. Originally published here When I was growing up, my dad talked often about income statement thinking vs. balance sheet thinking. Most people think of their finances like an income statement. You make income. You spend it on stuff. You make more. You spend it on stuff. But people who understand money think about their finances like a balance sheet. They make income. They invest it into assets that earn additional income. That they turn into more assets. And so on. Balance sheet thinking requires a mental shift. It requires delaying gratification — realizing that the investment made up front will likely pay dividends later. Your time works exactly the same way. Your time is an asset Most people subconsciously think about their time like an income statement. Time in, money out. They want to get paid for every hour they work. No money, no work. But some people think of their time is an asset. An asset that can be used to build more value over time. These people focus on maximizing the of their hours, not necessarily being compensated for hour they spend. value every Rather than their time, they their time. spending invest A tale of two freelancers Imagine Lucy and Mike both want to start a freelance design business. Neither have great portfolios yet. Mike reads articles about how you should never work for free. That you should be paid what you’re worth. He talks to some people for advice and decides his time is worth $50 an hour. He only takes on projects he gets paid for. At the end of the year he’s done 10 projects averaging $5,000 each. Lucy realizes her portfolio needs to get better. She needs to get better, by working on real projects with real constraints. She decides to spend 8 hours a week promoting the hell out of herself (obviously unpaid) and the rest doing work. If she gets paid, great. If she has unallocated time, she fills it up with work regardless of cost, even if it’s free. End of the year, she’s done 50 projects averaging $1000 each. Many of them, particularly in the beginning, she does for free. They make the same amount of money. Mike made more per hour worked. . She’s had 5x the opportunities to learn on real projects with real constraints. She has 5x the logos and examples to put on her website, Dribbble, etc. She has 50 customers whom she can leverage for referrals. But Lucy is now a better designer than Mike After 1 year, she is able to command more than $50/hour on projects. And her pipeline is much bigger. In year 2 she makes considerably more than Mike. Because of a 1 year investment of her time. It works in real life This isn’t a fake story. . During the day I was an Account Manager. I had aspirations of becoming a Creative Director. Only problem was I wasn’t good enough. I did something very similar in my first job So at night I did design work for my company on my client projects. For free. I did dozens of them, outside of my normal job responsibilities. I didn’t get paid for any of it. But I got WAY better than I would have otherwise. And eventually it became my job. In 18 months my income tripled. And it put my career on a trajectory that would have been impossible (or at least taken considerably longer) otherwise. Most importantly, it taught me a secret. . It takes longer, but not as long as you think. And the rewards far outweigh the short term costs. Investing your time vs. spending it creates exponentially more value in the long term It’s a secret I use to this day. When we started , we charged 30k to design and build entire apps for startups (web and mobile!). To some people that might sound like a lot of money, but I promise you it isn’t. It was barely enough to pay our team. . Digital Intent The partners made nothing But we got the logos. We learned how to execute on multiple projects at the same time. We learned how to sell those kinds of services, how to manage those kinds of projects, how to allocate resources. And that investment allowed us to charge progressively more. Today the same services cost up to 10 times as much — and it’s still a good deal. The team got the experience to become badass at what they do. And we’ve demonstrated the ROI enough times to make it a no brainer for our clients. If we tried to “charge what we were worth” at the outset, there’s a good chance we’d still be a 3 person company today. At a minimum I think our growth trajectory would have been considerably different. Same thing with . I had experience building and selling companies, but none as a GP in a venture fund. Founder Equity Almost every fund charges a 2% management fee each year and gets 20% carry when there’s an exit. Our fund charges no management fee and has no traditional carry — we own the exact same thing our investors do. That means we’ve worked our tails off for 3 years identifying promising companies, doing diligence, serving on boards and generally trying to make ourselves as helpful as possible for our founders. And we take zero salaries from the fund to do so. In fact, any profits from our consulting company that don’t get reinvested in the business go right into the fund. To income statement thinkers that sounds insane. But if it works, the upside is transformational. On paper we don’t look like typical VCs. Don’t have the normal pedigree. I don’t think we would have had we not been willing to put substantial skin in the game ourselves and have our