Small Business Labs

Internet Top Resource for Today's Job Hunters

Pew Internet's Searching for Work in the Digital Era illustrates the growing role online resources are playing in the job hunt. Key quote:

A majority of U.S. adults (54%) have gone online to look for job information, 45% have applied for a job online, and job-seeking Americans are just as likely to have turned to the internet during their most recent employment search as to their personal or professional networks.

The report chart below shows the various ways job seekers use online resources.

    

The report goes into greater detail on the use of mobile phones and social media in the job search process. It also covers online job seeking differences by demographic groups.

I don't often find myself disappointed by Pew Research studies - their work is consistently outstanding. And the information in this report is up to their usual high standards.

But there's no mention of online work intermediation platforms like Upwork, Fiverr, Airbnb, Uber, etc. It seems like if you are going to ask about finding jobs online, you'd include these rapidly growing sources of work.

The Growing Need to be the "Client of Choice" for Independent Workers

Harvard Business Review's Your Company Needs Independent Workers covers the growing need by corporations to be seen as a "client of choice" by highly skilled independent workers. Key qutoe:

Companies have long strived to become employers of choice for full-time regular employees — the surge in employer rankings and websites like Glassdoor.com and Vault.com demonstrate the importance of doing that. But with non-employees increasingly bringing much-needed talent, companies need to broaden their definition of what it means to be a “great place to work.”

The article is authored by myself and Gene Zanio, CEO of MBO Partners, and is based on research conducted as part of the 2015 MBO Partners State of Independence study.

The goal of this area of research was twofold. First, we wanted to better understand how much discretion professional services providers to businesses have over who they work with.

The second study goal was to understand what makes a hiring organization attractive to highly skilled independent workers.

We were a bit surprised by how much discretion skilled independents have over who they work with.

As the article chart below shows, 83% say they say have a lot of choice (48%) or some choice (35%) over who they work with. 

   

These results show the common view that independent workers have to take any work offered them is simply wrong, at least for skilled professionals who sell their services to businesses.

We were less surprised by what independent workers want from their clients. They want their work valued, control over their time and to be seen as part of the team. These echo the reasons independent workers give for preferring independent work over a traditional job.

   

Contingent talent is clearly becoming more important to both large and small businesses. See the HBR article for information and links to several studies showing the growing use of contingent labor by big companies; see our article from yesterday on the growing use of contract talent by small businesses. 

It's increasingly clear that attracting, retaining, and managing highly skilled independent workers is becoming required for business success.

Use of Contract Labor by Sole Proprietors Surging

The IRS recently released the 2013 data on sole proprietors. This data covers business receipts, deductions, and net income reported by individual taxpayers on Schedule C of Form 1040.

This is how most independent workers and small businesses report business income for tax purposes.

In 2013 there were a bit over 24 million sole proprietors reporting about $1.34 trillion in gross business receipts. In 2012 there were 23.5 million sole proprietors who reported $1.30 trillion in gross receipts. 

While looking through the data we were struck by the extent of the growth in the usage of contract labor - contingent workers such as freelancers, independent contractors, temps, etc. -   by sole proprietors. 

As the chart below shows, sole proprietor contract labor expenses increased 38% between 2010 and 2013. 

Over the same period salary and wage expense increased only 10.7%. In 2013 contract labor was 36% of total labor costs, up from 31% in 2010 and just 20% in 2003. 

The use of contract and contingent labor by businesses large and small continues to grow and we expect this trend to continue.

Risk Profiles of Freelancers Versus Non-Freelancers

There's lots of people criticizing independent work these days as being too unpredictable, risky and all around bad for both workers and the economy.

But a pattern we've noticed is almost all the criticism comes from people with traditional jobs. This got us thinking about risk profile differences between independent workers and those with traditional jobs.

In the 2013 MBO Partners State of Independence study we surveyed non-independent workers asking them about their views of independent work. The results were quite interesting.

First, non-independent workers see the advantages of independent work as, well, less advantageous than independent workers do. 

    

Second, non-independent workers see the disadvantages as being much greater. As the chart below shows, for every category mentioned non-independents see bigger challenges than independent workers.

  

One of the more fascinating findings was that half of the non-independents considered "having to invest their own money" as a major challenge. For independent workers, so few listed this as a challenge it didn't make the top 10 challenges list, so it was scored as "not applicable". 

