There is a growing shift to self-employment — more people are trading in their W-2 forms for 1099s.
Some 57.3 million Americans, or 36% of the workforce, are freelancing and contributing approximately $1.4 trillion annually to the economy, according to a research study by Upwork and the Freelancers Union titled “Freelancing in America: 2017.” The report found that the freelance workforce grew three times as fast as the overall workforce. Freelancers will make up the majority of America’s workforce by 2027, based on growth rates seen in the past year. Meanwhile, the Internal Revenue Service shows sole proprietorship registrations growing at an average rate of 1.6% a year (not counting the 2008 financial crisis), and rising one basis point every year for the past three years ending 2016 (the latest year that data is available).
As the ranks of the self-employed swell there is a need for more services, everything from credit-card processing to tax filing, that help these individuals manage their own businesses. And companies like Intuit, Salesforce and Square are poised to benefit from this need.
Intuit, Inc. (INTU) has been making an effort to target the self-employed for the past four years. The company noticed customers of its Mint app wanting to separate personal expenses from their business expenses in 2013, according to Jeremy Sulzmann, director of QuickBooks Self-Employed at Intuit. So, in 2014, the firm launched QuickBooks Self-Employed.
“We decided to create a product to help people keep better track of those expenses, help them remain compliant and save on taxes,” said Sulzmann. “We do see that there’s a growing section of the market of self-employed and we add a ton of value to them.”
QuickBooks Self-Employed, one of Intuit’s fastest-growing products, now has more than 700,000 users. Intuit’s small business and self-employed business segment, which has a customer base of 5 million, recently posted quarterly revenue growth of 18% from a year ago, Intuit highlighted the business segment’s bump in its 2018 fiscal fourth quarter earnings release. Intuit estimates the self-employed workforce in the U.S. will grow to 43% by 2020.
“Our biggest competition is people doing nothing at all, like keeping their receipts in a shoebox,” said Sulzmann. “It’s those people who don’t know there’s a tool out there that can help them be more compliant, efficient and save money.”
Earlier this year Salesforce, Inc. (CRM) launched Salesforce Essentials, geared to small businesses. It was created to help small business owners become more productive and to help them grow faster, according to Meredith Schmidt, executive vice president and general manager of Salesforce Essentials and SMB.
“It is uniquely tailored for small businesses, and helps them save time with apps that are easy to set up and use.” said Schmidt. Salesforce Essentials provides small business owners access to its premium apps like Trailhead, Einstein AI, Lightning and AppExchange, that are offered to its bigger corporate clients.
In a testimonial blog post, Y’vonne Ormond, who left a 20-year career as a software engineer in enterprise-size organizations to start her own technology consulting firm, 5P Consulting, said Salesforce Essentials increased her company’s productivity tenfold. “It has given us a cost-effective way to operate like a larger organization at the scale of a small business,” she said.
Square, Inc. (SQ) provides hardware and software that turns mobile phones and tablets into point-of-sales systems. In 2017, Square was one of the top payment tool apps for freelancers, according to Medium. The company’s second-quarter revenue for its hardware (Square Register, Square Stand and Square Reader) was up 78% from the same period a year ago.
“We’re empowering the electrician to send invoices, setting up the food truck with a delivery option, helping the clothing boutique pay its employees, and giving the coffee chain capital for a second, third, and fourth location,” said Square on its homepage.
Square has also partnered with Intuit to better cater to the self-employed. Transactions conducted on Square are automatically synchronized with Intuit’s QuickBooks so there’s no need for users to input data and processing fees can be viewed separately.
“Square is complementary to serve Intuit’s customers,” said Intuit’s Sulzmann. “We work in partnership with the whole ecosystem to empower the self-employed workers.”
Maylan Studart is a reporter for Yahoo Finance.