This past week, the International Freelancers Academy released the 2012 Freelance Industry Report, a 71-page document based on the results of a survey conducted earlier this year. I chatted with Ed Gandia, author of the report, founding partner of the academy and co-author of The Wealthy Freelancer, about the findings.
This is the second year you’ve done the survey. Will it be annual?
Yes. We’ll be releasing it August/September, going forward.
Why did you decide to do the survey and the report?
It’s amazing to me how many millions of freelancers and self-employed professionals are out there in North America and throughout the world, yet there’s very little information and analysis about who we are, what we do, what challenges we face, what we earn. Canada does a great job of this—there’s some great data about self-employed people, but it’s raw data, raw numbers, no real analysis of what we earn, why we do this, what are our values, how do we find clients. I just felt somebody had to step up and get that information, analyze it and put it out there.
Nearly 1,500 freelancers, primarily from North America, responded to the survey. Creative professionals—designers, writers and editors—make up about 60% of the respondents.
Yes, it’s very heavy on writers and designers. The cool thing about this spread is that it wasn’t just [the academy’s] mailing list. It spread in a big way through social media. Most people who call or think of themselves as freelancers are creatives. So that’s why you saw a lot of designers, writers, web developers. There’s a whole other world, people like coaches, project managers, engineers, accountants, bookkeepers and so forth, and we had a few of those respondents. They don’t really think of themselves as freelancers, but as self-employed or entrepreneurs or consultants. So I think it’s a function of the terminology we use.
Women make up 71% of respondents—and you note that, except for the category of $100 per hour and higher, they out-earn men at every price range. Also, almost half of the women are the primary breadwinners in their households. That’s very different than what we usually see in terms of gender income disparity. Could freelancing be the great equalizer?
I think it really is. I think freelancing is one of those professions where you dictate where you go and how high you go. This is just my opinion, but what I think is happening at the higher ranges, the $100-and-up, I wouldn’t call it a glass ceiling. I think there’s a psychological block. I say this because I have very good friends who are women and they’ve shared this with me, that women find it harder to price at those levels, what they’re really worth, than men do. So it’s not so much that clients refuse to pay it, but it’s what many women feel comfortable asking for. It’s hard for me to say this, as a man, so you qualify that as you like, but it’s anecdotal information I’ve gotten from women. But you’re right, I think it’s very encouraging that at all the other levels, they’re earning higher rates.
According to research cited in your report, nearly 26% of the American workforce is already made up of contingent or contract-based employees—and this is expected to rise. Yet, as you point out, freelancers don’t get much attention from politicians or the mainstream media.
I have a couple of hypotheses—I’m not sure how valid they are, but I think one reason is that many governments in the western world don’t think of solo professionals as job creators, so to them, there’s really no perceived benefit of encouraging solopreneurship or freelancing. We disproved that in this survey, but I think that’s a big reason. What really stumps me is that so many journalists are freelancers today, and these are the people writing the stories, yet there’s very little news [about freelancers]. Here’s another theory: when you do hear about it, it tends to be a negative thing—you hear about the disputes. Here in the U.S., you hear about the unfairness of companies hiring professionals as contractors and not paying them benefits. That’s a huge part of this 26%, by the way. So you’re hearing about the negative side of it, not all the success stories. And, at the end of the day, negative news sells.
Your survey found that freelancers do create work for others.
Forty percent of freelancers delegate and/or outsource work to others, which is a pretty significant number—I really thought it was going to be a lot lower. Typically, we’re not seen as job creators, but we’re spurring economic activity by outsourcing to others. The thing is, in many cases, it’s not traditional employees they’re hiring—many are contractors or freelancers themselves.
The survey looks at the reasons that people become freelancers, including greater freedom and flexibility in scheduling and the ability to pursue a passion. Less than a third of respondents are “accidental” freelancers or working solo as the result of a layoff or downsizing. I would have expected it to be higher, given the economic troubles in the U.S. Did that surprise you?