It's clear from this an other research that, on average, independent workers and non-independent workers have different risk profiles. The bottom line is:

Independent workers are more comfortable than non-independents with the risks associated with being independent and more willing to accept these risks in return for greater work autonomy, control and flexibility.

This is why the majority of independent workers are satisfied and happy as independents and prefer independent work over traditional employment. 

Going forward these risk profile differences raise a very important issue.

Our work indicates most Americans fall into the more conservative risk profile category. Our work also indicates those with conservative risk profiles are less likely to be successful as independent workers.

But as the economy shifts to greater levels of contingent employment, more people with risk profiles not suited for independent work will become independent workers. This is a key reason we need new policies and programs to make independent work safer and more secure.

So when reading or hearing people talking about how bad independent work is, keep in mind risk profiles. The chances are the critic has a risk profile that biases them against independent work.

But also keep mind without making independent work safer and more secure, growing numbers of Americans will likely struggle at work going forward.

What is Blockchain and Why Should You Care?

Spend Matters' article Why Bitcoin’s Blockchain Technology Could Revolutionize Supply Chain Transparency does a really nice job explaining blockchain, which the technology behind the online currency Bitcoin.

Key quote describing blockchain:

... blockchain is a shared, distributed ledger — really a new type of database structure — that runs without a single centralized operator. It is a secure, public and external system of record that participants can inspect, audit and update, and within it, all transactions are recorded.

Information stored in the blockchain system is boiled down into a code or “hash.” If someone tries to change the information, the hash will appear different, making it easy to detect any foul play.

This transparency provides a security layer that is designed to prevent anyone from altering information being exchanged via blockchain, which is why everyone is excited about its use for transactions.

In the case of the Spend Matters article, the focus is on using blockchain to bring greater transparency and security to global supply chain transactions. And they're pretty excited about it:

... blockchain could become a new “supply chain operating system” based on its decentralized architecture, which “has the potential to trigger a new wave of innovation in how supply chain applications are developed, deployed and used.

But blockchain can also be applied to a wide range of other applications, everything from property management to contracts - pretty much anything where a secure, transparent, trust-able record would be useful.

Or at least that's what the Economist says in their article The great chain of being sure about things. Key quote:

... the cryptographic technology that underlies bitcoin, called the “blockchain”, has applications well beyond cash and currency. It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths.

We've posted in the past on Bitcoins - the online, digital currency built on top of blockchain - and our advice to small businesses remains the same. Unless you have a customer base interested in using them(nerds, criminals,etc.) you can ignore them for now. Too few are using them.

It's also too early to worry about blockchain.

But over the next couple of years you'll start to hear more and more about this technology. It's simply too compelling not to be used. Which is why you should know about it.

Regus Responds to Coworking, WeWork by Adding New Brands

Officing Today's Regus' Strategy to Win Over the New Generation of Workers covers two new Regus brands designed to appeal to the many folks choosing coworking spaces over Regus' traditional office suites.

The brands are ThinkKora and Spaces. 

Key quote on why Regus thinks it needs other brands:

Regus is well aware of the fact that young, cool, hip, and creative people may not associate their aspirations with a corporate Regus environment.

As an analyst firm that spends a fair amount of time studying the coworking movement, we agree. I would add that not only is the Regus brand not a good fit with the people flocking to coworking spaces, their physical spaces and the way they are configured also don't work for this segment.

Regus spaces focus on privacy, security and their view of what a professional corporate office should look and feel like. The same is true for most other executive suites.

And there are a lot of people looking for this type of environment.

But as our research clearly shows, people in coworking spaces are a very different segment. They are looking for more than just a place to work. They're also looking enhanced social experience, networking, community support and help and opportunities to learn new skills.

Regus understands they can't deliver this type of experience in their current spaces. So they are opening new spaces under these new brands. Key quote from ThinkKora's homepage:

Join a growing entrepreneurial community, connecting with Kora and Regus members and partners from the world's of business and learning ...Find the inspiration, knowledge, skills, services and people you need through our learning and network events and our local Kora directors and connectors.

Definitely coworking-like branding.

There's little doubt rapid coworking space and membership growth - and especially WeWork's growth - is driving this shift by Regus.

They've been following coworking for years. But like most of the rest of the commercial real estate industry, they have only recently figured out coworking is a trend and not a fad.

We think this move by Regus is a good idea.

But existing players often struggle responding to disruptive new entrants using new business models and business methods. It will be interesting to see if Regus can successfully execute on this plan.

