How the Gig Economy is Redefining Entrepreneurship

Modern technology has had a disruptive impact on every aspect of our lives, and work is no exception. For the first time in history, we have the tools and resources to conduct our business from anywhere in the world. It has never been easier to become entrepreneurial. These days, practically anyone can develop a full-fledged business by offering their skill set, often from the comfort of their own home, all the while keeping overhead costs low.

Whether embracing freelancing as a full-time engagement or just taking up an occasional side hustle, the gig economy has become a powerful concept.

In fact, it now makes up over a third of the U.S. workforce: In 2017, the number of freelancers hit 57.3 million and continues to grow rapidly.

Many Americans prefer the pursuit of entrepreneurship, replacing the dreams of climbing the corporate ladder. As the land of the free and the home of the brave, the future of work is quickly becoming all about freedom and flexibility.

Related: Gig Economy is the Future of Work According to Babson College Professor Diane Mulcahy

The appeal of the gig economy

We are witnessing a major shift in the workforce. While the millennial generation represented 25 percent of the workforce in 2011, in 2017 it grew to 38 percent. This shift brings major changes to the work culture. Globalization, technologies and new opportunities are causing more experimentation around flexible ways to earn a living. Young workers want to control their workload and careers: 72 percent of millennials say they’d rather be their own bosses. Rather than cash bonuses, young professionals strive to develop personally and enjoy flexible work hours.

It’s no wonder that freelancing is becoming an increasingly popular option. One can think, “Do I work for the man tied to an inflexible Monday through Friday schedule while maneuvering the office politics?” or “Do I work at a pace and on a schedule that suits my lifestyle and/or family?” The gig economy brings this choice to almost anyone, no matter their skill or age. Graphic designers in their twenties can backpack across Asia while making $85,000 a year. At the same time, there are retired or semi-retired baby boomers generating livable income by consulting, tutoring or refinishing furniture.

With work being redefined, it’s curious to observe the impact of these dynamics on entrepreneurship. Actually, millennials are the least entrepreneurial generation of the last 25 years. Now for the first time in our history, businesses are disappearing faster than they are being established. But what does this mean?

New face of entrepreneurship

Millennials grew up during the recession, often seeing financial struggles first-hand. Many find themselves in a debt crisis due to college tuition: There are over 44 million borrowers in the U.S. who collectively owe $1.5 trillion in student loans. Millennials are opting for more comfortable and less risky options to be entrepreneurial, and that’s through freelancing. While the booming gig economy is partially responsible, it would be simplistic to blame it for the demise of entrepreneurship. Rather, it encourages new kinds of entrepreneurship, building a bridge between traditional employment and starting a company.

From a conventional point of view, a true entrepreneur is someone who identifies a problem, finds an opportunity, solves the problem and capitalizes on it. Entrepreneurs aim for profit but they also assume all of the risks. They innovate, take risks to secure growth, and seize the opportunity to create something truly valuable. A freelancer, on the other hand, spends the majority of their time earning active income by offering a skill they’re good at, directly exchanging their time for money. They generally work in their business – not on it, and their goal tends to encompass obtaining more freedom and control over their lives.

It’s not surprising that many see independent work as the first step on the entrepreneurial journey. After all, all freelancers need to find clients, develop skills and ideas, while testing them in the marketplace. This can be a great way to build the fundamentals of business ownership without the risks, costs, sacrifice and stress of becoming a traditional entrepreneur.  During an individual’s freelancing career, one can obtain a unique, versatile skill set, along with experience in marketing, customer service, cash flow management, sales and project management, among others. 

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How to make it work?

Similar to entrepreneurship, independent freelance work can be financially and existentially challenging. Not only do freelancers need to hone their expertise to carry out projects, their skill set also forms part of their own personal brand. And just like entrepreneurship, cultivating and maintaining this image at all times is stressful. The price of freedom and flexibility is uncertainty and a lack of stability. For even the most successful freelancers still worry about their next gig and maintaining a positive and credible reputation.

Freelancers should understand they need to protect their interests, especially when it comes to a job. The terms of a verbal contract are only as good as the memories of both parties, which morph over time. If there is a dispute about what both parties agreed to, even honest people tend to remember terms more in their favor than they may actually be. It’s recommended to always establish a written contract and request a down payment. A written contract protects both parties and helps avoid misunderstandings and either a dissatisfied customer or an unhappy freelancer who doesn’t receive the payment that was expected.

Many freelancers are using the existing framework of marketplaces such as Fivver, UpWork, and TackL to facilitate their work. While helpful in marketing your freelance services, the usage of these platforms comes at a steep cost. These platforms are taking margin from the freelancer’s job up to 30 percent, not counting the service fee that can be another 9 percent. Using them, freelancers may find themselves “buying” conditions not very different from a corporate job.

Being entrepreneurial can be simple. But before plunging in, every freelancer or solopreneur must understand the marketplace tools to participate in the gig economy and all the responsibilities that come along with it.

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