S2Ep12: Traditional Employees vs. Independent Contractors-which makes the most sense for your business

In today’s episode, Allan welcomes Matthew Mottola, an experienced expert in the freelance economy. Matthew is the founder of Venture L, a freelance platform. Matthew is also the author of The Human Cloud. In his book, Matthew empowers his readers with practical advice for freelancing. Listen to this captivating conversation between Allan and Matthew, as they discuss the very hot topic of freelancing vs employment.

Matthew R. Mottola
Dream Big. Act Bigger. Through the Human Cloud
Founder Venture L
Author The Human Cloud
For Press:  LinkedIn  I  Media Kit  I  Prior Talks
Allan has started and grown several multi million dollar businesses, his mission is to help
you do the same. Welcome to the business growth pod building the future one
entrepreneur at a time.
And the first is going to be how do you scale? Meaning? How do you go from zero to one
or one to 100? And the second thing is going to be how do you adapt and change?
meaning how do you become flexible? How are you agile, so you can change the what the
market needs. And both of those have a serious talent problem, meaning you can’t do
everything yourself. And so if you’re thinking as a business owner, how in the world are you
going to, you know, take advantage of a new opportunity or scale up the existing core
opportunity, and sort of the two traditional ways or you can hire full time or you can bring
in an agency. But freelancing does is it just gives you a third option, which says instead of
needing a middle layer, meaning to go through an agency, he can engage directly with
the talent that wouldn’t be doing the work if you weren’t an agency.
Hey, everyone, welcome to the show. I’m Allan. I’m a family man and attorney and an
entrepreneur. Each week, we provide resources and advice to help build your business. Are
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you ready? Then let’s go.
Hey, everyone, welcome to the show. Today, I’m excited to welcome Matthew Motolla.
Matthew is the co founder and CEO of venture L, the leading platform for freelancers to
run their businesses. He’s also the author of number one new release the human cloud.
Welcome to the show, Matthew,
Thanks for having me pumped to talk to you all.
So tell me a little bit about your background. I know that you’ve spent some time
overseas, and you kind of have this diverse history, both in terms of education and
experience, will you tell us a little bit about yourself and, and some of your strengths, and
you know, give us a picture of who you are?
Yeah, so it was like to say I’m kind of a one trick pony in terms of the freelance economy.
And then from a business or skill side have sort of been able to be on the product side, I
actually majored in finance and accounting. And to be honest, I do very little of what I
majored in, which I’m sure your listeners can relate to. So actually started freelancing just
as a way to make money outside of eating a full time internship, and then jumped into
sort of falling in love with the actual industry itself. So I jumped headfirst into technology
companies, specifically what software is required for this industry. And then most recently,
was actually leading Microsoft solutions, specifically the tech stack, to enable companies
to go spend up to $100 million dollars on freelancer. So a bit of that mix of freelancing
with entrepreneurship. At the end of the day, I really, really love the freelance economy
and enabling every single person on the planet to have an opportunity to be part of it.
I love it. So tell us what you’re talking about. When you refer to a freelancer.
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Yeah, so we’ll step it back just one level two. So when we say freelance, we don’t mean
that everyone is going to be unemployed, or that everyone is going to be a free agent. We
simply mean, there’s a transformation from full time and offices into models that are more
digital meaning using virtual tools, remote meaning remote work, and then outcome
based. And that means that whether it’s full time employees, or contract workers, they’re
working on more of a outcome based approach, traditional, if you want to have sort of a
comparison, a 1099, right, or a contract or even in agency is the freelancer model.
So just to clarify, can I be a freelancer, if I’m an employee of a company, like a full time
Technically No, but the way that you work is going to actually be very, very similar,
because you’re going to work in more of a product slash entrepreneur mindset, where
you’re going to be held accountable to outcomes.
So why do business owners care about this? Why should the you know my audience who
most of them are entrepreneurs, they either have a business or they’re trying to get to the
next level, or they’re trying to start their business? Why should they be interested? In This
Topic of freelancers?
Yeah, so it really comes down to there’s two things that you’re probably thinking about
right now as a business owner. And the first is going to be how do you scale? Meaning?
How do you go from zero to one or one to 100? And the second thing is going to be how
do you adapt and change? Meaning? How do you become flexible? How are you agile, so
you can change to what the market needs. And both of those have a serious talent
problem, meaning you can’t do everything yourself. And so if you’re thinking as a business
owner, how in the world are you going to, you know, take advantage of a new opportunity
or scale up the existing core opportunity. And sort of the two traditional ways are, you can
hire full time, or you can bring in an agency. But freelancing does is it just gives you a third
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option, which says instead of needing a middle layer, meaning to go through an agency,
you can engage directly with the talent that would be doing the work if you were in an
agency. So this sort of high level, like if we’re sitting in a boardroom, and we have that
slide up, that basically is like the classic KPI slide, right? We would say it’s better, it’s faster,
and it’s more cost efficient to hire a freelancer versus full time or going through an agency
and the numbers are actually pretty insane. I mean, from a cost perspective, 50 90%
cheaper. From a speed perspective that takes around 30 days, usually through an agency
it takes around two for freelancers, but that’s the sort of major reason is that you’re
thinking about how you’re going to scale up your business or how you’re going to react to
changing market needs. You need to get talent in the building and freelancing as a third
option that is better, faster and more cost efficient.
