Gig Worker, Freelancer, Microbusiness, Small Business: What’s the Difference and Why Does it Matter
Most small businesses tend to get lumped together as the 1099 or Gig Economy. But their size, revenue, and legal structures can be vastly different.
The U.S. Small Business Administration offers a Table of Small Business Size Standards, which allows for varying numbers of employees and maximum revenue, depending on the industry.
According to the chart, some businesses can have as many as 1,500 employees or bring in over $40 million in annual revenue and still be considered small.
Conversely, an independent contractor or a real estate agent making less than $100,000 a year is also a small business.
According to the U.S. Census Bureau, the majority of small businesses (54%) in the U.S. had fewer than five employees in 2018. As the number of independent and gig workers (the 1099ers) has surged since the start of the pandemic, that percentage is now much higher.
Whether a business consists of an independent contractor, a gig worker, a single-location coffee shop with three employees, or a granola manufacturer with 100 employees, one common factor among them is the need for financial tools to easily invoice, track cash flow, categorize business expenses, and create useful reports.
But they don’t all need the same tools. Savvy fintech platforms understand that not all small businesses can be served by a one-size-fits-all financial toolset. They recognize the nuances that differentiate a gig worker and a freelancer or a microbusiness and a small factory:
Gig workers: While not technically a small business, gig workers, who work on demand for one or more businesses, are taxed as self-employed and need some level of financial tools similar to true small businesses.
These folks generally freelance through a platform or marketplace. Think of services like TaskRabbit, Uber, or Instacart. While they’re paid through these platforms, gig workers are paid as independent contractors who receive a 1099 at the end of the year and must manage their taxes and possibly other business expenses on their own. These people are concerned with cash flow, but not P&L. They need the basics in terms of financial tools.
Independent contractors or freelancers: A little closer to being a true small business, independent contractors and freelancers send invoices to their customers. They are writers, software developers, photographers, and much more. Most are not technically small businesses, but some can be, depending on how their business is structured.
Some of these folks can work as employees for other businesses yet still have to track and pay taxes as self-employed individuals. Like the gig worker, they need to be able to track expenses and cash flow, but independent contractors also need to be able to send out invoices and collect payments on their own.
Microbusinesses: This is a gray area in the realm of small business, and the definition can be subjective. Microbusinesses are a subset of small businesses and are estimated to make up nearly 75% of all small businesses in the United States.
These can be a single-location coffee shop, a food truck, or someone selling products or services from their home, yet they all have fewer than ten employees and usually aren’t looking to expand. Freelancers and independent contractors are often considered a subset of microbusinesses.
The financial tools these businesses need are perhaps a bit more complex than what a gig worker would need, but not the often expensive packages big banks offer their business customers.
Small businesses: A “true” small business, which, as previously stated, could have as many as 1,500 employees, definitely has more complex needs than the subsets above. A small business is generally aiming to grow and will monitor P&L carefully. They have a much greater need for reporting and may need to track expenses for tens or hundreds of people.
However, like independent contractors and microbusinesses, the standard small business is still very sensitive to costs and how best to invest their hard-earned revenue for future growth.
A commonality for all small businesses, freelancers, and gig workers is that the individuals involved are almost always strapped for time and cash. They are hustling to make sales, manage cash flow, and plan for growth. They need tools that simplify tracking, billing, reporting, and all other aspects of managing their finances, but they don’t all need the same level of sophistication in their toolset.
For any business, the financial tools they use are extremely important. Apps that track cash flow and expenses and connect to other financial tools save time and money. Small businesses, microbusinesses, independent workers, and gig workers all need financial tools that simplify finances, are low cost, and require minimal resources.
We engineered the Hurdlr API to allow fintechs that serve small businesses to broaden the types of tools they can offer their customers, so all small business types can have the full suite of tools they need to manage their businesses on one platform. Because what all small businesses need is a simplification of financial processes so they can spend more time running and growing their business.
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Gig Economy Jobs Like Uber
As an independent contractor, driving for an on demand economy company gives you the ability make money with your extra time. Drive during your lunch break, at night, or during busy weekends – it’s up to you. However, these companies don’t only provide taxi-style services; companies like HopSkipDrive enable the driver to chauffeur kids to their activities around town, similar to a nanny. Other rideshare companies allow the individual to use their vehicle to make extra cash by renting it out or sharing a ride to work. If you have a car, then there’s an on demand economy opportunity out there for you.
Gig Economy Sites Like Airbnb
Make money off renting out your home, car, boat, tools, or almost anything with these sites like Airbnb. If you are out of town, make money while you are away. If you have free space in a home you live in, you can leverage that too. You can also choose specifically who you would like to rent to – say, a college sports fan. Check these hosting companies out below.
Gig Economy Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
Gig Economy Jobs for Freelancers
Freelancing allows individuals to work wherever they want, whenever they want, with whoever they want. Freelance occupations range from bloggers, lawyers, chefs, stylists, caregivers, techies, and many more. If you like the freedom to travel and be your own boss, check out the companies below.
Rideshare Companies With Jobs Like Uber
As an independent contractor, driving for an on demand economy company gives you the ability make money with your extra time. Drive during your lunch break, at night, or during busy weekends – it’s up to you. However, these companies don’t only provide taxi-style services; companies like HopSkipDrive enable the driver to chauffeur kids to their activities around town, similar to a nanny. Other rideshare companies allow the individual to use their vehicle to make extra cash by renting it out or sharing a ride to work. If you have a car, then there’s an on demand economy opportunity out there for you.
Sites Like Airbnb
Make money off renting out your home, car, boat, tools, or almost anything with these sites like Airbnb. If you are out of town, make money while you are away. If you have free space in a home you live in, you can leverage that too. You can also choose specifically who you would like to rent to – say, a college sports fan. Check these hosting companies out below.
Delivery Jobs Like Postmates
Delivery jobs vary in their specific functions, but they all allow independent contractors like yourself to travel, create a flexible schedule, and deliver goods (as opposed to passengers). Jobs like Postmates give you the ability to work short gigs during times like your lunch break or at night, while others like Roadie allow you to use space in your car for somewhere you are already going to deliver a package.
Unskilled On Demand Jobs
If you’re looking to help someone out and make some quick cash, then this section is for you. These companies function as automatic lead generators: instead of finding gigs by yourself, these companies give you the gigs. If you enjoy working with people and assisting them with their problems, many of the companies listed allow you to do just that.
Freelance On Demand Jobs
Freelancing allows individuals to work wherever they want, whenever they want, with whoever they want. Freelance occupations range from bloggers, lawyers, chefs, stylits, caregivers, techies, and many more. If you like the freedom to travel and be your own boss, check out the companies below.
