Using Freelance Staff to Build Your Agency with Shahar Erez

One of the most frequent conversations I'm having in my agency group and with my private coaching clients is around talent or quite frankly the lack of talent right now. And therefore there is a need for us to find more creative ways of finding good people. And of course one of those ways is finding great freelancers. So that's the topic for today's podcast and I am really excited to be joined by Shaharazz, who is the co founder and CEO of Stoke, an on demand talent platform empowering companies to adopt a hybrid workforce model that scales as quickly and efficiently as they needed. Now in 2021, Stoke was acquired by Fiverr for $110 million just 15 months after coming out of stealth mode. So that is super impressive and I'm really interested to dig into that a little bit later. I'm Rob Da Costa and this is the Agency Accelerator podcast. As someone who has stood in your having started, grown and sold my own agency, I know just how it feels during the ups and the downs of agency life. So this podcast aims to ease your journey just a little by sharing mine and my guests experiences and advice as you navigate your way to growing a profitable, sustainable and enjoyable business. Welcome to the show Shahar. I'd love to hear your view on the state of the market for good creative talent right now in 2022.

First of all, thanks for having me Rob. It's great to be here. I think the state of talent when we founded the company back in 2019. Sorry, we did the research in 2018 it was already evident that there is a significant shift happening in the market and we're transitioning from kind of searching for conceptually employees or long term engagement to more skilled based engagement. And we kind of got into kind of the early 2020 with kind of a perfect storm. There were multiple forces shaping what we're now seeing in the talent market. First and foremost, companies and agencies need to adapt faster. The type of skills that companies and agencies need is constantly changing. So if you go back, marketing agencies, media agencies, 15 years ago were looking for online marketing was, was a function. No one's looking for online marketing anymore, right? Online marketing is like 15, 20 different people because you, you're. We're almost in an era of sub residencies right? Everyone is a specialist in, you know, in LinkedIn or Facebook or Instagram or Tiktoks like or Videograph or content, right. It's like there's so many different skill set. You don't want one stop shop. One person that does everything and mediocre and Everything you want, great people, each of these. So that was a significant trend. Number two again, pace of change. And on the other end, on, on the talent side, if you will, first and foremost, people didn't want full time long term engagement anymore. So in a research in 2018 we already saw that 45% of Gen Z. Gen Z for those who don't know, born 95 to 2005, sorry, 45% of them in the United States, high schoolers back then said they will never take a traditional job. They want flexibility, they want a different social contract. Employee tenure has dropped to an all time low, below two years on average, sticking to a single company. And third, people again wanted this flexibility in remote work. Even before COVID Right. We started seeing this trend of digital nomads before COVID Obviously Covid has accelerated, but it happened before. And so I think we're, we're kind of in this significant workforce revolution, probably the greatest that we've seen since the industrial revolution over 100 years ago in which employment is skill based, shorter term project based, and that should lead to a lot of significant decisions and how you build an organizational DNA that can cope with these changes. And so generally speaking, yes, there's lack of talent, but not really as bad as most think about it. I just think that most people are still trying to find talent the way we thought of talent five years ago and not how talent is evolved to become.

Yeah, I mean I think that's a really good observation. Do you see this trend? I guess the answer is probably yes to this, but do you see this trend continuing in the next few years?

So a forecasts are again pre Covid that by 2030, 60% of workforce will be freelancers. There is researchers out there that forecasted this before. The trend has been continuing for the past 20 years. So it's not just the last two, three years it's been going on. By the way, if you think about it, this is how people used to work. Before 100 years, people worked. If you showed up for work, you got paid the same day. If you didn't show up to work, you didn't get paid. And somewhere in the 1920s, around the great Recession, countries have realized that if there is a recession or anything, they can't support their citizens. So they legislated Social Security and things like that to be able to pay. And then what we now call employment has emerged. Now we're back in a world where people want to get paid for what they know, people want to work remotely, people want to have multiple Employers, um, more work can be done remotely so you don't have to show up to a specific location. I can, I can work for a company that's a block away and then provide consulting services to a company in the United States at night and tomorrow morning spend some time with a different company. So this diversification is happening. Is it going to continue? Yes, I think one of the biggest challenges, and by the way we see it with small companies, agencies are kind of built on that model, right? You have a project, you need people. You don't have a project, you don't want to pay salaries because it's like you're a margin based business. I think the biggest gap right now is how companies are able to evolve because the largest employer obviously are corporates and they're still having a hard time going through this shift because, you know, I'm 75, born, I'm 46 years old and I got into the industry in 2000, 2001 and I was trained throughout my career how to hire full time employees. This is what I was trained to do. How to interview them, how to qualify them, how to do performance reviews, how to give them merit increases. This is what I knew. Now when someone tells me, well, start working with freelancer, it's like how, where do I find them, how do I interview them, how do I know they're great? How do I know they're going to stick around? So I think there is a mental shift. It's a lot easier for millennials and Gen Zs people like us. It's a little harder, I guess.

