An economy of freelance is growing at a rapid pace and it is expected to stay in the future. As noticed there are 56.7 million Americans freelanced in the last year. Nowadays people wanted more and more flexibility in the way they work and global economy demand is changing continuously and traditional work is being revolutionized. This research actually shows you the talent that can earn more money by working for themselves.
With self-fulfillment being a greater driver for freelancers than job security, they are constantly acquiring new skills to distinguish themselves. At the same time, companies are turning to freelancers as the most cost-effective way to recruit the cream of the crop talent in specific fields while avoiding overhead costs. The gig economy is booming.
Kamran Ansari is a venture partner at Greycroft Partners, where he invests across the financial technology and commerce areas. He managed Greycrofts investment in the popular app Venmo, the leading digital wallet and payments solution, and has seen a major shift in how the job market is becoming more freelance-oriented. It's driven not just by the rise of on-demand technology services like Uber, Lyft, Postmates, Task Rabbit, DoorDash, etc, but also by the fact that many more experienced, educated professionals are choosing the flexibility of freelance work over fulltime, employment. For employers, freelance workers are often less expensive because they don't require the added overhead of 401k, healthcare, and other benefits.
Online freelancer platforms such as Upwork and Fiverr provide endless project opportunities. But with these projects come further responsibility in managing your business, not just your projects. Freelancers are falling short when it comes to making sense of their own finances and business selves. To make it in the gig economy era, freelancer behavior toward money needs to change and so does the existing business infrastructure available to them.
How big is the problem? Well, it's big.
We are now in the midst of tax season, with March 15th looming as the deadline for submitting taxes as a business owner. Yet, most freelancers have no idea how much their financial backend bookkeeping and inaccuracies are actually costing them and often feel anxious even attacking them. In fact, they unknowingly lose thousands of dollars a year each in missed deductions. With time prioritized toward mastering their crafts and learning new skills to expand offerings and income, the less glamorous task of money and taxes quickly falls behind.
Lance is a mobile-first platform that empowers individual freelancers with dynamic backend business management and insights. According to a recent survey the company conducted, the financial confusion has become even more apparent in the area of tax prep and filing. Only 60% of the freelancers surveyed deal with their taxes annually, with 20% never reporting. Furthermore, 50% of freelancers believe they spend under $150 annually on tax prep and 40% spend another $150 or more annually on bookkeeping. These perceptions are largely inaccurate, as the cost of working with a CPA would typically come in at thousands of dollars.
Oona Rokyta, co-founder and CEO of LanceLANCE
Oona Rokyta, co-founder and CEO of Lance was blown away by the survey's results. We hear all the time from freelancers about their challenges in juggling, much less actively learning more about how to manage, their finances. This survey validated the belief that people are underestimating the cost of taking on their own accounting, to their own detriment. The average annual global freelancing hourly rate is around $19 well above the debated minimum wage in the US. With the right tools and infrastructure, freelancing can be both a very flexible and profitable path going forward.
Greycrofts Ansari has seen the pain firsthand and agrees current solutions fall short when it comes to helping freelancers manage their finances and businesses more effectively. Large platforms like Uber and others are trying to provide more solutions for their drivers, including access to recordkeeping, driver statistics, and some lightweight banking and payments features (e.g to track their earnings and monitor their payments). But that's really not Ubers core business, obviously, to build ancillary solutions to help their drivers. So, we're seeing a number of companies emerging that help freelancer (or those who hire freelancers) to manage things like scheduling and time tracking, banking services, invoicing, billing, bookkeeping, and insurance.
Financial education and tools need to be reinvented.
Banking and financial institutions have yet to provide comprehensive solutions for freelancers. The current infrastructure and tools offered are still largely built for and cater to small businesses, rather than freelancers need more often characterized by wildly fluctuating monthly revenue and expenses, and a constellation of job types.
This is an opportunity for tech startups to offer solutions to this large audience and quite a few are looking to disrupt the space. Many tech founders are seeing the need in the market and innovation is quick to follow with new solutions for freelancers across banking, insurance, timekeeping and scheduling, bookkeeping and Invoicing. Ones that have already attracted the interest of both freelancers and venture capitalists include France-based Shine, which recently announced a $9.3 million round to build a bank for freelancersLili Banking whos behind the Lili Visa debit card and mobile experience designed to empower independent workers and small business owners in this new work eraJoust, an executive banking for solo preneurs Bot Keeper, which provides automated accounting for freelancers and SMS and Lance, which is coming out of stealth mode these days.
With millions of freelancers in the US, it's clear that the gig economy is here to stay. Freelancers are working at an incredibly fast pace and with the growth of on-demand services, we're definitely seeing just the beginning of a new economic model. Now is the time for tech startups and financial institutions and platforms to catch up and be a leading force in this dynamic, new economy.