’ve been a professional software developer for seven years. Based on how the market is now getting another job would be a couple of phone calls. So I’m mostly confident that this is going to work out. It’s nice to have backup plans.

Ryan: I think that speaks to me and a lot of our listeners who are considering the switch is, that even though, even if you have a book, the jump from full time work to consulting or freelancing is still scary, right?

Pete: Oh, yes.

Ryan: One of the big things, or one of the nice drawbacks in all these is the worse that could happen out of all these is, “Hey, we ran out of money and I can no longer continue freelancing. I’ll just make a phone call and get a full time job.”

Our industry allows itself towards that right now.

Pete: Right now, and that’s not guaranteed in the future. Six months from now, it could be a completely different story. Right now, I count that as a viable plan.

Ryan: Yes, and you have the spouse too, right?

Pete: Yes.

Ryan: What did it take to convince her? Like, you could do this or that you could make the switch.

Pete: It’s funny. She never doubted my ability to do it. She was always nervous about it. It took a lot of, going over the numbers and showing her plans, there’s so many spreadsheets.

I think I have a spreadsheet that’s got eight tabs with different scenarios and different breakdowns and things. That helped her out. Then, we sat down one day and I asked her, “What is the big thing that you’re most concerned about?”

She said, “Health insurance.” She didn’t even hesitate. I was like, “OK, that’s easy. That’s money.” That’s all it is. I sat down and I looked up. I went down through the marketplace which is huge by the way.

The whole Obama Care ACA thing is a huge boon to people trying to do this because prior to the start of those programs, if you wanted to do this, you either had to get insurance to your spouse.

Or you had to get insurance on the private market which was never comparable to what you could get to an employer. Either because, it was cheaper but didn’t cover as much and also they could drop you.

Or if you have a preexisting condition like, “I’m a cancer survivor. There is zero possibility that I could get an insurance prior to the ACA.”

Ryan: Yes, and that also speaks to your wife’s biggest concern. It’s like, “Hey, we have to go through this. I just want to be sure that we’re well taken care of.”

Pete: Yes, exactly. I spent probably two solid days going through all the options for us for health insurance trying to find comparable plans to what we got through my employer. Then, I finally found a couple and made up another spreadsheet that goes through all those options.

It turns out basically if you have a condition that requires medical care, you’re going to pay the same amount every year depending on, like you’re going to pay a higher premium and a lower deductible or you’re going to pay a big deductible on a lower premium.

It all evens out. It’s just like picking the one in the best network and then go for it. That’s what we did. We have a small gap about two weeks. That’s over and we’re totally insured and everything’s great.

Ryan: Awesome, congratulations. Now, do you have to…so, insurance was the big concern.

Pete: Yes.

Ryan: Did you do something from where you were working full time and then you went freelance part time? And showed her that you could earn that money to pay for the insurance?

Pete: Sort of, I’ve been doing consulting on the side since about May. I could point to that and say “I can bring money in. There’s no question that I can bring some of them out of money in.”

It was always enough to cover the health insurance. Then, it was like, what would I have to do to make it cover our whole budget for the month. Now, that’s what I’m working for, it’s getting enough client work to cover the budget.

October is my first full month and I think we’re going to make it. November, based on the clients that I’ve been talking to, we should be able to surpass that.

Ryan: Nice. Starting in May part time.

Pete: Yes, small. Just a couple of hours a week.

Your First Big Win as a Freelancer

Ryan: OK, more than anything I’m sure. If I remember correctly, when I first started out, the biggest thing that I wanted to prove to myself was like, “Hey, can I actually get someone to send a check to me in the mail?”

If I can make that one small thing happen, the rest of the stuff will start to take care of itself. Is that the kind of process that you had with freelancing part time?

Pete: Yes, it was a process that went from, ‘is someone going to send me a check?’, and it turned out yes, someone will send me a check for work that I do for them after I send them an invoice. Like that, right there is a big step.

Then, the next step is, “Well, this invoice is really big. Are they really going to pay it? It’s ludicrous.” It turns out that yes. They will just send you a check.

Ryan: Yes, is that whole impostor syndrome thing again?


Pete: Yes, exactly.

Ryan: It’s not just like limited to technology. It’s also, “Hey, man. I’m billing for this insane amount. There is no way I can convince this person to pay me. They’re just going to laugh when I send them this invoice.”

