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Are freelancers killing small businesses?

There’s a lot of work around in the web industry at the moment. Everyone I know in the industry will testify to this. This is making it very easy for freelancers to pick and choose the projects they work on. The work is plentiful and lucrative – why work for anyone in full time employment?

I’m wondering if this could in fact spell doom and gloom for a lot of small web businesses?The only real options for them might be:

  • Get lucky – find the right people at the right price and keep them on board with perks they won’t find freelancing.
  • Move up the ladder – charge significantly more so that they can afford to keep a regular pool of freelancers busy.
  • Go pop – as profit margins narrow and then vanish as freelancers ask for more money. Inevitably, this would lead to more freelancers going in to the market.

Obviously, if this happens, where will the freelancers then go?

They’ll be stuck working for large organizations, lots of corporate shit to deal with, lengthy payment settlement (I’ve previously heard of someone going bankrupt recently because his largest customer switched their payment terms from 30 to 90 days). In short, they’ll be back to square one. The cake will be all eaten, and it will be time to bake another.

I suspect what will happen in parallel as freelancers see this happening is they start to form small businesses themselves. And the cycle will begin again!

I have freelanced before so I know most of the benefits, and I’m certainly very familiar with all the draw-backs. Here are a few reasons why I choose to be part of a company instead:

  1. I’m stronger in a team. Working with the same people on a regular basis allows me to identify and improve my weaker areas and it also lets me feel I’m contributing to the skills of others.
  2. I’m building something. It’s difficult to get rich as a freelancer, if you take yourself out of the picture, you probably don’t have anything to sell. As a company, everyone involved should be pulling in the same direction so that, at some point, we are worth far more than the sum of our parts.
  3. It abstracts me from a lot of the problems. I do feel that I came off slightly better in this area. Mark takes a lot (ok, perhaps an understatement!) of the hassle out of running a company. He takes care of everything I wasn’t good at when it was just me. This leads me to focus on the stuff I am good at, which is hopefully beneficial to both the company and myself.
  4. You will have bad days. Some times your brain just can’t get on the job. It’s helpful to have people around you that are trying to get to the same finish line. Don’t leave a fallen man behind and all that!
  5. It’s fun. We have and are being presented with projects and opportunities that just wouldn’t be available to us as freelancers. It really feels that we are building something that could stand alone without us. Slowly, but surely.

I think we’re all in a good place right now in the web industry but I do hope that a bit more talent comes in to the industry that can see the benefits of joining a small business.

I’d like to think that most company founders are not actually evil and just out to make money out of their staff. I know that anyone with the right skills and enthusiasm to pull together with us at the moment could see big rewards in the future; but it’s difficult finding the right people.

  • Tom
  • 11 November 2007
  • 2 comments

Comments

iamkeir

said on 12 November 2007

Good post, Tom.

I recently posed the question “Freelancers - what would it take to make you go permanent?” to the underscore mailing list and had some great insight from both sides.

I thought your points were some of the most compelling yet.

Perhaps I’ll try and get permission to publish some of the mailing list comments here too.

Right, now to pick a pussy…

Aaron Trevena

said on 15 November 2007

Actually I think freelancers are helping sustain small businesses - Most of the work I do for my smaller clients saves them a lot of money - they can’t afford or don’t need a fulltimer to do the job, can’t afford to train or multi-task somebody inside the company and I only bill for the work that needs doing.

The very real problem I’ve seen a lot is outsourcing the wrong jobs in the wrong way - paying to lease managed servers can quickly become far more expensive and constraining to a business than buying cheap hardware, colo and paying a part-time or freelance Sys Admin, or worse still the managers or directors try and save money by doing it themselves or getting their technical resources to waste days wrestling small jobs that a professional could do in a few minutes.

I’m a freelancer and a small business, luckily I have the business sense to know when to pay somebody else to do something - whether it’s my accountant, pixel pushers, a beardy wookie or a baby sitter.

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