Growth-Envy: How SMBs Are Beating the Big Boys in a Borderless Economy

With a few years of general economic malaise now behind us, small and large companies alike have learned to run leaner businesses. Yet, for small and midsize businesses [SMBs] in particular, trimming the fat has proved especially difficult as they look to figure out how to grow their business without spending more on the necessities for growth.

This dilemma comes into play particularly when trying to expand the employee roster and a new trend has emerged for SMBs with growth-envy: long-term contracting. Recent research reveals that SMBs regularly turn to long-term engagements as a growth strategy. In fact, according to a recent SMB Trend Report [1], the number of employers hiring long-term contractors on an ongoing basis has increased 800% since 2008. Furthermore, contractor assignments lasting longer than six months have risen by 540% during the same time period. This shift from traditional hiring practices to the use of long-term contractors has now become the new “normal” for many SMBs.

Why Long-Term Contracting?

Contracting is not a new concept, temp work and short-term contracting are two practices with long histories in employment practice. While both are temporary solutions to help a company’s production, neither presents a long-term solution to building out a reliable, cohesive team. In the end, their temporary tenure results in a vacant spot needing to be refilled or converted into to a traditional, full-time hire.

Without a doubt, hiring full-time employees offers a number of benefits temp workers and short-term contractors cannot fulfill. But it also presents a large investment: recruiters’ fees, background checks and drug tests, medical and dental insurance and outfitting additional office space. According to industry experts, on average it costs a company $4,000-$5,000 to recruit and hire one full-time employee. However, by opting to use long-term contractors, SMBs bypass these expenses, virtually eliminating overhead from human resources.

The flexibility of long-term contracting also enables employers to tap into specific expertise on demand. Recent advancements in technology provide SMBs with easy access to the global talent pool by enabling remote hiring, management and payment of contractors.

Long-Term Contracting as a Career

The long-term contracting trend not only helps SMBs meet their budgets while growing, it also provides new career opportunities for professionals of all levels.

Today’s SMBs are looking to long-term contractors to fill a wide spectrum of strategic positions in their companies in areas like graphic design, marketing, mobile application development, as well as in core management roles. In all cases, schedule flexibility, more career control and the availability of work from anywhere makes long-term contracting an attractive choice for professionals across industries. Not to mention there are tax benefits to long-term contracting: Some utilities, mortgage and expenses as a home office may be deducted from federal income taxes each year.

Often, contractors have developed a career by simply marketing their services to one or more clients and positioning themselves as a niche expert. Others have built their own business by subcontracting work to other qualified contractors, delivering a range of services and managed solutions. In fact, many companies within the services industry have traditionally started as contractor-based models (for example, a PR firm or ad agency founder who uses contractors to ramp staff up and down relative to the number of clients they have at any given time).

Here to Stay

Some of the most effective SMBs seem to have discovered a balance of permanent staff and long-term contractors to achieve their growth goals during the economic downturn. Long-term contractors offer employers a low-risk and efficient means to quickly scale their businesses and we should expect it to continue long after the economy turns around.

[1]oDesk SMB Trend Report, February 2011

Gary Swart is CEO of oDesk, the largest and fastest-growing global employment platform. He has a passion for helping businesses thrive in a borderless economy, and speaks regularly on best practices for remote team management, the impact of the on-demand workforce and the future of work. Gary has more than 17 years of leadership experience in the enterprise software market built during his tenure at Intellibank, IBM and Pure Software. Gary holds a bachelor’s degree in Business Administration from the University of Maryland.