Pete: Right, or be disgusted or just throw it away, or whatever and never talk to you again, right?

Ryan: Yes.

Pete: Then, that’s not what happens. They pay it and then they talk to you. Then, they give you more work.

Ryan: Yes, at least for me, there has never been any scoffing as far as like, “man, I can’t believe you charge this much.”

Just as long as you do the work that you say that you’re going to do and you deliver it. When you say you can deliver it, people would gladly pay you.

Pete: Yes.

Switching to Freelance

Ryan: Cool. Then you have three or four months where you earn income. You checked all the checkboxes with your wife and gained your family’s approval. What made you say finally like, “Hey, everything’s lined up. It’s time to make the jump.”

Pete: We have agreed upon cut off where we said that we would talk by the end of August. Like, revisit the whole thing at the end of August. Because I was champing to go. She said, “Well, just wait.”

We talked at the end of August and agreed that our emergency fund was in such a place that we could go for a couple of months, almost three months at the time. Then, she said, “OK.”

I started figuring out an end-date to coordinate insurance overlap. It didn’t quite work out how I wanted to. We had a gap of two weeks. Nothing bad happened.

Really, the worst thing that happens is if something happened during that gap, we would have elected COBRA which would have cost us an additional 1,200 bucks through the end of the year.


Ryan: Yes, it’s an extra premium you have to pay. I think we did the same thing when my wife was switching jobs. Our insurance went to an unknown zone a little bit. How often do you look at that number, that war chest?

I think I remember having the same experience. I had a war chest and say, “Hey, this will last our family like several months. If we get to this amount, it’s time for me to start making calls for a job.” Are you looking that often right now?

Pete: Kind of really often. I go through and every weekday morning, I have this routine where I go through. I hand enter all of my financial transactions. I go through it in all the things that happen the last day and check off things that cleared.

Then, I have a couple reports. I’ve got a dashboard report that shows like everything’s in flight and balances and everything. Then, I have a runway slash burn down report that shows really detail like this is how things in the budget hit during the month.

This is how our cash flow looks. It has a graph and it has a date. Like, this is the date when the war chest runs out. This is the date when we totally run out of cash.

Ryan: That’s cool. That’s much more automated than I had. I had to look at the bank account and just do the calculations and the fly [laughs]. Very scientific.


Pete: Yes, I’ve been living in this personal finance system for seven years. Since in 2007, I was a brand new professional software developer being paid relatively well.

I bounced a rent check and I said that was really stupid and started tracking everything to the penny. Then, I transferred that system over to my new business. I basically copied the whole application and made a new one for the business.

Avoiding the Black Hole of Worry

Ryan: That’s good though, right? Because when you make the switch, there are a lot of things you can’t control. A lot of those things quite frankly could prove to a lot of stress. You can’t control when your clients going to pay you whether they pay you on time.

You can’t control leads initially, like how many leads are going to come in a given week. There are a lot of things out of your control.

If you have a system like you’re speaking to with your personal finance system, I wouldn’t say it gives you false confidence but it gives you some kind of confidence as far as like, “Hey, things are OK and things are going to work out.”

Pete: It gives you information. If you don’t have it, it’s just a black hole that you can throw worry into.

If you have information that you can look at, then you can, not necessarily stop worrying have a focus and have actual concrete things you can take action on. That’s what I’ve done.

If any listeners out there are going to, are considering doing this, I think one of the big things is to get personal finances in order.

Either build yourself a system or find a system like you need a budget or Mint or something.

Then, for business finances, it’s even more complicated so, get an accountant. I don’t have an accountant yet. I’m getting to the point where I think I should have one.

Ryan: Yes, I haven’t really made a lot of hires in the past several years, that the big ones for me was finding an accountant. Eventually, finding like some kind of assistant to delegate some of the work to do.

Time to Decompress

Ryan: This was pretty cool that you have told me about before was when you quit your job, it’s not like you went into a straight panic mode and start working right away. You actually took a couple of week break. *

Pete: Yes, I had to force myself. Like, I hadn’t take an actual vacation from work since before I get sick. Since 2012, I hadn’t taken any sort of vacation other than three days for honeymoon.

Ryan: I think I remember you telling this about that was like, “Man, I got sick. I had to save my time for my honeymoon. I hadn’t really the time to relax.”