I love that. And there’s some glaring benefits to using a freelancer, 1099, subcontractor,
whatever, you hit on a couple of those speed, you know, it costs less, there’s in terms of
just payroll taxes, it’s a no brainer, right? Because it costs less, you can end up paying
somebody more putting more money in their pocket, more having the gig, you know,
bidding the gig higher than you would if it were an employee, just because you have that
buffer and the decreased costs of overhead taxes, benefits, all of these things. And
contractors are easier to find sometimes and employees, especially with technology that
we have today up work and different platforms where you can find people, what are some
of the drawbacks? Let’s knock those out from the beginning. What are some drawbacks to
using a freelancer
Contractor? I’m so glad you asked. So the number one is legality. We talked about it
before, if you see me give you some nightmares, right? And then you’ll figure out some of
the patterns. So first nightmare. Let’s say that you’ve been hiring over 100 freelancers for a
couple of years, and let’s say over 1000 freelancers for a couple of years, and you’ve
they’ve been working 40 hours a week for you, they’ve basically been no different than a
full time employee, except you’re paying them on a contract. So like you said, you’re not
paying payroll insurance or the other things, they can turn around in a class action
lawsuit. And they can say you should have classified us as a full time employee and given
us benefits. And so Microsoft actually got sued over $100 million. I think it was early
2000s. about this. And so misclassification is one of the biggest risks in terms of are these
freelancers working, basically being full time employees without you giving them benefits
or paying the taxes that you should? So that’s the first major one. The second one is from
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a legal perspective, what happens if you let out IP intellectual property or what happens if
freelancers get access to things that they shouldn’t. And so, to be honest, these are one of
the things the big difference is that this still happens in an agency. And this still happens
with full time employees. The difference is, if it’s an agency, there’s more money to sue. So
if an agency, you can go and you sue them or a freelancer, you don’t have necessarily
that much leverage. So those are the first two is the legality and the misclassification. The
third one, though, is purely a moment in time. And what I mean by that is, with any new
type of change, there’s a change management component. And so when you’re going in,
you’re hiring freelancers, you know, the good thing about that the fact that there’s 16
million people just on the Upwork platform alone, that can help your business means that
you have huge potential and getting people in the door. But the bad thing is the processes
haven’t caught up. And so most likely, if you’re a business owner, the last thing you want to
do is actually hire more people, you want to get more work done. But you don’t want to
have to take on more work just by hiring people and managing them. So that’s usually the
third risk is just that the change management component is the fact that this is new. And
so you’re not going to master hiring freelancers overnight.
Yeah, so And as we’ve been having this conversation, I’m thinking about things from just a
sheer business owners perspective, about some challenges. And in full disclosure, my
companies have used hundreds of independent contractors in different facets over the
years. And so I’ve had some really great experiences, I’ve had some neutral experiences
and bad experiences. And really, I’m unbiased, I’m trying to get to the best possible
solution for a particular business owner. A couple of other things that I thought about, one
of them relates to the legality. And so and I want to get into the legality and kind of the
analysis of whether somebody should be classified as an employee or a contractor, we’re
going to get into that in just a little bit talking some specifics, because it comes up quite a
few areas, quite a few industries quite a bit. But that aspect that I’m referring to, that
could be not necessarily a good thing with an independent contractor or Freelancer is this
element of control, right. And each state has their own tests about what constitutes or
how you should classify somebody, whether employee or contractor. But what most of
those states come down to, if not all of them, is they come down to this element of
control. They use these, you know, anywhere from 12 to 16 point tests to determine what
type of control a company has over this individual. Right, the less control they could be
more favored as a freelancer, more control. They’ve got to be classified as employees.
Now, as an employer, I want as much control and I hope this doesn’t sound crazy. I mean,
control and training in in helping them with projects and controlling their hours, stuff like
that. That’s what I mean by control. Having a little more control over the end work
product, but it can be a little difficult for a business owner to swallow this pill of, Hey, I’m
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going to pay this person, I only have them for five hours a week, or 10 hours a week or 20
hours a week. And they’re going to go and then do something for, you know, the same
thing for another company. How do we get beyond that with freelancers, as a business
owner, that has created a company that super personal and something that I’m very
passionate about which all business owners are about their business? How do we come to
terms with this idea that, hey, I’m paying somebody to do something? And then they’re
gonna shut off their work with my company? And then go do the same for another
company? How do I get a freelancer emotionally involved and bought into what I’m doing
with my company? Yeah.
