Imagine that, one day, you wake up to find the freelance platform you rely on to make a living has simply disappeared. Your work history, clients, portfolio, contracts, and reviews are gone, just like that. What now?
Fiverr, Upwork, and similar platforms may seem like titanic institutions that are too big to fail, but what if they did? What would that mean for the countless freelancers who use these platforms as their primary sources of income? What would it mean for the organizations who depend on these platforms as sources of affordable labor?
Even something much smaller than total collapse — even something as simple as an increase in platform fees — could spell disaster for freelancers.
These scenarios are far from outlandish. Fiverr announced in May that it would go public in the US. In its filing, the company revealed it had lost more than $36 million in 2018. Freelancers and the organizations that hire them should pay close attention to this news. It simply is not good business to rely too heavily on a third-party business for income or talent acquisition. Tying your business to the fortunes of another is inherently risky.
Making It in the Marketplace
Freelance marketplaces are excellent ways for independent businesses to get some seed money without selling equity. Freelancers and burgeoning entrepreneurs can use these platforms to quickly connect with clients and earn some revenue, without worrying about marketing, sales, and all the other concerns that typically surround earning business for a new endeavor. On the flip side, these platforms can also quickly connect existing organizations with freelance and contract workers, making it easier for companies to get the talent they need for cheap.
However, people on both sides of the freelance equation need to be aware of the limits of this model. Marketplaces have their own agendas, terms, and conditions. They make money on your work and your hiring. That’s the trade-off freelancers and employers have to make when they leverage these platforms. Freelancers and employers that act outside of a platform’s terms and conditions — even if they don’t mean to — might find themselves on the receiving end of warnings, penalties, or even account closures. These can be particularly damaging to freelancers who use the marketplace as their main or only source of income. Probation or deletion means no work and no income, which spells disaster for any business.
Why Diversification Is Healthy
To be stable, any business needs multiple income streams. This is especially true for freelancers, who operate in an inherently tumultuous environment. Freelancers should take note of the commonly repeated maxim that the wealthiest people have at least seven income streams. The exact number may not be accurate, but the gist of it is. Wealthy people stay wealthy because, even if one of their income streams fails, they can rely on the other streams to stay afloat.
For a freelancer, diversification means, at the very least, having accounts on multiple freelance marketplaces. Not only does this platform diversification protect you from the risks of becoming too reliant on any one marketplace, but it should also lead to a stronger online presence. If you have profiles on a variety of marketplaces, you make it easier for people in need of your services to find you.
To go one step further, freelancers should also consider investing in their own marketing efforts, rather than only using marketplaces to gain visibility. This may include hiring a marketer, if you have the budget. Either way, the point is to start driving money directly to yourself without a mediating marketplace. In the long run, this will allow a freelancer to build a fully functional empire of their own, and they’ll only have to use marketplaces as secondary sources of income.
The same goes for the organizations that use these marketplaces to connect with freelancers and contractors. Start building your own network of reliable freelance talent. That way, if any of these marketplaces go under, you won’t be left in the lurch.
Additionally, if your freelance business already has a solid network of customers and contacts outside the marketplace, it may be time to start thinking about growth acceleration. Investors are always looking for the next big thing to fund. If you deliver consistently great results and nail your branding, you might just be able to attract the funding you need to bring your business to the next level. Note, too, that attracting investors doesn’t just bring money — it also brings outsider, expert knowledge. These are exactly the things you need if you want to grow independently wealthy from your freelance career.
Any business must deal with factors beyond its control — known and unknown — that will impact its bottom line. Seasonal high and lows, economic downturns, negative consumer attitudes: Whatever the influences may be, every freelancer needs to be aware of how outside forces can affect their long-term success.
This is why tying your efforts to a single marketplace is not only risky, but simply bad business. An outside force should not be the entire foundation on which your freelance business is built. Bad things happen, and taking time now to set up multiple income streams will help you survive when those hardships inevitably arise.
For a successful long-term freelancing career, remember these things: Hedge your bets with multiple income streams, run accounts on several marketplaces, invest in your own independent sales and marketing, and consider expanding your business when the time is right. Fixing marketplace overreliance is not hard to do, but overcoming the failure of your only income stream is.
Rick Mac Gillis is CEO and founder of Dragon Cloud, a service connecting high-quality clients with high-end software engineers.