Small Business Labs

Is a War for Talent Starting in the On-Demand Economy?

It seems almost every day an on-demand economy company announces a big fund raise. For example, the delivery service Door Dash announced last week it raised an additional $40 million. 

And pretty much all of these companies have business models built on the use of independent contractors as service "providers".  

Most of these firms trying to attract independent contractors from roughly the same pool - people looking for flexible, independent work in the service sector with a lot of them only interested in working part-time. 

This raises the question of whether or not there are enough independent contractors to go around - and, if there aren't, will there be an on-demand economy war for talent. 

Already on-demand economy companies are facing worker recruitment issues. Otherwise they wouldn't be spending so much money trying to find and hire people see.

Zen99's interesting analysis of recruitment spend by on-demand economy companies, which we covered yesterday, shows the extent of the industry's recruiting efforts.

With the economy improving, unemployment continuing to fall and traditional employers starting to raise wages (Walmart and Target being examples), talent is already harder to attract than it was just a year or two ago.

In fact, there are many professions/job categories where the war for talent is quite real today. Mobile device programmers and welders are two examples.  

Add in dozens (maybe many dozens) of on-demand companies collectively planning to hire literally millions of independent workers over the next few years, and you have the makings of potential bidding war for on-demand talent.

So will there be an on-demand economy war for talent? And if there is, what impact will it have on on-demand economy companies and their providers?

To be honest, we're asking these questions because we don't know the answers. 

Over the next couple of months we're going to explore this issue and try to figure it out. We'll let you know what we find.

Competition to Hire On-Demand Economy Workers Heating Up

Really interesting atricle by the folks at Zen99 on the amount of money being spent by on-demand economy companies like Uber, Lyft and Instacart are spending to recruit "providers" (contract workers). 

The numbers are quite large.

For example, Lyft is reported to have budgeted $50 million for driver recruitment this year alone. And the major on-demand economy companies are each spending millions of dollars a year on Craigslist ads.

The article chart below shows the impact of these efforts on the prices of common Google adword search terms related to the on-demand economy.  

This is all good news for the industry's providers, who are the independent workers doing the real work - driving, cleaning, delivering, etc. Competition means higher wages, more perks and better jobs.

With so many on-demand economy companies being formed and basing their business models on the use of contract labor, it will be interesting to see if provider demand starts to exceed supply.

If so, the workers will be the winners as companies fight to secure on-demand talent. 

A Honey of an Indiegogo Campaign

Beekeeping has been around for thousands of years. And the process of collecting the honey has always been difficult (just ask Winnie the Pooh).  

It's also hard on the bees, which often believe their hive is being invaded and attack the beekeeper.

But a father-and-son team from Australia have developed an innovative beekeeping system - Honey on Tap -  that simplifies the process and makes it easier for both the keeper and the bees.

Their Indiegogo campaign has created quite a buzz (their words, not mine), and they've raised a record setting $6.3 million in advanced sales so far - and the campaign is not finished.

Quick digression - most articles on product crowdfunding campaigns describe the effort as fund raising, donations or the raising of venture captial. These campaigns are actually advanced sales where people are providing money in exchange for the future delivery of products.

I find this product and crowdfunding campaign fascinating on several levels:

1. Beekeeping has been around a long time. It's hard to believe someone didn't invent something like this before. It shows innovation can happen in any industry.

2. Crowdfunding sites continue to be an excellent funding options for creative and innovative product ideas, especially from small businesses and micropreneurs.

3. Bees are struggling due to colony collapse. It's good to see people supporting products that help bees.

See Shareable's excellent article for more details.

The Decline of Employee Training & The Rise of Side Gigs

The chart below, which shows a decline in employer-provided and on-the-job training in recent decades, has been making the rounds in the economic blogs.

It comes from the 2015 Economic Report of the President (page 147), which is prepared annually by the President's Council of Economic Advisers for Congress.