So let me give you the two biggest hesitations that clients and companies have had for
my whole career in this. And I’ll be honest, when they would first ask me because when I
started in freelancing, it just makes sense to me. So when I first heard about something
else, I had no idea that the other thing didn’t make sense was in full time employment. But
so the two major hurdles are usually culture and onboarding. And so from a culture
perspective, they would say, this Freelancer doesn’t work for us. And so and we have a
very, very special culture. And so why would I want to bring that and build it? The second
thing would be onboarding. And so there’s kind of no secret, what is it like a year and a
half is usually the best ROI when you’re hiring employees, because it takes at least six
months to ramp them up. And so with a freelancer, you’re saying, hey, they come in the
building for a week, you onboard them, you pay for all their onboarding and they’re gone.
Right? So those are the two major hesitations. Now, we can systematically talk about ways
to sort of break those hesitations away, because they’re real, they can be a negative, but
they also can be a huge positive. The high level takeaway, though, related to all of this, is
that there is a mindset shift in terms of going from input to outcome. And what I mean by
that is, in full time work, it’s super easy to walk down the hallway, and just say there’s a
bug in a seat where when you’re talking about freelancers, if you don’t have the proper
outcome defined, then yes, you might have just wasted, say, $1,000, if that’s what the
contract was for.
So yeah, and it seems like with a lot of things, and being an entrepreneur and owning
businesses, creating systems, and creating protocols, and developing a vision for your
company, all these things take time, they take more time in the beginning than not doing
them just like training an employee, but the idea is that they save you time in the long run.
And it sounds like that’s kind of what you’re saying with freelancers, right? You want to be
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organized. With as an employer, you want to be organized, so that you have a clear vision
of what you’re expecting from the freelancer. And you know, when the end result, whether
it’s completed or not, and to what degree how satisfied you are with it. Whereas with an
employee, you could just say, hey, let’s start working on this, we’ll kind of see where it
takes us. But you know, as time goes on, you can kind of go back and forth and, and work
on it, is that an accurate assumption that with a freelancer, you want to be able to say,
Hey, this is the project,
Let me know when it’s done. 100%, as success of a freelance project comes down to
properly scoped outcomes, as well as being very, very prescriptive in the working
relationship. And so the major thing that goes wrong actually, is the managing of
expectations from both a quality and a communication perspective. When we say quality,
like here’s the best example of what would always happen, let’s say that I hired you for a
PowerPoint, what you think looks good, and what I think looks good, are probably totally
different. And so if I go to a Microsoft, and I show them, what I would assume would be a
good PowerPoint design, they might look at it and say, This is disgusting. This is New Age,
this is that millennial crap. Whereas if I went and I brought Microsoft’s presentations to
someone in San Francisco, they would say this is old, this is enterprise get this old crap
away from me. And so that’s usually the number one problem is just managing
expectations of what good looks like. And then from a communication perspective, it
comes down to those little informal things. And so if you’re working with a freelancer, like
my freelancers, I make sure there’s this thing called the 40 hour class where they don’t
have to respond to me for 48 hours. Now, that requires a lot of discipline, making sure that
they’re working on the right things. And it also requires discipline in terms of making sure
that they understand and I understand. So yeah, that’s a really great way to put it is that
there is upfront work to make sure that things are prescriptive and well defined, or else
there can be problems down the line.
So one issue with having a business is having this you know, the structure of
accountability. And having a system where people know who they quote unquote report
to or the things that they’re responsible for, that they can take ownership in and they can
kind of take pride in their work. What are some things that you’re able to do to help kind
of model this with freelancers? What type of system works well for them in terms of
reporting, and how do you figure out some of these issues where people used to using
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Yeah, is interesting, actually. So I started in financial services. And then I jumped into,
obviously with technology. So working in large tech working startup tech, and working
with freelancers is actually a lot like working in product teams, versus working in more of a
service organizations like accounting or finance. And what I mean by that is, it’s not so
much the input that matters, it’s more the outcomes. And one of the common frameworks
is like the KPI framework, right, where you have the key result or the cursor, okay, our
system is thinking about when you have the objectives, and you have key results. And so
when working with a freelancer, I’ve noticed the okere framework is probably one of the
best. And the reason for that is that the freelancer is by far the expert at the work itself,
but you as the business owner, are the expert in terms of the high level strategy of what
your business needs. And so you were saying, so you’re in pest control, right. And so in
working with a freelancer, one of your okrs, or one of your objectives, might be awareness
that’s top of the funnel, and then the freelancer might be an expert in content
management. And so instead of saying, hey, freelancer, I expect you to work 40 hours a
week and produce three articles, the outcome might be, we’re going to hire you for a
month, you’re going to have $1,000 retainer, and we expect to have at least 2000 views
on our website and our content management website. So at a high level, that’s generally
the best way to work with your freelancers is to think about it more from an ownership
slash outcome perspective. And to be honest, like freelancers or business owners
themselves, and so you’ll be surprised at how well you probably align on this framework
versus employees. I personally found that when I was in leadership positions in companies,
it was easier to work with freelancers than it was in place, because freelancers were a lot
more outcome, and had a much better ownership mindset.