BTW, this move by Regus is more proof that coworking has reached an inflection point and will continue it's rapid growth.

Millennials and Bleisure Travel

Regular readers know we like new buzz words here at Small Business Labs. So we had to post on "Bleisure" - a term describing the blending of business and leisure travel.

According to CNN, Bleisure travel is defined as:

a term used to define professionals who are shunning the all-work-and-no-fun grind of business trips by mixing them with vacation time.

While Bleisure travelers come from all age groups, millennials (aged 15-35) are seen as most likely to combine business with pleasure while traveling. Key quote from Fast Company's How Millennials are Redefining Business Travel:

... millennials can approach business travel as a lifestyle experience. In their position, why not hack a grueling travel plan to make it more enriching, rewarding, and—yes—pleasurable?

Enter what some in the travel industry are terming"bleisure" travel (to the dismayed groans of others). At first, "bleisure" only referred to business trips that were extended for pleasure. Now the word encompasses leisure experiences that are woven throughout a business trip.

In other words, millennials aren't just adding a few days of vacation here and there to their business trips, they're turning the entire trip into a fun experience. The Fast Company article has a great example:

I recently heard about a millennial business traveler who booked a hotel 40 minutes away from his destination city, in a ski resort town. He wanted to stay near his preferred CrossFit gym, and he liked the luxe vacation town better than the nearby city where business meetings were to be held. The company would cover his rental car and gas anyway.

A recent Washington Post article also looks at how millennial travelers are mixing work and fun with a focus on how they are changing the hotel industry. Key quote:

Hotels are also starting to integrate more unique and local experiences. For example, some properties [such as Denver’s Brown Palace] are implementing farm-to-table menus, brewing local beers on-site [Fairmont San Francisco] and organizing local excursions and activities for travelers.

There is a trend toward more open spaces. Younger travelers generally want to spend less time in the room and are more interested in meeting other travelers in social settings within the hotel. So you’re seeing things like lobby bars and open works paces that are not just for hotel guests but welcome locals as well. 

Expedia's Future of Travel report has more data and insights on millennial travelers.

The Smart Coworking Hotel for the Modern Traveler

Skift's Vienna’s New On-Demand Coworking Hotel Is the Future of Hospitality covers the new Hotel Schani, which includes a dedicated coworking space.

It also has all sorts of fancy technology that allows visitors to personalize their hotel stay and coworking experience using their mobile phone. You can even book the actual room you'll be staying in from your phone.

I particularly like the concept of the "hotel as a connectivity platform". Key quote:

Local members and paying guests can create a user profile with both professional and personal information in Schani’s online coworking marketplace, which people can use to connect with each other.

“The marketplace app should give existing coworkers and individuals a chance to network with like-minded people and start partnerships,” says Komarek. “The coworking space is intended for both locals and hotel guests as an interface for local and global collaboration, so we want to facilitate networking and offer regular events for community building.”

Providing connections, networking opportunities and access to like minded people is becoming increasingly common. This article references another Skift article on San Francisco's Workshop Cafe. 

They too provide an online connections service. Key quote:

The community page in the Workshop Cafe app adds another layer to the overall experience where you can opt-in to share your profile and see who else is working around you, and their specific numbered chair. So someone might say they’re a Ruby on Rails developer and they’re looking for work. Accountants will provide the types of bookkeeping services they offer freelancers, or a lawyer might promote his experience with patent law.

This is all part of the broader trend towards work/life blending. We see this happening in coworking spaces and it's quickly spreading to hotels, cafes and traditional office settings.

SEC Approves Equity Crowdfunding

Up until now, entrepreneurs raising money through crowdfunding platforms such as Kickstarter promised their backers products in exchange for funding. 

But last week the Securities and Exchange Commission approved a law allowing the general public to participate in equity crowdfunding campaigns. 

The new rules will allow small investors to buy shares of private companies under the provisions of the Jump-Start Our Business Start-Ups (JOBS) Act. Prior to this change, equity crowdfunding had been legal only for accredited investors - those with high incomes or a high net worth.

According to a Forbes article, equity crowdfunding was already set to surpass traditional VC funding in 2016 and the new rules will more or less guarantee this. Key quote:

Crowdfunding was already expected to surpass VC funding in 2016 at $34B a year in total crowdfunding online, across all types of crowdfunding. By bringing in a new class of investors with Title III, we can expect further growth of the equity market as venture capital continues to move online.