unusual no-free structure. It’s only been possible because we focused on asset value, not income. gotten the fund off the ground Dumb reasons to work for free There’s a subtle difference between what I’m suggesting and what most people (particularly freelancers) think of when this topic comes up. In that world, it’s not unusual for a potential client to ask you to work for free. They might dangle the idea of “exposure” or of follow on work if they’re happy with what you do. They might be a startup trying to convince you they’re going to be the next big thing. Those dumb reasons to work for free. What I’m suggesting is more strategic. are Most reputable clients won’t ask you to do something for free. You should be wary of anyone who does. . Especially when it’s an opportunity or person you wouldn’t be able to work with otherwise. But that doesn’t mean you can’t offer it Smart reasons to work for free There will be times in your career where your aspirations are insufficient to reach your goals. You lack the expertise. Or the . Or the ability to convince people you have the talent. network Whenever that’s the case, working for free can be a strategic way to close that gap and accelerate your growth. Strategic looks like taking on a project to learn an industry or , that you can now leverage on future engagements. technology Strategic looks like walking into a brand that’s way above your pay grade and saying “I’m so confident I can increase your X by Y%, I’m willing to do the engagement for free — pay me if it works.” Strategic looks like emailing that influencer you’ve always admired and saying “let me help you get that podcast off the ground — I’ll do the speaker recruitment, interview prep, post production, even promotion if you like. You just have to show up. I’ll commit to 6 months. You don’t have to pay me — I’d just like some mentoring, and some introductions if I perform as promised.” Strategic looks like joining the board of that networking organization (or starting your own), working your tail off, leveraging the opportunity to become a connector in a given industry with a reputation for getting things done. Looked at through this lens, you’re no longer someone being taken advantage of — you’re someone using it strategically to benefit yourself. But I’m too old / busy to work for free! A common objection to this thinking is that it’s only relevant for younger people without responsibilities. Folks who are older, with mortgages and spouses and kids can’t possibly be expected to do this. Candidly, that’s just horseshit. I had an employee who was getting his MBA full time at Kellogg. He wanted to become a product manager. There was no curriculum at the school. So he created one. He taught himself web and mobile programming — not enough to be a developer, but enough to know what is and isn’t possible. He taught himself how to use Sketch to make prototypes. How to leverage existing UI kits to quickly communicate his ideas. How to use Flinto to prototype animations. He became a one person machine for identifying ideas an putting enough meat around them to be convincing. He flexed his new skills on projects for us, effectively volunteering to be a product manager on top of his normal responsibilities to get experience. Now he’s a fast-rising product owner at a Fortune 500 media company. I have a former student who wanted to transition into marketing but had zero experience. He took it upon himself to learn paid acquisition so he could rapidly test and validate ideas for his company. He leveraged that experience to get on the radar of the VP of marketing, who ended up offering him a job on his team. He did this while attending grad school full time, running the entrepreneurship student organization, and operating his own Jiu Jitsu studio. These two both did this on top of full time jobs and full graduate level course loads while juggling the responsibilities of a family. I’m not suggesting it’s easy. And I don’t want to minimize the difficulties some people face in their personal lives, things I couldn’t possibly imagine. Myself and the folks I know have certainly been given healthy doses of privilege, and to suggest otherwise would be ignorant and unfair. But for people, I do believe it’s possible to pull this off on top of your existing responsibilities. You adjust your lifestyle. You get focused and efficient at getting things done. You make the time. most Never stop investing your time. If you want to get good at something, don’t wait for your employer to build a development plan. . If that means doing some work for free, so be it. Take control of your own career ladder If you want to accelerate your timetable for achieving some career or entrepreneurial milestone, working for free is a counterintuitive but effective way to get there. This doesn’t mean you always work for free. If you get paid, great. But at a minimum keep it in your back pocket. It’s far more important to get the experience, the logo, the case study, the added network, the mental models that come from doing the work. Forget about dollars earned per hour. Think instead about % of hours spent building the asset that is your career. Your time is an asset. Spend it as such.

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The Incredible Power of Working for Free

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