So Matthew, for a lot of companies, they don’t know exactly like you give the example of,
you know, a freelancer that was doing, you know, SEO, or some type of blogging or
whatever to get eyeballs on their website. A lot of times they don’t know what that end
result should be. Right. So if they’re hiring a freelance for the first time, let’s say they
haven’t had money to have an internal digital marketing program, whatever. And they’re
wanting to hire a freelancer do some Seo? How do they know when they’re getting good
value out of this Freelancer? What are some tips and tricks or whatever that they can do
to just to get started down the road? Once you know Freelancer has been around for a
year or two or whatever, they’ve used a couple of different freelancers. They’re a little
more familiar with it. But getting started. I think that’s from a business standpoint. That’s
one of the hesitations is, man, how do I know that I’m actually getting some value out of
using a freelancer?
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You ready for my trick question, though? How do you know you’re getting value in a
marketing? Yeah, so
I mean, that’s a good question. Right?
Like, seriously serious question, like, how do you know like, advertising is a perfect
example, right? Let’s say, I give you a million dollars. And I’m like, hey, go invest this in
advertising. How are you measuring advertising?
So and that’s the thing is that and I know this is gonna sound super old school to you. But I
know that a lot of my listeners, this is gonna hit home for them. So the comparison would
be using a freelancer versus having an employee who’s, you know, in his butts in the seat,
like you said before? Well, I could see that they’re actually at work, you know, and they
may be watching Netflix or whatever. But so it’s not. And this is this sounds super old
school. And trust me, I’m trying to change my mentality with this. I know I’m coming
around. It’s taken me some time, but especially with what happened with COVID. And
how we did a lot of remote work. I have a marketing director for one of my companies, I
have not physically seen her in probably eight months, face to face, no joke. So it but it’s
taken me a while. But that’s the thing is if somebody’s saying, Well, you know, should I hire
an employee or a freelancer? They’re like, well, at least the employee is going to be in the
office with me. And I can see that they’re actually doing something regardless of the
results, right?
Yeah. And so okay, this would be a funny story related to this. So when I went to Microsoft,
one of my sort of terms was I want it to be predominantly remote. And because to me, I
just I, an office does not make sense in terms of maximum productivity. There’s a couple
of reasons. But so that was one of my number one things when I went there was I’m going
to be accountable to an outcome, which was get 10 customers by this specific date. If I hit
that, then I’ll be working remote if I don’t hit that, then fire me or let’s figure out something
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else. But so that was like, it’s funny seeing the divide. I kind of feel like I’m in Grand Torino,
like watching the old guy on the porch being like, get off my lawn. But um, I hear you. And
one of the things that when I was watching the Bill Gates documentary, I don’t know if
you’ve seen that. And he memorized the license plates. And in his office, he could see the
car so he would know if people were going home before 8pm, which to me is just insanity.
But know that there is a fundamental difference when you’re hiring freelancers is that you
do have to have trust that you can’t see them and you can’t like you mentioned kind of
control. But it doesn’t matter how long they work, it really comes down to the outcomes.
Now, with that said, this is pretty obvious. So when I started hiring freelancers, I had no
idea what I was doing in terms of what I was hiring for. I didn’t know the price that I should
charge. I didn’t know how the project should be run. I just knew that there was outcomes
that I needed to have happen. So some were designed, some are SEO, even with the book
actually the my now co author who’s also CTO of a large company, when I hired him, it
was to do editing. And he could have told me it was $1,000, he could have told me it was
$100. But I put trust, sort of in him as the expert. So with that said, I always like to say,
meet with a freelancer. And if they don’t teach you something, then don’t continue the
relationship. That’s like my cardinal rule of if I’m going to put trust into a freelancer. And
then with that said, the second thing I do, is I always understand what I have to lose. And
so when I started hiring my first freelancers, I said, All right, I have 250 bucks to lose. And
so this first product is gonna be 250. And if we lose it, and it goes wrong, like I knew that it
doesn’t necessarily hurt me. So those are the two things I would say, to sort of get off, you
know, to ease off the porch, the first thing would be, make sure that a freelancer is
teaching you and you don’t leave the call, telling them what to do, but instead of them
answering the right or asking you questions that are insightful and teach you. And then
second thing, start small and start at a place that, you know, you can lose one huge thing
with executives was start with something like market research, where it’s like a $200
project. And they bring up insights that even if you did it, like you probably could have
found those. But it builds that trust of Oh, it’s okay that they’re not sitting next to me and I
and I don’t have to see them leaving the office. But you know, after 5pm every day,
I love this concept of actually like both of those things that you just hit on number one,
seeing if the freelancer can teach you something, because at the end of the day, business
owners, entrepreneurs, we’re always looking to increase our knowledge base, and to figure
out something that we didn’t know before. That’s what makes entrepreneurs really
powerful, super curious. And always and that’s the thing is that all lose money, if I learned
something. And so every time I lose money every time, you know, there’s a physical asset
that gets damaged, or I lose an employee, or whatever I try. And sometimes things get
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emotional. So I have to like take a step back and say, Well, what did I learn, right?
