35% of the U.S. Workforce Now Freelances

Data Scout is LSA’s series that curates and draws meaning from third-party data. Running semi-weekly, it adds an analytical layer to the industry data that we encounter in daily knowledge building. For LSA original data, see the separate Modern Commerce Monitor™️ series.

The share of the U.S. workforce whose livelihood comes from contract work continues to ratchet up.  That number now stands at 57 million U.S. adults — or 35 percent of the workforce — according to the sixth annual Freelancing in America survey. This is 10 million more than it was five years ago.

The income this represents is about $1 trillion, or 5 percent, of U.S. GDP, which ranks it higher than single industries like construction and transportation. There are several things to unpack here including drivers for this trend and, more importantly, strategic implications for those who provide SMB software.

Starting with the drivers, there are several reasons for the uptick including cultural factors and availability of tech that enables contract work. Supporting the latter, a larger share of freelancers are in that position by choice. 60 percent report choosing a freelance lifestyle and 28 percent do so full time.

Others are compelled to freelance work for reasons out of their control such as health or family commitments that prevent traditional/commuting full-time jobs. But regardless of the reason, the clear trend is that more Americans are freelancing. This sort of makes them effectively (Schedule C) SMBs.

Qualifying that statement, these freelancers could be considered “SMB-adjacent,” in that there’s some overlap in operational needs. They’re probably most similar — behaviourally and operationally — to the “s” side of the SMB scale, or what we sometimes called VSBs (very small businesses).

Their pain points and buying habits are also likely similar, gravitating to cash-flow friendly SaaS tools for operational needs. That leads to strategic implications for Saas players who currently serve VSBs. For them, the growth of the freelance economy boils down to a larger total addressable market.

As for the types of software they need, fintech is probably the flavor of SMB SaaS that’s most relevant. That includes tax & accounting software, or emerging tools that help with cash flow, like Fundbox. They’re likely less in need of customer acquisition and advertising, but website builders are relevant.

We say customer acquisition is less relevant because freelancing is more often about cultivating a few ongoing gigs, as opposed to the scaled customer acquisition game of storefront-based SMBs. 45 percent of freelance work is “skilled services” like programming, as opposed to gig work like dog walking.

But 77 percent of freelancers affirmed that software helped them get contract work. So if this population subset continues to grow, it’s a clear demand signal for client acquisition tools. It’s unclear what they’re currently using, but it’s likely a combination of Craigslist, LinkedIn and meat-space networking.

Speaking of demand signals, 81 percent of freelancers report the need for better automation and tools to grow their business. They spend half their time on marketing and administrative work, so any SaaS tools that can help scratch that itch are looking at a potentially-sizeable market opportunity.

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