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Building a Business for the Freelance Economy

Building a Business for the Freelance Economy

The freelance economy has seen impressive growth in the past decade. According to the latest stats, nearly 36% of American workers are involved in the gig economy in some form or the other, contributing over $1.28 trillion to the economy. The freelance economy is also witnessing similar growth in other parts of the world, including countries like India, Philippines and Ukraine.

This growth in the number of freelancers provides aspiring entrepreneurs with a new market to target their products. Most SaaS and B2B products are targeted at the enterprise or small business customers. This makes sense given the size of the market. But with growth in the freelance ecosystem, a growing number of B2B products are also targeted at this population of business customers.

Such businesses can typically be classified into three categories: Operational, Growth and Ancillary

Operational enablers are businesses that help freelancers do their primary job better. An example for this would be web design tools for a freelance web designer, car leasing services for Uber drivers, and tools like SEMRush or Ahrefs for the freelance marketer.

Studies show that only 2.2% of startups hire freelancers for their marketing activities. In absolute terms, this still means thousands of freelancers being hired each month to market startup businesses. Building tools that can help them manage their clients is a really profitable proposition.

Growth enablers are businesses that help freelancers drive business growth. These enablers could be SEO tools to improve a freelancer’s website rank, social media tools (including niche ones like the Instagram hashtag generator) and tools to help a freelancer build customer reviews.

Ancillary services are those that help administrative and compliance related services. For instance, a business that helps Uber drivers with their tax returns could be considered an ancillary service.

From a business-offering perspective, each of these tools is not very different from what you see in the market for other business categories (small business, enterprise, etc.). But by specializing in the freelancer market, you could offer features that are solely required by this group of buyers.

For instance, Freshsales, the CRM suite from Freshworks has a startup plan that is offering a free CRM System, very well suited for the freelance business user. Unlike the paid plans that come with a lot of amenities (like team inbox or multi-user login) that an established business will need, the Sprout plan is free to use for a single user and includes the most basic functions to get started.

The objective here is two-fold: build tools that will help a freelancer manage and grow their business. The business wins when these freelancers grow big enough to upgrade to a paid plan. The other objective is to create niche paid plans that will uniquely suit the needs of a freelancer.

While all of this appears viable, building a business around the freelancer ecosystem is not without its share of challenges. Firstly, freelancers are bootstrapped in their operational strategy and hence do not actively pay for products. This is especially true in product categories where there are adequate number of freemium options.

Catering to the freelance operator is also expensive from a CAC (customer acquisition cost) perspective. This is true in the case of products that are priced on a “per user” basis. Signing up an enterprise customer with hundreds of users is more profitable than signing up as many freelance customers on an individual basis.

But having said that, enterprise customers also need extensive support and freelancers are not as needy in terms of hand-holding and support. While the cost-benefit scenario might work differently for every industry, it is fair to assume that freelance businesses offer an attractive market to businesses looking to serve a niche customer base.

Published: January 6, 2020

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