I remember when you kept on considering about doing this switch to consultants like, “I just had the freedom to do that.”

Pete: Yes, that was. The big impetus for this whole thing was freedom to not be butt in seat for a number of hours on a certain schedule that I don’t control. I know there’s full time jobs out there that allow you to do that.

There aren’t full time jobs out there that allow you to do that and work out on your own projects during what would ostensibly be work time.

Ryan: What did you do for those two weeks?

Pete: For the first week, I limited computer use to probably 45 minutes a day, just doing my daily finance routine and then, checking email and stuff.

Then, I read books. I played a little bit of video games. I think one day, I watched “Clone Wars” all day.

Ryan: That’s cool.

Pete: Yes. It was great. It was magical. Then, the second week, I worked on my book pretty exclusively. I think I did a couple little client projects during that. They couldn’t really wait. I mostly worked on my book. That was also great.

I got progress in areas where I hadn’t been able to get progress because trying to focus on that kind of thing for just like an hour a day is really hard. Like, loading all the state into your brain that you need to manage.

What am I going to write about? But, also writing the software that I’m going to write about at the same time that takes a lot of concentration. It really helps that I had full, whole days to work on it.

Ryan: So, it’s the whole context which problem right?

Pete: Yes.

Ryan: For me, that’s a reason why I tend not to take on more than two clients at a time. It’s just because my brain can’t deliver the same kind of value, if I was constantly switching between clients.

Now, do you think this is something you’re going to build in into your, I guess consulting schedule? Or you take a couple of weeks breaks here and there throughout the year to work on your book or other project is?

Pete: Yes, definitely. Part of how I’ve structured my rate, it came to the rate that I came to is predicated on having a certain number of weeks every year where I don’t get paid.

I assume that I have at least depending on which call I’ve looked at this treated it’s like it’s 10 to 15 weeks of unpaid time during the year. That maybe optimistic, I don’t really know yet.

I have my rate set such that I can take that at least that amount of time off and not be hurting.

Setting Your Rate

Ryan: Let’s talk about your rate a little bit. How did you come up with it? Did you come up with a number, or it sounds like you reverse and engineered the amount of money that you would need for the insurance, for your family’s income? Then, came with a baseline number?

Pete: Yes, basically. I took the monthly budget or household budget and divide it into weeks. I guess before that I decided, “So, this is how much I need to make.”

Then, effectively multiplied it by two assuming that my overhead in Brennan’s book, Double Your Freelance Rate, he has a whole couple pages dedicated to those. Like, how do you decide to rate. [Ryan notes: Here’s the link to Brennan’s book. And while you’re at it I’d recommend subscribing to his newsletter. He’s one of the five newsletters that I actually subscribe to and read.]

One of the things he’s got in there is you can reverse engineer. One way to do it is to take your monthly burn rate and then, multiply it by some multiplier. He’s got a really optimistic one in there of 1.5, which I found not to be quite that true, because of the health insurance thing.

That multiplier needs to cover taxes, expenses, putting money away in the business such that you don’t have to worry necessarily about well this check is coming in and I need to pay this bill.

The ideas that your monthly revenue is somewhat divorced from your monthly expenses. At least week to week timing. Building up a buffer is included in the multiplier. He said 1.5 and I tried that but, it didn’t seem it was really enough.

I ended up writing this really crazy complicated spreadsheet that spat out like 2.5 and 2.25. Between 2.25 and 2.5 depending on if we could deduct the health insurance from the taxes or not.

Ryan: That goes back to the whole like having information, right?

Pete: Yes, exactly.

Ryan: One thing that I want to speak to is, it’s misleading to just call this your rate. Because what actually is, is it’s the minimum.

It’s the minimum that you need to make, whereas for clients, you can actually charge much more than that depending what they actually need you to deliver.

Pete: Right, let’s say my minimum rate is a hundred bucks. Then, for example, then what you can charge clients is what you want to be charging is at least some like 20 percent higher, 20 to 30 or 40 percent higher than that.

To build a bigger buffer or to cover other bases that you need to cover or unexpected expenses and things like that. That’s what I’ve done. I unfortunately I have a range of rates right now.

I don’t really like it. I’m trying to say to have new clients start at my top rate right now. I don’t really know how it’s going to work.