Yeah, I'm a lot, I'm a lot older than you. I'm a bit, just about a baby boomer. I think on the cusp of X gen and baby boomer, I think it's a really good shout to say that perhaps there isn't a lack of talent, it's the way people are recruiting. I think that's a really good, really good observation. So tell me, how should people be recruiting now? Given that they're telling me, hey Rob, we're really struggling to find good people, what should I be telling them?

Well, I think there's a couple elements to that equation. First of all, the biggest barrier that we're seeing in 90% of companies that we interact with, first and foremost is mindset. Open up to that. And by the way, most people when we talk to them are kind of say, well, I'm looking for full time employee. Well, if you find a freelancer, that's okay as well. It's like no, it's like you got to treat it as a strategic element of the company to start building a flexible backbone and, and what we call a talent cloud. Start pulling in resources constantly. Be recruiting. You know, when I was, when you're in a growth stage company and there's enough cash in the bank, there's this element. Always be recruiting. Always be recruiting for funds. Always be recruiting for great people. Always have open headcount because you don't know when you're gonna, when you're gonna need that person. It's gonna be too late. It's gonna take you six to nine months. So always be recruiting. Always build out your freelancer database and change the mindset when you're onboarding a freelancer, when you're opening up to that idea, understand that freelancing is like going out on a date, right? When you're going out on a date, you're not committing to marrying anyone or having kids together. You're kind of saying, you know, let's figure out if we can survive this dinner, grab a drink and if we like it, we'll have another date and then another date and then maybe at some point we'll move in together. When most of us are under the mentality when we hire full time employees that after four dates we got to get married, right? It's either we get married or we separate. And in freelancing and the companies that are doing it well really have an open mind that says if I need something done, I'll find a freelancer. If it's a short term project or maybe it's a long term opportunity, but I'll treat it as a short term thing. I'll give them a small task to do. I'll see how they work. I'll see how my communication with them works. If it works well, we'll continue and I'll have more jobs for them over time. And if it doesn't, no hard feelings, there's no, you don't have to fire them, you don't have to go through hr. It's like, okay, no new project for you. It's all good. It's all within expectation. One of the companies that does this very well, by the way, is Automatic. The company that developed WordPress, they have, it's public on their website how the process works. So if you want to work with WordPress, like, you know you're going to have an online interview, by the way. Now they do it through chat, which I find super challenging. I don't know how they interview over chat, but they do. And if you go through that, you'll get a two week project. During the two week project, small project, you know you're going to get paid for it. It's not going to get paid for the project. At the end of the project, the people who worked with you, we're going to meet together and say, did we like working with him? What's his professionalism level? Do we think he can be successful? If the answer is yes, you're going to get a two months project, same thing. And at the end of it, okay, now you become a regular contractor for the company. Now every company can have a different process, but the mindset is more of an on job qualification. We're not going through months and months of interviews because interviews are not great indicators by the way. There's stats and I'm not sure I can back those up, but there are stats out there that say that 30% of employees quit within their first three months or something of that sort of, which is insane. The amount of money and time you spend on interviewing someone and then you find someone that either didn't want to work for you or you didn't want them to work for you anymore. It's so costly. Use that energy, just get people on the job, let them do some work, figure out how it works and then start running with them. I would add to that what we are seeing with freelancers and companies are adopting this. Freelancers are an acceleration to how the company operates and people don't think about it often the right way. Freelancers are working for, you know, I don't know. We didn't discuss your career, Rob. I worked for six different companies throughout my career. That's my, you know, 20 years, six companies, give or take. Freelancers work for five companies a year, sometimes two, sometimes three. So when they're coming to you, they have a significant database of knowledge. They've seen how companies work, they know how to hit the ground running, they know how to interact within your company. Again, some better than others. They're not all the same. And that helps the company significantly learn what other, what, what worked well at other companies, what failed at other companies. So you're, you're literally pumping up knowledge and capabilities into your organization when you adopt that approach.

Yeah, that's so good. I acknowledge with my hands in the air that I might need to change my mindset a bit about this. So my next questions might be a bit of old paradigm thinking, but. So first of all, how do you stay profitable when you're hiring freelancers? Which potentially cost more than the equivalent full time person. Maybe that's the wrong thinking.

