Hiring Freelancers Before Employees Helped Keep Our Burn Rate Low and Growth High

When you first launch your start-up you feel very contained. In the beginning, LendEDU was a team of two including myself and my co-founder. And in the beginning you often don’t think about scaling human capital. Scaling human capital might feel like a luxury in the beginning. After all, you need traction traction traction, right?

At LendEDU we made an effort to think about how our business would scale from a human capital perspective. While we have a small team of 9 full-time employees that I see every day, a number of the people who have made us successful don’t work from our office and aren’t even LendEDU employees.

That’s because I quickly realized that running a successful start-up meant running a lean business. It’s been critical for our growth and stability to hire freelancers for things like content writing or design work rather than hiring for positions that we might not be able to fund next month if our income fluctuates or we realize we need to shift our business focus.

While that’s meant that there are fewer people to chat with around the water cooler, it’s allowed LendEDU to stay focused, flexible, and adaptable. It’s been one of the secrets to our success.

Startups like ours aren’t alone in looking to freelancers or contract employees to fulfill business needs. As of July 2017, around 15 million people in the U.S. were self-employed, according to the Bureau of Labour. It’s estimated that by 2020, as many as 40% of workers in America will be freelancers or contractors.

So, how can this freelance army help your company grow? Here are three things that we’ve learned from using freelancers:

1. We Have More Control Over Our Burn Rate

As the owner of a new business, nothing makes you sweat more than watching cash fly out the door. When it comes to start-ups, being aware of your fixed expenses every month is critical. The more fixed expenses that you have, the less opportunity you have to adjust your burn rate if you have a lean month, cash flow issues, or a great investment opportunity you can’t pass up.

For start-ups that are pre-revenue, this is especially important as you have to be careful not to spend down your cash reserves before you’re able to start bringing money in the door. Other companies might struggle with cyclical profits where there’s more money coming in certain months than others.

If you have employees, you don’t have flexibility — they expect a paycheck every month regardless of your cash flow. But with freelancers, you can scale up your costs during months when you’re flush and scale down when you experience cash flow setbacks. This allows you to ensure that your burn rate is in accordance with your long-term plans around business growth.

Freelancers are also perfect for small companies who often don’t need someone full-time to do things like content writing, graphic design, HR, PR, or accounting.

2. Good Freelancers Are Hard (But Not Impossible) to Find

We struggled when we were first looking for freelancers to create content and blog articles for our site. Some of the writers we contacted turned in articles that weren’t publishable. Others never met a deadline we gave them. What we finally did was find people who were already blogging or writing online for sites we admired and reached out to them to get them to write for us.

Many people use platforms like Upwork where they can tap into communities of freelancers from around the world. But with jobs often being offered at very low rates on these sites, it might take a significant amount of sifting before you find someone that will deliver the quality of work you need.

We’ve found some great freelancers by asking friends for references, posting requests for proposals on jobs boards or Craigslist, and going to networking events.

3. Hiring Freelancers is an Art and Science

I recommend you look at the portfolios and check references of the freelancers you’re looking to work with. If you can, meet with them in person. If they don’t live near you, talk to them on the phone or Skype. This will give you an idea of what they might be like to work with — or at the very least whether they can arrive on time for a meeting.

Start by assigning a new freelancer a test job to make sure that the quality of their work is on par with what you need. If a freelancer doesn’t deliver exactly what you want on the first try, review the instructions that you gave them to make sure that you were clear. I’ve often found that when I haven’t gotten what I wanted from a freelancer it was because my instructions were vague.

The best freelancers are able to take feedback and quickly adjust their work to give you what you need. So, give them feedback and see how they respond to it.

Your Freelance Relationships Are Investments

Once you know you want to work with a freelancer on a longer-term basis, it’s important that you don’t put too much pressure on them to reduce their fees or give you a discount. While you should ask for a deal if you plan on giving them a significant amount of work, asking them to work for too much below their hourly or flat rate is a recipe for a short-term relationship.

Just because a freelancer isn’t an employee doesn’t mean that you don’t invest time in training them. Turnover of any kind costs you time and revenue.

Finally, make sure to show your freelancers that you recognize their contribution to their business. This year, we sent all our freelancers a gift as a thank you over the holidays. They’re a critical part of our team and we wanted them to know it. Find ways to make them feel appreciated so they keep working for you over the long-term. Maybe someday you’ll even be able to hire them full-time!