In the age of one-man businesses, co-workers should unite

A massive movement is under way with the rise of the one-man business.

Often web-based, they employ no more than their owner (who often frequents co-working spaces, hipster pubs and coffee bars). But are these just workers? Or are they real entrepreneurs in the making, whose new ideas and ways of doing things make them worthy of support and funding?

The movement is being driven by the growth of what The Economist magazine calls “on-demand services” – firms that mop up freelance jobs in sectors from taxis (Uber), independent contractors (Handy) to hotel beds (Airbnb) with the help of web platforms.

Co-workers of the world unite

One indication of the booming trend is the emergence of co-working spaces — where entrepreneurs and independent workers pay a fee to share a space and benefit from working in the presence of one another.

More than 160 000 people worldwide are members of over 3 000 co-working spaces, says a 2014 reportby DeskMag.com and Emergent Research, up from just 20 000 workers in 500 spaces in 2010.

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Co-working spaces are cropping up everywhere (see this map). They are booming in emerging economies like Malaysia (in places like The Nest), as well as in India, says qz.com. In Chile, the government, through its small business agency Corfo, is even looking into funding co-working spaces.

And in July a conference in Cape Town, South Africa is set to highlight the growing trend.

Follow the money

Another indication of the rise of freelancers, is the booming online economy. They made US$941-million in all, from over two million online work jobs last year, according to Elance-Odesk. About half of this was from web technology work, with mobile technologies jobs topping the fastest growing sectors of work.

There are now 9.7 million freelancers registered on the site. Most of the freelancers are from the US, but freelancers from a number of emerging economies are flocking to the site – such as those from India, the Philippines, Pakistan and Bangladesh (with respectively the second, third, fourth and seventh highest number of freelancers). South Africa (36 000) and Brazil (17 000) are way behind India’s 650 000 users.

The biggest increase in jobs listed is generated by EU countries and the US. Freelancers in Bangladesh, the Philippines, Russia, Romania, the UK and the US saw the biggest increase in earnings last year.

Where are the jobs?

The truth is few businesses create employment for more than the owners themselves.

In the US almost 79% of small businesses have no employees. In Chile (according to a recent survey), the figure is 69%. It’s almost 85% in Brazil (says a 2013 report) and 67% in South Africa (a 2010 report says).

Yet a certain class of small firms is more likely to create jobs than others, argues a 2013 report. It says a small number of tech startups create a significant number of jobs in the US.

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The report shows that in contrast to the net job destruction rate for all private firms in the US between 1990 and 2011 (the number of jobs destroyed was higher than those created) — tech firms saw a net job creation during this period, of about 2%.

Support them or not?

So should policymakers help turn the ever-growing number of freelancers into entrepreneurs? Or are they two completely different things?

Seth Gordin argues that there’s a clear difference between the two.

“The goal of a freelancer is to have a steady job with no boss, to do great work, to gradually increase demand so that the hourly wage goes up and the quality of gigs goes up too. The goal of the entrepreneur is to sell out for a lot of money, or to build a long-term profit machine that is steady, stable and not particularly risky to run,” he says.

In those economies where unemployment is high (like South Africa) it may pay to take a two-pronged approach.

Firstly the state and private sector should target those freelancers that have the potential to become entrepreneurs and scale their ideas — with seed funding and help from business accelerators or incubators.

Secondly they should ensure that help is at hand should these freelancers fail to make an income (by helping them become eligible for social grants). A good across-the-board social welfare system would help.

Some will make a lot of money out of the growth in freelancing (co-working sites and website that facilitate freelancers as well as businesses that hire them, like Uber). Big companies could save by hiring freelancers as they won’t have to pay benefits. Business support services could also win, as the demand for mentoring and need for networking is likely to climb.

But trade unions will lose out, while the government may fret more over losing tax income. More freelancers will have to club together if they want to ensure that earnings don’t stagnate. More will have to learn to share and barter rather if they are to sustain themselves. Exciting times are ahead.

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This is an edited version of an article which originally appeared on Small Business Insight, a Burn Media publishing partner. Stephen Timm writes on small business and is presently in Cape Town, South Africa. Click here to sign up to his monthly newsletter. Follow him on Twitter at @Smallbinsight and on Facebook. Image by Ibai Lemon via Flickr