I don't know if it's the wrong thinking. You know, when you, when you're looking at the biggest motivation to hire freelancers, money saving is number five on the in the list. It's faster time to market, operating at full capacity, flexibility in the organization. There's a lot of different reasons. Financials are might be a reason, but it's not the leading one. Generally speaking, I am almost impartial about the cost of freelancers. Generally speaking, some of them will be more expensive, some of them will cost less. But the thing is, if you right size the project to your budget, you're able to do that with freelancers, which you can't with employees. So the way I started with Stoke, we didn't cover it, but I was working for the company, I was acting CMO for a company and I took over the team. There were, I think were 10 people in marketing back then. And marketing was, I'd give it a B minus back then. You know, the how, the execution level. And I want to do some things and you know, I found like this is the team I have. It's like, you know, taking a football team and saying, okay, we got to win. It's like These are the 11, you know, players you have on the field. It's like this is what you got to do with. And I realized like there's no way to make any significant change. So I think it was week one or two on the job, I laid off half the team, I fired half the team and with it I had, I think it was $700,000 now made available because I didn't have a headcount anymore. And I deployed all the dollars into freelancers and within three months I tripled all of previous year's leads. And it's not because I'm a great marketeer, that wasn't the case. But I was able to take those $700,000 and get, you know, an expert SEM person for two days a week, an SEO person for one day a week, someone to clean up our email email templates, someone to clean up our salesforce designers to content writers. Like I got people in right sized to what I needed. I don't need a full time SEO expert. I didn't have that much to do, but I wanted someone to do it right. One day a week was good enough for me. And so from a budgetary perspective, it actually worked a lot better for, for the type of business I ran now. For agencies, which I know are some of the subscribers on this, I think for agencies it's a lot more efficient because at the end of it, this is you're running project based. Everything is project based. So you can keep your margins. So you have a margin for a project, you have a target margin, you know how much you want to put into a project and you can actually track that constantly. If you have an employment line item, it doesn't matter if you have less or more projects, you're still spending the same amount.

Yeah, so interesting. So I think one of the mistakes in terms of a mindset and an approach that I'm making and some of my audience makes is that they are trying to hire a full time role. They can't find a full time person, so they then look to a freelancer. What they really need to do is start looking at the projects and the specific things that they have and hire to fill those projects. I guess that's the big momentum shift.

And what happens over time. It's not what happens, it doesn't happen overnight, is that at some point you're going to have a database of, you know, in agencies land, you know, SEO people and might be video artists and photographers and you have this database. And then when a project comes, you can pull out of the database was available now and kind of. Right. Size them to the project and then it helps you keep that track. What we're seeing, one of the mistakes is people are kind of saying, oh, when I have a need, I'll go find someone. Guess what? When you have a need, doesn't mean they're available.

Yeah.

So you constantly need to take care of this. You know, it's like, it's like having a podcast and only airing when you have something important to say. So when you have something important to say, no one's going to come listen to your podcast because there's no continuity.

Yeah, absolutely. Good, good comparison. What about a cultural thing? Because sometimes people have struggled and by the way, I sound quite negative, but I'm not about freelancers. I'm just kind of posing these challenging questions. What about cultural fit? Because sometimes people struggle with freelancers because they've got their own agendas, their own visions for their own freelance business. Obviously when you hire an employee, you're looking for someone who's going to be a good cultural fit and hopefully grow with the business. How does that, how do you manage those two things?

So I think cultural fit is true in both employment and freelancing. Obviously there's a lot of Shades of grade of freelancing. So I have freelancers here in my company by the way, we're 30 people company. We have almost 40 freelancers we work with. Okay. Some of them are showing up at the office three times a week. Some of them I've never seen. Some of them are here for a two week project. Some of them we worked with for the past six or nine months. Right. And so it's not one size fits all, you gotta fit it to what you need. So if it's someone that you want in the office, then cultural fit is super important. If it's someone that's an expert in. I'll give you an example. Someone's doing podcasts, right. It's like I'm recording a podcast or someone that's editing. I haven't, I actually have an agency that's working with us and helping us schedule these podcasts as an example. I don't need a cultural fit with them. Right. It's like they're, it's a pure business relationship. They're not in the office, they're not showing up at the all hands. I'm not doing performance reviews. Like okay, keep it loosely coupled. If it's someone that's part of the team, then it needs to be part of the team. It needs to help drive efficiency, it needs to still be fun to work with them. All these things. But again it's on the job evaluation. I think it's very difficult. People have. We give too much credit to an interview process of full time employees. When you meet someone for know, four sessions, 45 minutes each, do you actually think you know how they're going to be in the day to day work when things, when shit hits the fan, when things go south, you don't know it's the same thing. Freelancers actually give you that opportunity to learn through the job. And the second thing I will tell you one, I have a friend who told me once when I hear when I hire an employee, they're committed to the company and they're part of who we are and so I can trust them. So you got it backwards. A freelancer will always show up and work hard because they know if they don't, they're gone the next week. They always have something to prove. I've seen, I've worked with corporates and mid sized companies. There are so many people that are complacent because hey, you know, I'm here, I'm okay, I'm kind of in the mid range of execution. There's no real Reason for me to work super hard, no one's going to fire me. Freelancers are constantly on, constantly pushing towards execution. There's endless researches that show that they are more up to date in skills and higher and more engaged in execution.