It did at first, but I really think we overestimate how many people who have been laid off or downsized go out on their own. It’s a very risky proposition for a lot of people, so I think it might be an idea, but the safety of a traditional job is just too appealing.
“Finding clients” and “the feast-or-famine cycle of work” were the most-cited freelancing challenges. How could we remedy this—for example, how could policy-makers do a better job of supporting freelance workers so that they can earn more consistently?
That’s a good question. I think, first of all, freelancers need to become better businesspeople. I come across too many freelancers who don’t treat prospecting for clients as seriously as they should. So I think that’s the biggest issue—you have to become much more serious about it, because that takes care of a big problem. Second, I think we need to make it easier for freelancers, especially in the U.S., because we don’t have some of the things you have in Canada in terms of health care. We need to make it easier to source some of these benefits affordably. Health care, insurance, other benefits that employees get automatically—it becomes difficult and very expensive to get that as a freelancer. So I believe you need to make it easier in order to encourage people to take that risk. I think that’s why there aren’t that many accidental freelancers—there’s too much at stake. If you have a family, you need those benefits, you need that safety net.
Despite the proliferation of content mills and job sites like Elance, only 3% of respondents said that competing against lower-cost freelancers is an obstacle. Were you surprised about the findings?
I was. Again, the little bit in traditional media about freelancing tends to focus on the negative aspects. We talked about one already, corporations laying off their workforce and rehiring them as contractors. The other is competition from overseas, and rates you can’t compete against. To see it in the survey, I was surprised the issue was rated so low. You hear a lot more about it than you actually see it. The numbers show it just wasn’t the top issue.
“Referrals,” “word of mouth” and “tapping my personal/professional network” were the most-cited methods for finding and landing clients. What advice can you offer to someone who’s breaking into freelancing and doesn’t have much of a network?
I think people underestimate the value of their network. You have to go a little deeper. Many times you think, “Well, I don’t know anyone in marketing,” for example. But what we need to start thinking about is “Who do I know, who could put me in contact with someone in marketing?” So, two steps removed, and that’s where the answers are going to come and that’s where the solutions are, regardless of your profession. In my case, I need to talk to a marketing director or manager. If I don’t know any, if I’m just starting out: who’s my target market? Software companies. I know six people in software companies but none in marketing. But can I get three of those to put me in touch with someone in marketing at their organizations? The key word here is resourcefulness. We need to become more resourceful. It’s not going to be an easy thing. You may not know someone, a VP of marketing, he may not be your neighbour, but who do you know who knows someone and can put you in touch?
Is there anything else that stood out for you?
A new finding this year, and it’s actually the most fascinating of all, is the fact that 72% of freelancers consider themselves to be entrepreneurs. I was not expecting that at all. I thought it would be more like 30%. And the differences between those who see themselves as entrepreneurs, in terms of their earnings and how happy they were and other factors, was dramatic—they’re happier and they earn more. Ninety-two percent of “entrepreneurial freelancers” are happier freelancing versus 86% of their peers who don’t consider themselves entrepreneurs. You also have 38% of entrepreneurial freelancers earning $70-plus per hour, compared to 20% of their peers. That’s almost twice as many. I thought it was interesting—it’s not just a mindset without any substance. Financially, they seem to be better off, and also in terms of overall happiness.
Is it possible that the psychological shift of thinking of oneself as an entrepreneur leads to better results?
Correlation doesn’t mean causality—I don’t think one factor causes the others, but I think they go hand in hand. People who come into freelancing with a certain mindset…I don’t want to read into this too deeply, but I think it’s people thinking of themselves as a business. We asked, “Would you consider yourself to be an entrepreneur?” So my theory is that that question was perceived as “Do I think of this as a real business?” I think those who treat it as more of an art don’t do as well: “People should hire me because, look at my work, it’s beautiful.” I think those things go hand in hand—if that’s the mindset, then the mindset will also be: “I don’t need to prospect aggressively because this is what I do and people should see it.”
Click here to download the 2012 Freelance Industry Report.