Many software developers are interested in getting a 10% or a 20% raise, while in reality, there are many other options that help you make more money.
If you have a goal right now that involves earning more money than the amount you are making, then chances are, it is worth for you to consider the five ways of getting paid as a developer.
1. Salary and employment benefits
You get a weekly, bi-weekly or a monthly salary. In most cases, the same amount of money is wired to your bank account each time. This gives you stability, as you know when you will get paid.
Another aspect of employment is extra benefits such as a cheaper or free public transport pass, a company car, free sick leave, annual leave, and some other perks. The intention behind these perks is to make your life safer and easier to plan.
Some companies offer bonuses that are tied to the performance of the company or your own performance. Other companies offer bounty bonuses for completing a critical project. This is the variable element of salaries, and often times this adds an extra 10-20% on top of the basic package.
A few companies offer stock options on their own shares. These are call options that enable you to become a shareholder or sell the option at a profit. Most of the time, employees of a company rather choose the latter option, as a software engineer is rarely motivated by owning a tiny part of a corporation.
There is a wide range of salaries and benefits available on the market. Generally, this type of income is the most stable way of getting paid. Employment is chosen by developers who have a need for a high degree of security.
If unemployment rate is low and demand is larger than supply, you are likely to find a job. At first glance, employment seems to be a great option, as it offers fixed income that allows you to live a comfortable life. Governments around the world are also interested in keeping as many people employed as possible.
This is why most people overlook the three dark sides of employment that most people tend to forget:
- Your income grows slowly: Companies tend to give raises that are proportional to the current salary of their employee. Doubling your salary in one step is very unlikely even if you switch jobs.
- All your income depends on one client: If you don’t have other income streams, all your income comes from your one and only employer. This means they have negotiation leverage over you, especially if it is hard for you to find a different job. When market demand for developers becomes lower, salaries tend to go down. This is what happened in some areas of the world after the financial crisis of 2008-2009, and the same process will repeat itself over and over.
- Your performance hardly influences your earning ability: Clocking in at 9AM and clocking out at 6PM is not optimal for peak performance. There isn’t enough incentive to overperform. Often times, to earn an extra 10% bonus in employment income, you have to put your skills into practice in such a way that it would earn you a lot more by selecting one of the below income streams.
Once a software developer got feedback that his work could only be substituted by two to three senior developers. As a result, he got an 8% bonus at the end of the year and a possibility for a 10% raise in half a year. Unfortunately, this didn’t happen, because he left his company.
Contrast this with an underperforming developer who gets paid even if his contribution gives more work to his team than doing the job themselves. Both developers take home their salary. It is not uncommon for the underperforming developer to earn more in the short run due to negotiation skills. It often takes years for the overperforming developer to catch up, unless the overperfoming developer leaves their company in favor of a more lucrative position elsewhere.
I have learned over the years that some people misunderstand my message concluding that overperforming does not make sense at work. I never stated this, as I strongly believe in overperforming at work despite the capped financial rewards. The real reward for doing good things is that you can do good things. This enables you to gain experience and develop your skills. As you develop your skills, you unlock new career options, and money will eventually catch up with responsibility.
I do claim though that there is a hack that enables you to earn more money faster. This hack is taking more responsibility for your future and creating income streams that go beyond employment. Let’s investigate these income streams.
2. Hourly or daily rate as a freelancer
Freelancers may be paid in multiple ways. One is hourly or daily rate.
Freelancing is a position of less comfort and higher responsibility, because you get none of the benefits that employees get. You got sick? Well, bad for you, no-one pays your sick leave. Your contract ended? Bad for you, find a new client or go on idle.
The uncertainty that comes with freelancing needs to be managed. Full time freelancing is not an option for everyone, as more people choose employment than freelancing. Trends continuously change in favor of freelancing, but employment still stays the number one safe option.
In exchange for uncertainty, the upside of freelancing is the higher hourly rate. If you do the same job as a freelancer as an employee, you can expect to earn more money on a per hour rate basis. You can also target working for remote clients more easily, and find clients that are willing to pay more than in your country.
Exceptions apply for the high hourly rate though. Some freelancer marketplaces keep the hourly rates low to the extent that it makes more sense to find a job in a country with high salaries than a freelancing opportunity in a freelance job portal such as PeoplePerHour or Freelancer.com. The best opportunities pay relatively well even in these portals though. For instance, I have managed to secure $100/hour projects in these platforms.
Another upside of freelancing is the ability for you to get multiple clients. This helps you in two ways:
- Your earning ability is not tied to the artificial 40 hours a week limit,
- If you lose one client, no problem, you have access to many more
In some cases, you have to be prepared for dry periods when you don’t have enough clients to work for. During these times, it is important to have backup activities that can earn you money. This is one reason why the next three income streams come handy.
3. Pay per project
Welcome to the gig economy! In sites such as fiverr, you can offer services that cost multiple times 5 dollars. In the above mentioned PeoplePerHour and freelancer.com sites, the same holds: most of the tasks in there are project-based. This means to you that you get your payday once you complete a project.
In a gig marketplace, you define your own gig. In a freelancer marketplace, the buyers decide what kinds of projects they want.
You can also start a Kickstarter or Indiegogo campaign for your project, where you get paid to create something cool. You get funds from your backers assuming that you deliver what you promised. Three of my colleagues have executed successful campaigns, some of them earned six figures. No wonder why they reduced their working hours afterwards.