Hopefully, that $10,000 loss isn’t completely meaningless, because I truly believe that our
best lessons, the ones that really stick with us, are our most painful experiences. So I think
this to me to this should summarize, as a business owner, like what kind of lessons you
know how crazy can a learning space, so I’ll be honest, when I joined Microsoft, I didn’t use
Microsoft products. And I had no idea how they worked. And I was hired, the role was paid
to build a customer facing product for the freelance economy. That was it. And I was a G
Suite user. And so when I hopped into Microsoft, I had knowledge about the freelance
economy, and I knew some of the industry problems. But I had no idea how to use
Microsoft products. And so I literally hired freelancers to teach me about Microsoft
So I was in the trenches with these freelancers being like what the hell is SharePoint, and
then telling them the customer pain and collaborating with them over how to use
SharePoint? So like, if it wasn’t for freelancers? Yeah, that’s my favorite stories. Like, it
wasn’t leaders. I was like, like, I don’t want to have to teach and manage and like, Well,
guess what, like freelancers built the like, illegally? I probably can’t say that. But
freelancers were the reason I was able to understand Microsoft products and then build a
solution for it.
Yeah, that’s awesome. And it’s just a great perspective, if a business owner goes into this
relationship and says something like, hey, if nothing else, I’m gonna learn something. And
I’m gonna find somebody that can teach me something that I don’t already know. And
most entrepreneurs invest a lot in themselves. They invest a lot in courses and classes and
books, and they invest a lot of their time in listening to podcasts. And so that makes a lot
of sense. And then your other thing was, hey, how much can I lose here? entrepreneurs
were the consummate risk takers, right. And that’s a great way of looking at it. And I’ve
done that before I hired somebody at the University of Michigan to do some type of study
for spring pass in Detroit or something like that. And that’s exactly how I looked at it. And
it’s funny, because you put into words what I was doing it, I didn’t even know it.
Yeah. And let me give you one more example to just to help with the mindset of this. And
so when we think about working with freelancers, one of the major things and freelancers
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versus employees is you feel like a freelancer works with you once and they never come
back again. But the incentives are actually aligned for the freelancer to take care of you
more than any full time employee probably ever would. The reason for that is because
freelancers don’t want to have new clients every single day, freelancers are looking for
their ideal clients that they can scale across. Usually, that’s five to 15 really, really good
clients. What that means is that if they like you, they’re going to take care of you. And so
there is sort of this reset in terms of freelancers have the power, but if you are a good
client, freelancers will go to bat for you. They will the service they will give you will be out
of this world. I can promise you that one quick example. Just a couple of weeks ago, a
freelancer emailed me saying, hey, Matt, your copyright is out today and your website, you
want me to go change that? And I’m like, absolutely. What a full time employee catch
that? probably not but because this Freelancer was so invested in my personal business,
because he liked me as a client. He literally Was emailing me before I can even find that.
So that’s one major advantage is that and you know, to add on to that, too, you know, I’ve
worked with the same freelancers, my whole life, and I probably will keep working with
them for my whole life. And so the project ends, the company might change. But I’ll always
be collaborating with the same people.
I love that mindset, because it’s almost like the freelancer is, in a way, a salesperson at the
same time, right? Because they’re looking for additional work. So they’re going to be, you
know, if they’re developers or whatever, they’re going to be looking at your website, hey,
what can we do to make this better, whereas an employee on the clock may not
necessarily do that,
I get that 100% Allan, I have a form literally, that just says collab opportunities and
freelancers, whenever they want, can fill that out on projects that they would recommend I
go forward with, like, that’s how much trust I put in freelancers that they are the ones
driving, and that will scale my business.
That’s a really cool aspect of being kind of project and results driven, versus, hey, I’m
gonna go sit my butt in the chair for eight hours, and then I’m going to leave, right versus
time driven. And it was a lot of what’s going on in our economy,
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most of your employees, like they’re sitting there, and most of them, they don’t give a shit
about your company, quite frankly, right? And
what is the campaign does good or bad, they’re gonna get paid. We’re a freelancer, if the
campaign goes bad, you’re not going to hire them again. And so the incentives are just
lined up in a way that, whether it’s what’s it called selfless, or whether it’s selfish, who
knows? Who cares, because the incentives are lined up for them to take care of you.
Exactly. aligning your interest is huge. And I like to think that, you know, I have fantastic
employees, we have a great company culture, but it’s something that’s really hard. And I
can definitely see that benefit of using a freelancer, whereas it’s just more streamlined
with, hey, you perform, you get more work, you get paid more, before we shift gears, I
want to talk about the legality in just a bit before we do that, I think a lot of business
owners are scratching their head, you know, they’re not coming off the porch, so to speak
just yet, because they’re worried, hey, as soon as I find a good freelancer, who gets my
company gets what we’re trying to accomplish, I’m going to lose that person to
somebody else, or they’re not going to have enough time for me, they’re going to be
freelancing with other companies. What do you say about that?