Ryan: I think, that way even though you might not like it and feel uncomfortable having a range of rates right now. You’re not putting yourself in a box. Like say, “This is my rate. This is everyone’s get charged.”

There’s a lot of experimentation in all these. I think my first year one of the things that I did was, every time I got a new lead, I would push up my rate like 20 bucks. I know it until people’s going to start saying, “We couldn’t afford that.”

Or just giving me a little bit of feedback. Eventually, you start to rely on other kinds of data to try come up with your rate. One thing that I recommend is knowing actually what the client’s budget and what they’re trying to achieve.

Using these two information to come up with a rate based on helping them achieve their goal and still being able to make money. That’s really cool.

Sending Leads Pre Qualifier Questions

Pete: One of the things that I started doing really early on is sending out a set of, if someone is sends me a cold lead, like if someone calls in and, “Do you want to do some work for us?”

I send them a set of pre qualifier questions, which I customized a little bit depending what they say. Most of the time it’s like, “Tell me more about what you want. Tell me what your proximate budget is or the question is, do you have a budget?

Is it at least a certain number of thousands of dollars?” That weeds out a lot of people that are just like, “Well, I just want an hour of your time.”

Ryan: Yes, because you got a lot of those.

Pete: Right, yes. Exactly. Then, “When do you want to start and who am I going to be talking to. Is it you or is it developers on your team or what?” That’s been super helpful because it helps clients actually think about what they want and concrete terms.

If you just say, if someone sends you an email and then, you just respond, “OK, let’s have a phone call.” That phone call could last an hour and a half. You couldn’t actually get a good idea of what the project is.

In this way, at least an outline of the project is there in written form that I can then think about before we have a phone call. Then, it’s a framework to talk about when you’re forming the idea of what the project’s going to be.

Ryan: Yes, I think more than anything what you’re talking about is like having a process. It’s just having a process that reveals important information. It’s just not like, “Hey, we’ll just take this conversation in the fly.

I just learn anything I have to learn about you. I’ll somehow absorb all that. We’ll just work in our engagement and everything’s going to be perfect.”

There’s certain kinds of information that is pretty important to actually building a successful endeavor like, what’s the delivery date for this? How else are we going to make money? Like, what kind of budget are you working with?

And all those kinds of things. Having a process like that I think also helps filter out specific clients exactly what your pre qualifying emailed us. That’s cool. I think that covers a lot of what we want to talk about.

I think to me, some of the, I guess the key points in all this was one, you can build leads through education. Your book is something that educated people on stripe and because you position yourself as an authority and something that generate leads.

Another thing is the process of switching from full time work to freelancing is scary for everyone. No matter how prepared you are. Preparation does bring a little bit of confidence and gives you more information that whether or not moving into a positive direction or not.

I guess, by having that information, you can make those calls based on information rather than emotional fear of our false confidence. It knows another thing.

I can’t think of anything else right now. I think those really are the key things that struck me through this conversation.

Pete: If at all possible, take a break in between.

Ryan: Yes, taking a break is key. Even now, I’ve been doing this for several years. There are times where I just have to tell the client. “Look, I need a couple of days or a couple of weeks just to decompress.” Just because we have all this freedom.

We should actually take advantage of it and build in vacations to recharge. One thing just to close things, I know that you’re prelaunching your book.

You mentioned earlier that you’re going to be working on that again or you are working on that again. Do you want to give the listeners a little bit information regarding your second book launch?

Mastering Modern Payments

Pete: Sure, the book is “Mastering Modern Payments Using Stripe with Rails”. The relaunch involves several edit passes. Then a completely rewritten chapter on subscriptions. That was the big feedback from the first edition.

It’s been, this didn’t help as much as people wanted to is subscriptions. I completely took all the feedback and I distilled it into a brand new chapter about how to do subscriptions.

Then, updating everything to lead these versions. Then, also a brand new web based reading experience. If you’ve seen Discover Meteor, it’s heavily inspired by that. That comes out on October 15th.

Ryan: All right. I look forward to checking that new copy. We’ll be in touch. Good luck on the next year. I would wish you luck.

It seems like you’ve got everything lined up to be very successful on this freelancing/consulting world.

Pete: I hope so. I take all your wishes if you want to give them. I think it’s a lot of preparation in making your own luck.

Ryan: Alright, cool. Thanks.