Neil Lewis - Innovative Entrepreneur

Solving problems by growing profitable businesses @neil_lewis

Will everyone be a freelancer soon?

The latest UK employment report confirmed that 4.2m people in the UK are now registered self-employed, an increase of 84,000.

That’s the highest figure ever – yet the Telegraph says this is the result of desperation.

Certainly, the life as a freelancer or self-employed person is tough and we have to work through the highs and lows – but the reality is that with the changing conditions companies face, full time employees who have – every year of service – ever increasing rights and become ever more expensive to let go, are becoming a thing of the past.

Why’s that?

Well, simply put, the flow of revenue that small and medium sized companies rely on to pay wages and meet bills has become ever more variable – one month good, two months bad etc… such that the company needs to be able to vary its costs accordingly.

Equally, more business costs have become staff related. In particular, the whole digital revolution has meant that instead of buying advertising space or renting lists from 3rd parties and paying the post office to deliver thousands of direct mail pieces, companies now hire digital marketing employees.

That seemed like a good idea when things were going well – but now, it has simply increased the overall fixed costs on the business.

It’s all About Fixed costs

Anyone with experience of running a business knows that fixed costs – often employee costs – are a potential killer. Especially if you are a small or agile business, then keeping fixed costs down is critical.  Hence, working with freelancers is attractive – as these costs can be varied – whereas, employee costs can not.

It seems inevitable to me that the shift from fixed cost staff (employees) to variable cost staff (freelancers) must continue not only during this recession but in the recovery phase too. The speed of change and rate of competition in many markets is making it increasingly hard to find long term profitable products.

In fact, if you look at some of the most successful business models of recent years – they are increasingly using variable staff costs.

For instance, franchising, is a way of keeping central fixed staff costs low with a few employees – but growing fast – by adding staff to the business where those staff are either franchise owners or staff working for the franchisee not the franchise owner.

Equally, one of the fastest – and quietest growth business models is network marketing – where nearly everyone is an independent distributor or consultant.

It is interesting that both franchising and network marketing are both thriving in the current economic climate – see the relevant bodies for franchising and networking marketing.

These more agile forms of structuring the business allow it to grow much faster whilst keeping the fixed cost risk small – and these businesses are creating a greater competitive challenge to old-style business models.

And, if we are facing a future where more and more of us are either freelance, on long term contracts or self-employed business owners (ie freelance in my book) then we can expect those business models to keep growing (and winning) whilst traditional employers will continue to shrink high paid jobs or simply offer minimum wage shelf-stacking type roles.

You can even see this is the growth sectors of pharmaceuticals – we are all getting older and buying more health care and it is a growing market – but large pharmaceutical companies are downsizing and now look to buy innovation from small bands of startup entrepreneurs rather than run huge (fixed) innovation teams at head office. It can’t be long before they too adopt the franchise or network marketing model or similar more flexible way of engaging staff.

Will we all be freelance soon? When you think that even politicians are on a (max) 5 year fixed term contract, then I think, yes, we probably will.

 

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I help people *profitably* set up in business to solve real-life problems. The big problems that I am currently focused on are health, fitness and obesity. I’m looking for partners to either grow independent businesses in a supported and structured environment or develop new digital health and fitness products and services.

If interested in working with me, please get in touch with me via Enterprise Freelance Fair.

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Written by Editor on June 20, 2012 and filed in Entrepreneurs, Featured, Freelance Jobs, Innovative Entrepreneur, Opinion , , , , , , ,


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