The new rules around equity crowdfunding are quite complex, as is pointed out by this Venture Beat story. At 685 pages long, most small businesses will need legal help to make sure they are following the rules. Key article quote on compliance:

If you fail to comply with the rules (like submitting your annual report with the SEC within 120 days after the end of your fiscal year and posting a link on your website), you could lose your exemption, which means that you will face hefty fines and legal fees to defend yourself. Be sure to follow all the rules/filings before, during, and after you raise your funds. For instance, you cannot list your offering on more than one platform. Also if you want to host a launch party to promote your offering, do NOT do so with the funding portal (unless it is a broker-dealer) because that is considered offering investment advice (by the funding portal), which is not allowed.

Not everyone thinks this is a good idea. Key quote on the potential downsides from a New York Times article:

The equity shares they buy will be risky, illiquid investments. Investors will generally be required to hold on to the shares for at least one year, and there are not yet many marketplaces for those seeking to sell shares in private companies, which are difficult to value.

Some critics are deeply skeptical about the quality of the investments that will be available. “Ninety-nine percent of these deals will prove to be unprofitable,” said Andrew Stoltmann, a lawyer who specializes in securities fraud. “This is a disaster waiting to happen.”

As a long time angel investor I have mixed feelings about this bill.

It will clearly make it easier for startups and small businesses to raise money - especially from friends and family and others who would like to invest but are not accredited investors.

But I've dealt with a whole lot of disgruntled angel investors over the years who, frankly, didn't understand the risks they were taking even though they were supposed to be sophisticated investors. I suspect opening up equity crowdfunding is going to result in many unhappy investors.

I also think there will be more fraud than is anticipated. 

But hopefully the positives will outweigh the negatives.

Book Review: Raw Deal - How the Uber Economy is Screwing American Workers

Steven Hill's Raw Deal: How the "Uber Economy and Runaway Capitalism are Screwing the American Worker makes no attempt at being balanced.

It's a non-stop attack on Uber, Airbnb and any other company or person who offers contract work or suggests freelance work isn't awful. 

In case you didn't guess, Hill is a political progressive.

But even other progressives are targets. 

For example, Hill spends 10 pages oddly attacking the left leaning Freelancers Union and it's founder Sara Horowitz.

Their offense is suggesting freelance jobs can be good.

Despite the book's hyperbole, vitriol and one-sided point of view, I genuinely enjoyed it.

As we've discussed extensively in the past, there's a dark side to the freelance economy. Because of this dark side, we need better laws and protections for temps, contract workers and others being unfairly exploited or in need of more economic security. 

And Raw Deal does a great job describing the dark side. 

But in his anti-freelancing zeal, Hill completely ignores or dismisses the overwhelming evidence that the dark side only applies to about 1/3rd of independent workers. The majority like being independent and prefer being independent over having a traditional job.

For example, the U.S. Government Accountability Office (GAO) recently did an analysis of contingent work and found 85% of independent contractors are content being independent and would not want to be traditional employees.

They also found that 57% reported they were very satisfied with contract work. Only 45% of traditional full time employees surveyed reported they were very satisfied. 

And, of course, our work (and the work of others) consistently shows the majority of independent workers are satisfied and prefer independent work over having a traditional job. 

Raw Deal also ignores the advantages sharing and on-demand economy companies provide consumers. There's a reason these companies are so successful - they provide services that consumers want. 

The book closes with policy suggestions for making independent work less precarious. This section is quite good.

The main policy suggestion is the creation of independent security accounts.

This concept is very similar to the idea of shared security accounts, which have been discussed for several years. Key quote on shared security accounts from a Fast Company article on this topic:

One can think of the Shared Security Account as analogous to Social Security, but encompassing all of the employment benefits traditionally provided by a full-time salaried job. Shared Security benefits would be earned and accrued via automatic payroll deductions, regardless of the employment relationship, and, like Social Security, these benefits would be fully prorated, portable, and universal.

Hiring organizations would pay a small amount on top of any hourly fee or payment made to the worker to cover social security, workers comp, medicare and even potentially things like sick leave, unemployment insurance and vacations.

Much like what has been done with the affordable care act, this would make these protections and benefits portable and not tied to a specific job or employer.  

This makes a lot of sense and would go a long way towards making independent work more secure.

Our bottom line is Raw Deal is well worth reading regardless of how you feel about independent work and/or sharing economy companies like Uber and Airbnb. 

The issues raised are important, the downsides of the freelance economy real and the policy suggestions helpful.