A freelancer is an independent contractor with skills in a certain area, such as website design, search engine optimization, or marketing. Startups hire freelancers for two reasons. First, they fill gaps that companies have in their expertise. For example, a business may need to develop a social media strategy but lacks capabilities to do so. There are freelancers who are social media specialists, who can quickly and effectively help a business design a social media strategy. Second, firms can hire freelancers on an “as-needed” basis, so they are typically cheaper than hiring a part-time employee. In addition, if a business hires a freelancer for a project and it does not work out, the firm can choose not to hire the same person again. In contrast, it is more difficult to separate from a part-time or full-time employee.

There are a growing number of web-based platforms that make it easy to identify and hire experienced freelancers. Upwork (www.upwork.com) and Guru (www.guru.com) are popular examples. These platforms are services that allow freelancers to identify themselves and make it possible for anyone needing a freelancer to browse through the listings to find a good fit. For example, Guru lists freelancers by category such as Programming and Development, Design and Art, Sales and Marketing, Business and Finance, Legal, and more.

Both Upwork and Guru allow freelancers to post profiles that provide information about their areas of expertise and feedback from previous clients. Upwork’s profiles include the freelancer’s photo and brief bio, the number of jobs arranged by the person through the Upwork platform, the job success rate, and the history of past jobs, including comments from previous clients. For example, at the time we were writing this feature, a freelancer named Rinkesh C. had completed over 65 successful projects through Upwork with a 99 percent job success ratio. One of Rinkesh’s clients wrote, “Rinkesh is a great designer and very easy to work with. He does not need a lot of instruction and is super-fast. Would highly recommend.”

This type of feedback provides future clients assurance that Rinkesh C., who charges $25 per hour, might be worth a try for a project. If he is able to help a company design an effective website or app, that cost may be well worth it. Consistent with Upwork’s expectations, he charges only for the number of hours it takes him to complete a job. Startups use Guru and Upwork freelancers for a variety of jobs. Some of the most in-demand skills are web design, WordPress, Shopify, graphic design, social media marketing, Facebook, Instagram, email marketing, and marketing research.

Over time, companies often become comfortable with individual freelancers, resulting in a relationship that is more of a partnership than an arms-length arrangement.

The platforms make money by taking a percentage of the fees the freelancers receive for their work. Upwork’s freelancers pay a “sliding service fee” based on total billings with each client: up to $500 in earnings: 20 percent service fee; $500 to $10,000 in earnings: 10 percent service fee; $10,000 or more in earnings: 5 percent service fee. Clients pay a 3 to 5 percent fee for each transaction, depending on where they live and how they pay. There are protections built into both Guru and Upwork’s platforms to prevent freelancers from taking money and not completing a job. Both Upwork and Guru are expanding the number of fields for which they provide expertise and new providers are entering the market. Companies can now find qualified freelancers to reliably plug almost any skill gap they have.....

Discussion Questions:

1. Imagine that you are the founder of a company and need help setting up QuickBooks for your firm.
QuickBooks is an accounting and bookkeeping platform for small businesses. Search Upwork for QuickBooks freelancers. Select the one that you think represents the best combination of expertise, experience, and cost. Summarize the key attributes of the person you chose to complete the project.
2. To what degree is it appropriate or inappropriate to hire freelancers to fulfill some of a business’s core competencies?
3. Make a bullet-point list of the advantages of hiring freelancers to complete short-term projects for a startup.
4. In what ways do you believe that a freelancer could become a partner of a company rather than an arms length independent contractor?