You’re not wrong. You’re absolutely not wrong. But with that said, you probably don’t need
that person for the amount of time that you think. And you might need them for one
specific outcome. Or you might, it might be okay, that they’re working with other clients.
And so what I mean by that is, if you’re an SEO expert, they don’t need to dedicate 40
hours to one company, and they might dedicate eight hours a week to you one week, and
then, you know, 80 hours for their next client the next week. And so I think the you’re
totally right. But if we sit back and we look at what really matters, I think it comes down to
the outcomes that you want in your companies. And you’ll notice that time isn’t
necessarily coupled with results that you need, for example, you might need 80 hours of
one play this week, and then 20 hours the next week. So that would be you know, that’s
how I would use that. What’s it called worry. And you’re right, like they are going to work
for multiple people. There’s different ways to and we can talk about different ways to
what’s it called mitigate that because I mean, this is the classic thing, right? When you hire
an Accenture, they go and they do the same thing for your competitors. And they literally
just go to your competitor and they say, Hey, we did for this expression, do you want the
Traditional Employees vs. Independent CoPnatgraec1to3ros-fw2h1ich make… Transcribed by https://otter.ai
same thing and better? freelancers? Don’t do that. I can promise you that. But with that
said, the reason that it’s okay that they have other opportunities, there’s just because the
work that you need them for isn’t necessarily full time meaning 40 hours a week for 365
days a year.
All right, love it. Let’s talk about the legality. another hurdle that a lot of my listeners are
going to have to overcome is because they’re so scared that just like you were saying
about Microsoft and their issues, a lot of companies, I don’t think it’s unique to them. They
have these issues, because they misclassify people, what are some tricks? What are some
tips? What are some comments that you have about that to make sure that if you’re
hiring a freelancer, especially those that start to do more and more work for your
company? How do you make sure that they stay within that safe zone where you don’t
have to cover payroll taxes for them?
Yeah, I think the first thing is make sure that the freelancers you work with are
professional. Generally, what happens when you get in trouble is when a freelancer is
working for just you. And it’s happens a lot of times writers, especially if a writer is working
with just you and they’re an individual, and they literally work just like a full time employee.
that’s usually where the problems happen. So the first thing to look out for is when you
work with freelancers, make sure that they are a business, meaning that their brand might
be their name, but make sure that they also have other clients, that they have proper
invoicing processes. If you ask them, you know, if you finish a project and they’re asking
you about invoicing or it’s not a streamlined process, that’s a major red flag. Likewise, if
you start working together, and they don’t give you a statement of work, or a proposal
document that looks just like an agency, that’s a major red flag, so that the sort of first
step is make sure that the freelancers you work with are professional. Second thing if you
want to mitigate that though, is if you go through freelance platforms like in Upwork I
don’t want to say it to be honest but because if you’re on the team freelancing, you
usually are totally against most of the freelance marketplaces. But the second layer is if
you do want to be safe, then also go through freelance marketplaces, because those that
want to say they take away all the risk, but they are sort of a middle layer that does
mitigate significantly, a lot of the risk. So that’s the second thing. From a third thing,
though, it’s just to have a relationship with these people. I think one of the, it’s kind of like,
what is it all roads to how they’re led by good intentions. And so a lot of times, what you’ll
see is companies, specifically, decision makers will think that it’s in their best interest to
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treat you know, to not have a relationship with these freelancers. But then that’s when all
of a sudden you put yourself in tons of risk, because most freelancers, they want to have a
deep relationship with you. They want to be part of the team, they want to see your
company grow. And as long as you have an honest dialogue around, hey, like, I recognize
that there’s going there, and we work with us all the time about this, but we recognize that
there’s some significant classification and legal risk, and you just have a two way
dialogue. And they’ll say, Oh, yeah, I know, I can’t work 40 hours a week for you. I have to
prove that because one of the sniff tests is, is this employee only working for you? And so
yeah, so the first thing I’d say is make sure freelancers are professional. Second thing is
going through freelance marketplaces, especially if it’s your first time. And then the third
thing would be to have a relationship with these freelancers, in an honest dialogue about
these things. In most cases, it’s kind of like Texas, right? It’s all about good intentions,
because what the government really cares about is they want to act like they’re
protecting the worker, and they want to get their taxes. And so you know, if you can prove
that you took all the reasonable steps, their rational aim would be to not misclassify and
put the employee in a bad position. More likely not you’re in a good situation.
Love it, I think you’re spot on with that a lot of new insights there that I hadn’t thought of
specifically about them being professional, because they’ll understand, hey, I need to send
an invoice. This actually needs to look like it was a contracted job, not me just, you know,
working for this company. And I think ultimately, what it comes down to, and I mentioned
this before, is control. So if if you hire a freelancer, and you’re telling them where to work,
you’re telling them when to work, you’re telling them who they can work for, you’re telling
them you know, you’re providing the tools for their work and all of this, that’s going to look
to the IRS more like an employee than a contractor. Exactly.
I like to say to you, like tell them why don’t tell them how that’s always the biggest
problem is when employees feel like they have to tell freelancers how to work. And to be
honest, it doesn’t help you like freelancers know how to work, which kind of goes back to
what we’re talking about the porch.
