It is a good time to start a business. Not only can you have Fortune 500 infrastructure at a small business price through cloud services, but you also can add staff and specialist expertise on a pay-as-you go model through the rise in popularity of independent contractors. There’s no longer a scale issue. You come up with a business idea and start right away without a lot of overhead.
Currently, more than 34 percent of all employees are freelance workers, according to independent research firm, Edelman Berland. This percentage is expected to rise to nearly half of all workers by 2020.
This is good news for entrepreneurs. Here’s why.
Reasons for Embracing the Coming Freelancing Revolution
The old model of employment had small business owners selecting a handful of employees who could reasonably perform key business functions. These workers usually needed to be geographically local, and the business needed to have enough work for the person to justify the hire.
With freelance workers, however, businesses can bring on employees on a per-project basis, and they no longer need to worry about workload. There’s no long-term commitment, and different freelancers can be hired to handle specific jobs within a company. This translates into better talent.
Further, businesses can pick and choose among a much larger talent pool since freelance workers don’t necessarily require a full workload. This means businesses can grab workers who only have a few hours to give, expanding the talent pool further.
More Business Flexibility
Life as an entrepreneur is an exercise not only in overwork, but also constant adjustment and readjustment. Situations change fast, and the freelance revolution can be a boon for your startup because it allows for better business flexibility and agility in the face of these changes.
Instead of the overhead that comes from a set of regular staff employees and the office and equipment infrastructure that requires, using freelance workers means that businesses can add or take away workers as-needed and make faster changes in both the business model and business processes.
Firms that embrace this model will even forego a physical office, instead in many cases relying on decentralized online work environments such as Trello or Basecamp that allow for better business agility.
The use of cloud-based real-time communications platforms such as Agora.io also is used to stitch together these teams of freelancers into a coherent whole. With real-time communications, teams built on freelance workers can see each other virtually and connect with each other for projects no matter where they are in the world. As teams change in composition, these cloud-based communications platforms both scale and can quickly adapt far beyond what a business could do if its employees are all in the same physical office and physical, fixed infrastructure is required.
“You need three things when you start a business today,” laughs Tony Zhao, founder of Agora.io. “First, you need a business idea. Second, you need to hire some freelancers. Third, you need a good video chat platform to connect with them.”
When workers can be added on a project or per-use basis, the level of expertise goes up. Rather than hire employees who can perform many tasks, startups that use freelancers can make every hire a seasoned specialist since these workers are being hired for a very specific job.
Instead of hiring a general marketing manager, for instance, someone who must handle content marketing, strategy, SEO, SEM, branding, event marketing and many other specialized tasks, businesses can hire several freelancers to handle the combined effort, each one an expert on the particular work they’re tasked to handle.
Unlike traditional full- or part-time workers, freelance workers are not usually paid by a salary or by the hour. Instead, payment is based on outcomes and specific performance.
The advantage of using performance-based payment is twofold.
First, businesses maximize every dollar spent on employees by ensuring that the money spent always translates into meaningful output. Freelancer payment always correlates with performance, so startups never waste money on unnecessary or inefficient staffing.
Second, performance-based payment means that startups and lean businesses can better budget for expenses and make sure that man-hours lead to requisite revenue goals. When work can be reliably correlated with man-hours as it can with freelance staffing, there’s much greater scope for accurate planning.
Employee oversight is an ongoing issue for most businesses who have traditional employees. The need for oversight is greatly reduced when workers are freelancers, however. That’s because pay is based on productivity, not hours spent. This means there is no incentive for freelance workers to waste time—and even if they do, businesses don’t pay for it.
Since most freelancers work remotely, there also are productivity gains in absolute terms; freelancers are more efficient than people who come into an office each day.
The average business saves roughly $1.900 per employee or freelancer who works remotely, a study by Harvard Business Review (HBR) found. This was partially because remote workers have fewer distractions and therefore higher productivity, according to HBR.
The freelance revolution is a boon if you’re an entrepreneur. Using freelance labor takes some adjustment in thinking, since freelancers are independent contractors and not employees who can be bossed around or expected to put in late hours without extra pay. But if you are forward-thinking and can adjust to this new style of employment, the freelance revolution has much to recommend it for businesses.