If you want a continuous stream of income with high earning ability, create an irresistible service and market yourself. Ads will drive traffic to your page and you will be able to get clients. These clients may pay you on a project basis or they may pay you recurring revenue in case you create a monthly service for them.
The highest leverage in pay per project type of income is applied on projects that are pay per result in nature. The client envisions a certain type of result, and you help them achieve it. It does not matter how much time it takes to achieve the result. This means that you can automate the majority of the work involved. Leveraging effort via automation is your first weapon towards decoupling your income from time. If you invent a great system, it becomes possible for you to earn ten or hundred times as much with a proper system than by working for an hourly rate.
A type of automation is employing others or hiring freelancers. This way you can outsource tasks that make you less money, and you can focus on the $1.000/hour, $10.000/hour, and $100.000/hour types of tasks better.
If you doubt that you can have a $100.000/hour type of task, think again. If it took you a 15 minutes negotiation to earn an extra $10.000, and you stay with a company for 2.5 years, your hourly rate for those 15 minutes were $100.000/hour. Many of us have these opportunities, we just have a hard time noticing them and taking advantage of them, because we are busy focusing on the $20-$100/hour tasks.
Beyond a certain level, you cannot earn more by trading time in exchange for money. This is when systems and business models come in. Let’s explore the last two income streams.
4. Royalties and financial transactions
This is one of my favorite income streams. If you write a book or create a course, it may set you up for a continuous stream of income for years.
If you work with a publisher, they pay you advances, signing bonuses, and royalties. The difference between an advance and a signing bonus is that royalties are only offset against the former. Once you earn your advance with royalties, you will continue earning money.
If you write a book or a course with a publisher, the royalties you earn typically range between 10-20%, and may increase further if you sell more copies.
If you work with a publisher, you can leverage their marketing budget and their audience in exchange for giving away the majority of the sale price. This is a convenient position, but it is not necessarily the most financially rewarding one due to the following factors:
- You have no control over the price and content of product once it is published.
- Quality is controlled by the publisher, and sometimes your own quality standards are higher.
- It is harder for you to market the course with paid advertising, because you only earn a fraction of the sale price
- The publisher may decide on not to market your product as intensively as some other products.
Often times, if you send your own audience to a publisher’s platform, you are rewarded better and the publisher sends more traffic your way. Your product also becomes more popular this way.
Nevertheless, it may make more sense for you to self-publish your product. You can keep the full sale price minus transaction fees if you sell your product from your own platform. For instance, you can install WooCommerce with WordPress and accept payments via PayPal, Stripe, or PayHip. You may also choose to use a self-publishing platform. At the time of writing this article, Amazon pays 70% for a special selection of e-books, while Leanpub pays 80% both for books and courses. This amount may be low with respect to other alternatives, but both platforms provide an audience and marketing tools.
Once you get full control over the sales of your product, your monthly or quarterly royalties become instant financial transactions. Besides books and courses, you can also upload an app in an app store like Google Play, or you can create your own web application that provides a service. This is called SaaS: Software as a Service. Besides SaaS solutions, an easier model is to sell WordPress themes and plugins. There is a new trending theme every year: just recall the X-Theme, Avada, Divi, OceanWP + Elementor etc.
The more popular your software or other intellectual property is, the more you earn. If your solution does not resonate with the market, you may end up earning just a few bucks per hour with all the time you invest in your product. However, you can also make it big if you develop the right product at the right time.
It is worth mentioning two other sources of income that are similar to royalties: affiliate commissions. By recommending selected products, you can generate recurring revenue by recommending the products and services of others.
5. Subscription model
Royalties and transactions are paid based on single purchases. It is also possible to get a recurring revenue stream by creating a subscription service.
For instance, if you create a bundle of five to ten courses, you can sell a monthly subscription bundle. If you create a software that provides a service in demand such as a simplified invoicing software for freelancers, you also get recurring revenue.
There are more options in this field that are not fully mainstream. For instance, if you create a Youtube channel, it is possible to collect backers who give you money every single month via a platform such as Patreon.
If a large audience follows you, you can also create a paid community, where the community members contribute by generating most of the content. You provide the platform for connecting them.
My experience with this income stream is limited to offering private coaching packages. Therefore, unlike the other four income streams, at the time of writing the article, I have not experienced benefits and drawbacks of this model. I know that the better your service and the more content is made available, the more likely it is that the subscription model is worth it for you. However, it is generally hard to scale this model, and it is easy to lose customers that just want to consume all your content in one month.
There are more opportunities than employment
Skills you learn and utilize as a software developer can generate you income in multiple ways. Besides employment, you can become self-employed and charge per hour or charge per project. You can also become a author of a software, book, course, or other intellectual property, and collect money after sales and subscriptions.
While some streams of income are directly proportional to the time you invest while earning them, other streams become more detached from your time.
The good news is that similarly to me, you can also start building multiple income streams as a software developer, and earn five to six figures that will eventually replace your daily job. I am warning you that this path is not for everyone.
I know, we are living in an era where an internet marketer flashes his lamborghini or his cool apartment, and sells you a course with information that you can find online for free. This is why I am cautious about promising what you can reach by exploring income streams that go beyond employment.
My peer group, a few of my clients, and myself have experience earning five to six figures with these income streams. If you are dedicated and you do the right things at the right time, this path will become financially rewarding for you as well.
If you would like me to help you build new income streams besides employment, the DevCareerMastery team can help you reach your goals. Book a free roadmap session with either me or with one of my coaches.