Yeah, you know, what’s funny is that that’s a great way to treat employees to write you
want to tell them what to do, but not how to do it. That’s kind of one of my slogans,
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because I don’t believe in micromanaging. I try to hire people that I think add a lot of
value. And I don’t want to be telling them Okay, do ABCD, you know, and this is how you
do it like that’s micromanaging. Tell them what to do. And let them use their experience in
there know how to figure out how to do it.
And this might be helpful for your audience, too, is, you know, think about your younger
employees. And I want you to put yourself in my shoes. So when I started working with
freelancers, or technically leading freelancers, I thought I was being a good leader,
because they were like teaching me everything, like how do I say it was, it wasn’t me
thinking I was this manager telling them what to do. I literally didn’t know what they
should be doing. And so they were the ones teaching me. But then when I sat in a
traditional leadership position, I remember thinking like this is just this doesn’t make sense.
Because the younger you know, usually the younger employees are, you name it have
very, very fresh and unique and unique insights. And so when you’re working with
freelancers, there’s kind of a bit of that mindset shift of like, they have power and insights
that you just simply can’t have, you’re the best at your business, but they’re the best at
that specific skill that they do. So that’s one thing I want to make sure it gets really hyper
across is number one year younger employees can be extremely empowered by working
with freelancers. And number two, these people are experts,
you said something interesting, you said something about how freelancers aren’t
necessarily huge fans of the online marketplace, like a Fiverr or Upwork? Or where do
people find if they’re not going to one of those? Is there somewhere better that they can
find a freelancer? What does a business owner do to track somebody down? That’s
talented? Yeah, best is relationships.
So simply search what you’re looking for. And most likely, there’s a freelancer who has
existing brand positioning, you might think that they’re an agency. So whether it’s
LinkedIn, or whether it’s even just Google, most likely, if you’re searching things like
content marketing, or whatever it is that you’re already interested in, the person who’s
writing that might be a freelancer, and more times than not, so that’s usually what
happens. Second thing is always relationships, like I said, so if you you know, what always
happen within a large organization in terms of how freelancing would scale is someone
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would have say, a great presentation. And another person would say, you know, hey, Judy,
how did you have that awesome presentation, they’d say, Oh, I met this freelancer. So the
second you know, place to find them would be looking to your existing relationship or to
your existing networks, third, freelance marketplaces, we can talk about the good, the
bad, but they are from a client perspective, they’re not bad, you’re gonna find really, really
good talent. One of the major problems we have in the freelance industry is just that
there’s not enough clients for the amount of freelancers that are available, which means
that the client does it in a little bit of a position of power. But yeah, that’s a deeper
discussion. Love it,
you said something to the effect of how working in an office does not make sense in terms
of efficiency. My guess is a lot of my listeners think the opposite of that think, hey,
somebody’s going to be better. If they’re inside an office, their dogs not distracting them.
There’s, you know, the psychological aspect of moving physically from home or gym or
whatever, to your workplace. All right, I need you to convince me otherwise, right?
convince me of that statement that you made.
Let’s just do a blind test. Let’s both hire five people, you stick them in an office, and I’ll
have my elastic team. And let’s see who moves faster. I’m gonna sound like a total a hole
right now. But sort of my example was, within Microsoft, we scaled up within a year, we
ideated, we brought a product to market, we scaled to hit our numbers that would get
increased investment. Within one year, I thought that was normal. Because I was used to
working with freelancers, I then learned Holy crap, I could have sat back and probably
took in five years. So any business owner out there, here’s the challenge, if we want to go
office versus remote distributed teams, more than happy to have a nice speeds, but
flexibility scalability challenge. Also, I mean, one other example, the company I run right
now, I mean, we’re just able to move so fast, because we don’t have a lot of the
traditional, whether it’s bureaucratic, or whatever it is, a lot of those things that get in the
way just aren’t there. And especially the bureaucracy, but yeah, no, I, let’s do it. Let’s take
a five person f5 team challenge and see who wins.
Yeah, and I think it makes sense from an enjoyability standpoint, right? I think people
when they’re happy, definitely when they’re positive, they perform better, when they’re
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optimistic about what they’re doing, when, when they enjoy their work environment,
they’re just gonna do better work, you know, they’re not sitting there thinking about how
crappy it is that, you know, they had a 15 minute commute in traffic, right, they’re able to
just focus on their work. So from that standpoint, makes sense. Here’s one thing that I’d be
so open to having an open this is where like, the logic is, I’ve
yet to really see it work really well, is within service organizations where it’s tough to have
like measurable outcomes. And so if you think about something like auditing, where it’s
really, really tough to measure performance from an outcome basis, I haven’t seen it work
to a scenario. So I do want to make sure it’s not all sunshine and rainbows, this can come
back to bite you if it’s at least from what I’ve seen. If you’re all of a sudden telling people
that don’t necessarily have a number that they have to hit, you can do whatever you
want. But with that said, if you can measure it, I’ve seen remote sort of freelancing
environments work better.