    

This data is collected only occasionally by the U.S. Census, which explains why the latest data is from 2008. But given the Great Recession, it seems pretty unlikely that employer-provided and on-the-job training have done anything but decline since 2008.

We believe the decline in employee training is having an interesting 2nd order effect - we think it's leading to more people having 2nd jobs. 

In our most recent survey of people with 2nd jobs, about 20% of these "side giggers" said "learning new skills" was the reason they had a 2nd job.

Follow-up interviews confirmed this with many of the interviewees saying they weren't getting training from their primary employer and felt they needed to do side jobs to learn the skills required for career advancement.  

We don't have historical survey data on this. But out interviews from a decade ago shows a much smaller percentage of side giggers citing this reason.  

This is another example of risk being shifted from institutions to individuals. In this case companies are shifting the risks and costs associated with job training to individuals.

The risk shift is one of the the most important and impactful societal trends we follow. It's also one of the least covered and discussed.

For more on this trend see the Intuit 2020 report or the excellent book The Great Risk Shift.

We'll have more data on this topic later this year.  

Goldman Sachs on Millennials

Goldman Sachs has an excellent infographic/report on millennials (born 1980 to 2000).  

They describe Millennials as:

Millennials have come of age during a time of technological change, globalization and economic disruption. That’s given them a different set of behaviors and experiences than their parents.

They have been slower to marry and move out on their own, and have shown different attitudes to ownership that have helped spawn what’s being called a “sharing economy.”

They’re also the first generation of digital natives, and their affinity for technology helps shape how they shop. They are used to instant access to price comparisons, product information and peer reviews.

My favorite report chart is below and shows the large drop in the percentage of young adults who are married and living in their own household.  

This report is one of the best, quick overviews of Millennials and their attitudes I've seen.

Small Business Owners Don't Like Taxes

I've never met a small business owner who liked taxes. No surprise there. Also, if you talk to small business owners for any length of time, most will eventually complain about taxes.

The recently released Wasp Barcode Small Business Accounting Report supports this.  As the report chart below shows and Wasp highlights in their blog post on the report, 52% of respondents report that they pay too much on taxes are they are not sure.

But I actually interpret the results a bit differently. I find it really interesting that 49% say they aren't paying too much.

Add in a chunk of the folks that are not sure - and no doubt some of these folks would say they aren't paying to much if pushed - and you find that over half of small business owners/managers don't think they are paying too much.

As much as small business owners hate taxes, they also realize they are necessary and a cost of doing business.  As long as they feel the tax playing field is even and their competitors aren't getting an unfair advantage, they are in general OK with taxes.

Wasp Barcode's Excellent Small Business Accounting Report

Kudos to Wasp Barcode Technologies for their excellent Small Business Accounting report. It contains survey results from companies with 11-100 employees on issues related to their accounting and finance functions.

According to their blog post on the report, the key findings include:

• 52% of respondents report that they pay too much on taxes are they are not sure
• 70% of small businesses outsource tax preparation, and 30% outsource tax planning
• 88% say they are either very satisfied or somewhat satisfied with their accounting services
• 42% of SMB’s have a CFO or Controller at their company

I found their data on what SMBs don't like about their accountants quite interesting. The chart below shows the top complaints by company size. 

The quick summary of this chart is SMBs want more help, advice and education from their accountants.

As we mentioned last week in an article on accountants growing role as advisors to small business, we're forecasting that accountants will increasingly expand their roles as consultants and advisors.

It's clear from this data their clients want this type of support from their accountants.

Uber and Lyft Lawsuits & the On-Demand Economy

Uber and Lyft were both dealt legal setbacks in two different lawsuits last week.

The separate suits - one filed by Uber drivers and other by Lyft drivers - allege they are misclassified as independent contractors. The drivers are claiming they are employees.

Both Uber and Lyft had sought summary judgments dismissing the cases, but the judges in both cases denied their requests and the suits will be decided by juries.

