Freelancing is a highly beneficial way to offer your expertise and supplement your income. If you scale successfully, you can even replace your day job with a full-time freelancing gig and start working for yourself with the perks of being your own boss and having flexible hours. According to a 2014 study by the freelancers union, over 53 million Americans in the workforce are now freelancing. According to a study by Intuit, in 2020, 40 percent of the workforce will be freelancers.

As I work to make a profit from my own business projects, I can see why a small business owner would hire freelancers. I can piecemeal order projects by highly talented people at sometimes a fraction of the cost, without paying payroll taxes and shedding some of the liability that goes with hiring full-time employees.

Of course, hiring freelancers comes with risk as well.

More Freelancers = Sifting Through the Talent Pool

With an increase in the number of freelancers, as well as large numbers of available overseas workers, you may be tempted to hire as rates may be lower for certain segments of the talent pool. This means risking poor quality work from folks who aren't as talented. The more highly skilled talent might also be able to charge more as they may be in higher demand.

For example, it may be tempting to hire 20 freelancers for $5 each on Elance, but you may end up getting 20 poor quality pieces of work back. Although this is only $100 and a few hours of your time, it also means going back to the drawing board and having to find the actual talent that will produce the work you're looking for. Hours and dollars will be wasted on a lot of these cheap freelancers. The $5 market may look rewarding, but be careful it doesn't add inefficiencies on your end.

Many small business owners can tell stories of how they got burned on middle market freelancers who produced excellent work in their portfolio, but didn't communicate particularly well, causing everyone to spend weeks or months just to get subpar results. This of course leads to missing crucial deadlines at the worst, or at the least, just wasting your time and money.

Here are a few reputable places that can help you find freelancers on the cheap, though you'll have sift a little:

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The Need to Manage Freelancers Wisely

Freelancers are not employees; they are independent consultants who can work wherever and whenever they want. Your best bet as a small business owner is to manage them by communicating effectively and by setting consistent deadlines. Attempt to outline the rules of your freelance relationship ahead of time through legal documents, and invest in project management software that may help with communication.

If you're a freelancer, it's important to be communicative and understand the needs of the client upfront, and get an idea of their vision. Make a strong effort to understand and be understood. When miscommunication occurs, you can easily lose a job or get a poor rating on whatever site or system you're advertising your services.

As we move into 2016, more and more software platforms will give startups the ability to manage freelancers. Many will will be turnkey solutions. SaaS products like Basecamp allow the project manager to create a task list, and allow both the company and freelancer to communicate through shared notes, documents, and deadlines. I highly recommend creating processes for your freelancers, and being very clear on the objective and deadlines. This guide on invoicing freelancers has proved to be helpful.

There are also freelance management systems (FMS) that help you find as well as oversee freelancers. Work Market is an example of an FMS that helps find, verify, onboard, track, and keep companies compliant when it comes to an on-demand workforce. It also allows the community to rate work. Most of their clients are enterprise level, so if you're a freelancer, it could be an opportunity to get in front of larger companies.

Risk and Litigation Issues

Perhaps the worst thing you can do is manage freelancers as if they were actual employees. This opens you up for a potential lawsuit in which you can owe back wages, and it can be a nightmare for any employer. Professional Employer Organizations like Trinet are actually a great resource for managing this risk. They take on the liability and give small businesses a dedicated HR person to advise on whether or not your startup is actually starting to look like more of an employer. I usually advise looking into using something like this so your company manages risk and attracts and retains employees by leveraging benefits packages.

This is one of the biggest legal traps for startups who often hire extra engineers to hit deadlines - they start to assign hours and manage 1099 freelancers as employees. It's a common mistake, and one that can lead to legal troubles down the line.

Co-Working Spaces will Be the Norm

As I've reported before in this space, every metropolitan area is seeing the growth of co-working spaces, and I definitely see the rise of these scalable networking factories. These environments help to foster startup success and best practices. I predict there will be not only more co-working spaces, but a variety offering benefits some of the bigger corporations offer - lunches, massages, healthy snacks, yoga, and daycare. If freelancers are willing to pay, they can work side by side with or even offer their services to the many startups and small businesses that call those spaces home.

Where Its Headed

Much is being being written these days about how millennials want to be their own boss and give their personal passions a try in business. With telecommunications options widening and expertise narrowing, freelancing will continue to be on the rise. There will be an increasing trend towards finding management tools that help small business owners find the right freelancers, communicate with them, and reduce risk.

I personally think PEO's will grow along with co-working spaces. PEO's will help startups manage the important differences between employee and freelancers, in order to avoid liability issues. Co-working spaces will increasingly provide a breeding ground for relationships between startups and freelancers that could prove to be very fruitful for both sides.

Editor's Note: Looking for PEO - Employee Leasing for your company? If you would like information to help you choose the one that's right for you, use the questionnaire below to have our partner, BuyerZone, provide you with information for free:

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