Gotcha. And then also with service businesses and other industries, which I think you’re
right about. There’s this control aspect, right? You want them to be in your vehicle with
your decals, and you want them to show up on the time that you scheduled with the
customer. And you want them to wear your uniform, and you want them to use the
products that you know what I mean. And so there’s definitely some sticky issues there as
Totally like b2b sales might be one that I’m like, ooh, not necessarily a good idea right
now, B to C sales. Great, because you don’t always have to go on site, there’s probably
less interaction. But now that’s a good point.
Gotcha. As we’re wrapping up here, Matthew, let’s talk about Let me tell you a quick story.
I was chatting with somebody this morning. And he was talking about how he wants to
start a company and talking to me about his business ambitions and things like that. Let’s
talk just for a minute about the business actually being the freelancer,
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How does some of this listen to me? Let’s say they have a design skill, right? They’re a
designer? What’s the best way for them to create a business out of that?
Great question. So there’s two secret ingredients. The first is going to be what product Do
you have, and who are the people that are helping you scale? When I say product, I don’t
mean necessarily building a software product or building something like a hammer or a
car or something like that matter. What I mean is really, really, really clearly scoping out
the outcomes that you can offer. So let’s say if you’re a designer, that’s a great example.
It’s going to cost $500 per infographic, it’s going to cost $200 per PowerPoint slide. So
that’s the first thing is really, really clearly scoping out what outcomes you can provide. I
like to say usually have two to five and make sure there’s a scale in that. So meaning have
a low one have a medium have a high one. The goal is eventually to have something
really high like say a $50,000 website if you’re a designer or $150,000 digital experience
or something like that manner. The second thing is people So as you all know, as business
owners, the way you scale is not by working harder, it’s having the right people in the right
place. And so it’s no different if you’re a freelance business, if you want to do little
individual gigs, meaning, say 30 articles a month, or 10 articles a month, then Okay,
maybe you can do it on your own. But if you’re a designer, and you want to be making
between 100 to 250, up to a million dollars a year, you’re going to have to go beyond
yourself, meaning you’re not going to have just a designer, you’re going to go when a full
website project. And in that website project, you’re going to have a content writer, you’re
going to have an SEO expert, you’re gonna have a front end developer and potentially a
back end developer. So in terms of how to scale your freelance business, the two sort of
secrets to scale are number one, having your product and then number two, having your
love it, because I see this issue with somebody that they would be a quote unquote,
technician, right, the E myth by Michael Gerber talks about it where somebody has a skill,
and then they open, you know, hang a shingle, offering that skill as a product or service.
Traditional Employees vs. Independent CoPnatgraec1to9ros-fw2h1ich make… Transcribed by https://otter.ai
And then they find that they basically just created a job for themselves, right? In order to
have a business, you have to continually replace yourself, and you have to leverage your
time, which if you have a year, this fantastic designer, it might be tough to do. So I love
that you mentioned that, you know, you got to get those people in there that actually
helped make the business.
Yeah. And the beauty of you know, because this has been happening forever, right? I
mean, the freelance economy is nothing new. Technically, the word freelance comes back
to the mercenaries when they would hire knights, they would be known as freelancers. But
so in terms of what’s different about the freelance economy, and today, and specifically
digital and remote tools, is that prior, if you wanted to go build up your own sort of
individual business, as an individual and service business, you’d have to be an agency.
And you would end up becoming a president or founder or director of your own company,
and you’d spend most of your time pitching and then basically just doing operations,
because of a freelance business, because of the remote tools available and collaboration
tools, you can still stay the best designer and spend 50 to 90% of your time on the design,
but then augment through fellow freelancers. And as we kind of talked about before,
hopefully, you know by now you’re so sick of me hearing me talk about outcomes. But the
big difference is instead of being an agency, where you have to measure people’s actual
input in terms of caring about how much time they’ve worked, instead, you’ll say, hey,
Tracy, you’re doing the website content. It’s due in two weeks, talk to you in two weeks.
Versus Hey, Tracy, what did you do today? Hey, Tracy, what are you doing tomorrow? So
that’s one of the fundamental differences is that you can now scale up your freelance
business without having to become one of those agency owners that’s stuck just herding
Sounds good. Matthew, for my listeners that want more information. How do they contact
Yeah, contact me on LinkedIn. Then from there, you’ll see the book, which is human cloud
book, you can go to human cloud book.com. And then if you want to take the plunge in
terms of scaling up your freelance business, go to venture l that IO.
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Alright, so sounds good. Thanks for joining us today, Matthew. As a pleasure. I think that
especially with what happened with COVID. Even if a lot of these businesses mine
included aren’t using freelancers, which I imagine we’ll all be using them more. But we’re
definitely going to be treating employees more like freelancers. And so it’s great to learn
all these aspects of it and get to the point where we’re accepting it. So appreciate your
Thank you so much. I don’t that’s music to my ears. The whole treating employees like
Freelancer so hell yes, thank you.
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