The judge in the Lyft case nicely summed up the legal difficulties, complexities and confusion around how to classify on-demand economy workers. He said:

"The jury in this case will be handed a square peg and asked to choose between two round holes."

As we've pointed out in the past these lawsuits are a really big deal to on-demand and sharing economy companies.  

If the courts find the drivers have been misclassified by Uber and Lyft and should have been classified as employees, the companies will face substantial fines and penalties.

They will also have to comply with a raft of labor laws and related costs (social security, workingman's comp, overtime pay, etc.) they currently don't have to deal with.

Additionally, they will have to reimburse the drivers’ expenses like they would for employees, likely including money for outlays like gas, insurance and vehicle maintenance costs.  

It's not clear the business models of many of the on-demand economy companies work if they have to use employees instead of independent contractors as their service suppliers.

In other words, these suits could severely damage the on-demand economy. Because of this, expect the deep pocketed on-demand economy companies to vigorously defend themselves.  

Also expect a wave of additional lawsuits as our legal systems tries to reconcile the realities of the new economy with old definitions of work and employment.  

The World Economic Forum's Top 10 Emerging Technologies

Continuing with futurist week, today we're covering The World Economic Forum's recently released list of their Top 10 Emerging Technologies of 2015.

Because the focus is on emerging technologies, it's more "futures" oriented than most tech trends lists - meaning most of these technologies won't have a broad impact for at least 5-10 years.  

This list has 3 technologies from the biotech field, 3 from robotics, 2 from clean tech and 2 from manufacturing.  

What's not on the list is in some ways as interesting as what is. For example, nothing specific on cloud or mobile computing or big data or the Internet of things.  All of these would have been on most emerging technology lists several years ago. I guess the folks at WEF think these have emerged.  

We were pleased to see that distributed manufacturing made the list. They define this as:

In distributed manufacturing, the raw materials and methods of fabrication are decentralized, and the final product is manufactured very close to the final customer.

Distributed manufacturing, which we cover in more detail in our Small Manufacturing section, is one of the trends we believe will lead to a faster growing small/maker manufacturing sector.

The 2015 list is below and the links take you the WEF page describing each trend in more detail:

1. Fuel cell vehicles

2. Next-generation robotics

3. Recyclable thermoset plastics

4. Precise genetic engineering techniques

5. Additive manufacturing

6. Emergent artificial intelligence

7. Distributed manufacturing

8. ‘Sense and avoid’ drones

9. Neuromorphic technology

10. Digital genome

Futurist Faith Popcorn on the Future of Work

We're continuing futurist week here at Small Business Labs by covering a presentation on the future of work from Faith Popcorn.  

Popcorn is probably best known - at least for those of us old enough to remember - for her best selling 1991 trends forecast book The Popcorn Report. 

I consider her an "entertainment" futurist. These are folks that entertain with exciting and/or scary visions of the future. It sounds from this description that I don't think highly of entertainment futurists, but that's not true.

The good ones - like Popcorn - provide thought provoking insights while putting on a good show. They play a valuable role by getting people thinking about the future.

And her vision of the future of work out to 2025, which is broadly described in her presentation summary slide shown below, definitely gets you thinking.

Having said that, entertainment futurists can get a bit sensationalist.

The slide below is also from Popcorn's presentation on the future of work. It suggests by 2025 sentient robots may be forming unions and acting as human overlords.

Neither of these is going to happen in this time frame unless: (1) sentient robots invade from space (like the Cylons); or, (2) come from the future (like The Terminator).

Both of these scenarios have a fairly low probability of happening, but they are more likely than AI advancing by 2025 to the point where robots start agitating for unions.  Besides, if you're an overload you don't need a union.  

So take a look at her slide show - it's really fun,  interesting, thought provoking and full of great pictures.

It even has a slide talking about "synesthesia" sex. I have no idea what that is, but it's nice to know the future of work includes some kind of sex.