So you have written your business plan, branded your dream startup, and scoured the market for clients. You have pitched your services to every C-Suite executive you can get in front of and exhausted all your relationships, but unfortunately you have yet to secure your first account. Don't fret. You are in good company. In fact, many entrepreneurs consistently face sales challenges in the first few years.
But instead of pitching your business service (rather its IT, consulting, assembly or etc.) have you ever considered pitching yourself as an independent contractor to your potential client instead? Think about it for a minute. Companies can save money (zero or limited expenses for office space, equipment, worker's compensation insurance, training, etc.), there is less bureaucracy to get approved, and typically the company has an established budget for contractors.
If you think this could work for your line of business, continue reading.
In 2014, Field Nation, an online freelance marketplace conducted a The New Face of the American Workforce survey on how independent service providers view themselves. The report concluded 52 percent of those surveyed view themselves as entrepreneurs and small business owners. One could argue these results demonstrate that independent contractors view themselves as capable and competent to blaze their own trail in the new economy of self-determinism, similar to that of an entrepreneur.
The general rule of thumb defined by the IRS is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. Sounds like an entrepreneur to me.
Below are two common rules to help determine if you qualify as an independent contractor.
1. Financial Control
Financial control refers to facts that show whether or not the business has the right to control the economic aspects of the worker's job.These include things like how work is paid, whether expenses are reimbursed, and who provides tools/suppliers.
Do you have a significant investment in the equipment you use while working for someone else? Are there fixed ongoing costs that are incurred regardless of whether work is currently being performed? Is there an opportunity to make a profit or loss?
If you answered yes to those questions, you probably qualify as an independent contractor.
2. Type of Relationship
Type of relationship refers to how the worker and business perceive their relationship to each other. The IRS is not required to follow a contract stating that the worker is an independent contractor. How the parties work together determines whether the worker is an independent contractor.
If there are no are employee type benefits--like pension plans, insurance, vacation pay, sick days, and disability insurance--and you're hired for a specific project or period, you qualify as an independent contractor.
Businesses must weigh all these factors when determining whether a worker is an independent contractor. If you're anxious about your next sell, don't necessarily shy away from going the independent contractor route. Remember, everything is negotiable.