Moving Up the Value Chain in the Gig Economy
The popular media narrative around the gig economy is that it’s just full-time work, minus the benefits and stability. Unfortunately, that is a narrow characterization as a result of viewing freelancing through the traditional lens of full-time employment with a single company.
While some people see risk and instability, many of the 35% of Americans who are freelancing see the freedom, opportunity, and an improved lifestyle that comes with being an entrepreneur and business owner. Consider the parent who can spend more time with the kids, the free spirit who’s no longer shackled to the office, or the hustler who has tired of the wage constraints of her current job category.
While there are certainly risks and downsides to the freelance economy, I think it’s important to highlight how a professional who wants to be her own boss can move up the freelance value chain, and think through how high the ceiling can go over the long-term.
Work Your Way Up (Much Like a Traditional Job)
It’s not surprising that beginning your career in the gig economy is similar to starting out in traditional employment or starting your own small business. You start from the bottom and work your way up over time.
Before you can build a reputation for yourself, you have to get someone to give you your first shot. You must be extra accommodating to convince a client to take a chance on you.
In a traditional work equivalent, entry-level workers start out at lower rates and earn more as they prove themselves in their industry. New (and old…) businesses often compete on price to gain market share, and then develop pricing power over time as they prove the quality of their products and services.
If you look at the earnings history of some of the most successful freelancers on the open platforms like Upwork, you can see a consistent pattern over time. They start out working on small-fixed price projects or short-term engagements at relatively low hourly rates. In some cases they may promise full refunds for dissatisfied customers (a practice that some experienced agencies still embrace). This reduces the upfront risk for these first-time buyers, and provides you with more opportunities to build your reputation.
With a few projects under your belt and positive feedback from your clients, you’ll build enough of a reputation to raise your rates and take on larger projects. Many people new to freelancing balk at the lower rates, but you have to think of it as using pricing power to gain market share when new buyers are willing to pay more as they are assured by your experience and reputation.
Grow Your Skills Diagonally
If you work with code, you might notice that mobile engineers make more than web engineers. If you design, you might observe product designers generally making more than marketing designers. Understanding which knowledge gaps you need to fill will help you learn how to make your relevant skills transferable to higher paying jobs.
This is a common practice at Skillshare (I’m the CEO), where professionals pick up adjacent skills and build a portfolio of work to cross into a new work category and capture the income jump that comes with it. Skillshare’s certainly not the only way — you can attend meetups, for example, or become part of a user group to learn more about the skills you want to develop and to get advice from professionals in the field . You might be surprised at how many people are open to having their brains picked.
Another route you can take is to do a 180° and incorporate something completely different into your career. For example, a San Francisco Uber driver started selling his homemade jewelry while driving people around. This out-of-the-box combination has Gavin Escolar “living the life [he] want[s] to live.” The idea of having a side hustle to your side hustle is a little ‘meta’, but it is a great example of a portfolio approach to your income and earnings.
Traditional employment is considered more stable, but ask the former employees of Enron or Lehman Brothers how secure they felt about their entire livelihood being in a single basket. Flexibility is the beauty of the gig economy — the ability to choose what you want to pursue and combine ideas, despite how unconventional it may seem.
Finding Leverage
One person’s output has expanded beyond our wildest imaginations… but as an independent freelancer there are still only so many hours in a day.
As your reputation and business grow, you will reach a point where your hours worked and income per hour start to plateau. That may be enough for you, or you may look for ways to get more leverage.
The most logical option is to start to farm out work to other freelancers or build your own services business. You see this quite frequently on platforms like Upwork. Once you have more demand for your services than you can meet, you can organize into an agency of freelancers and build your own company within the platform.
Many successful freelancers also leverage a virtual workforce to provide local services as a more traditional business. As you leverage your reputation and brand to generate work for other freelancers, you can dramatically scale your own reach and earnings power.
While you may have left your day job to avoid coworker-heavy situations, working with others can be hugely beneficial within the gig economy. It’s up to you whether you want to do it. Much like a traditional job, adding value with your managerial skills can enable you to max out your income.
There are also opportunities to invest in assets that move you up the chain, or to provide services or assets to others in the freelance economy. A great example is the most popular media example: If you’re an Uber driver, you might look into starting an Uber Fleet, where you lease out your car to other drivers and earn a percentage of their sales. I once met a driver who started out driving Uber X with a low-cost sedan. He then moved up to a black Suburban, which allowed him to pick up higher-paying rides with Uber Black and Uber XL (and continue to fill in time with Uber X). Eventually he started renting out his Suburban to other drivers, and was making money while he slept.
Final Thoughts
The gig economy is still in its infancy, but we are seeing freelancing breaking into higher-paying jobs. New marketplaces are launching every day to address the demand for freelancing in more “traditional” fields, like law or high-end marketing consulting.
As the gig economy grows, matures and becomes more mainstream, people will trust it more for vetted expertise and the opportunities will grow, too. There’s no shortage of people making a high hourly wage for the premium freelance services that they provide.
The lack of guidance or direction when entering the gig economy can be daunting, but that’s the flip side to the freedom it brings. All the bumps along the way of figuring out the nature of freelance work will all be worth it, when you realize there’s no limit to how far you can go.
This story is published in The Startup, Medium’s largest entrepreneurship publication followed by 355,974+ people.
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