Yeah, that's so true and yeah, absolutely agree. So talking of sort of managing freelancers, how, and I think you've touched upon this a bit already, but how do you manage? How should you manage if you've got a freelancer that's doing two days a week for you on an ongoing basis, how do you manage them differently or the same as an equivalent full time employee?

So there's a few different elements. First and foremost there's where do you find them, how do you onboard them? What's onboarding a freelancer means you need them to sign legal documents. You want to make sure you own IP at the end of the engagement, you want to make sure you're compliant with GDPR so that you can't access things they shouldn't. I mean there's bureaucracy that needs to be handled right then there needs to be. How do you track budgets and payments? So employees get paid on the same day every month or twice a month. Depends on how the company operates. And usually managers don't care about not don't care in the men, they don't care. It's like they don't have to worry about it, it just happens they get their paycheck. Freelancers, contractors, someone needs to make sure they got paid because they're sending an invoice, finance needs to process it. And we all have been through the process where all of a sudden a freelancer says I didn't get paid this month and all of a sudden the invoice is stuck somewhere and someone's trying to stall the payment to you know, I'll pay you net 30 or net 60. It's like all these. So there's, there's something there in the process. You want to track your own budget because usually you get a freelance budget. You have budget, you can do more, you don't have budget, you have less. So tracking that. And then there's everything to do with relationship with freelancer around compliance because there's more and more legislation in the United States. There's AB5 in the UK, now there's IR35 in Australia there's a legislation like how do you distinguish between an employee and a contractor or freelancer so you don't get end up getting sued for taxes or whatnot. So that's important. And then beyond that, you know, you treat them just like anyone else. I mean, they can join your team meetings, you can give them feedback. You don't give them reviews, you don't force them into a schedule, because, again, this falls into compliance. But, you know, we work with our contractors, freelancers, just as we do with anyone else. Again, depends on the job they do.

And fairly broad question, really. Do you recommend paying freelancers based on a project or paying them on day rates or hourly rates?

So, generally speaking, I'm a very big fan of paying for delivery. I think it's the clearest. But I do recognize it's not always an option. Right. So someone gave me. We have these debates here as well. Should we force the market into project based? Because project based is a lot clearer. And I was like, let's assume, you know, Rob, you're hiring me as a freelance consultant on how to grow, you know, the list of audience that you have. What are you going to pay me by the amount of advice that I give you? It's like, it's like, it's very. Not everything can fall into this project model. So some things are still kind of daily rate, hourly rate. But again, I think this is where part of building a flexible workforce means you can hire people based on the need and decide on payment terms based on the project.

Yeah, yeah. I had a story of a client who hired a copywriter, gave them a very clear brief. The copywriter was charging by the day. They came back at the end and delivered the work and said, look, I've gone way over the days that you paid me, but I'm not going to charge you. The client read the copy and it was terrible. And so there was a really different kind of, you know, view of the world from both sides. So, you know, by the way, that's a.

That's a great comment, because if it's the first time you're working with a freelancer and you don't know their style, make sure you break the project into smaller tasks and milestones. I want to see a draft after two days just to get a sense of direction. You're going to add it or create some style guides or icons. For me, I want to get like first three after, make sure that in the relationship, you're kind of structuring it to the smallest size of project you can to start getting a sense. Is this heading in the right direction? Because the last thing you want to deal with is frustration on both sides. Like, this is what I understood. This is what you said. Once there's trust Then everything is okay because you can trust them. But up until that point, make sure you break it down to the smallest milestone you can to gain that confidence.

Yeah, good advice. So one more question before we talk a bit more about Stoke. So if I am listening to this podcast and I'm nodding my head, agreeing with everything that you're saying, and I'm thinking, I've tried all the normal channels to find this freelancer pool, but I'm really struggling because they're in demand at the moment. What advice would you have about that?

So, first of all, I doubt anybody tried all because there's about a thousand marketplaces out there. So it's pretty much impossible. You know, when we built Stoke, we didn't build it with kind of saying, hey, we're going to build our talent pool and we're going to have a better talent pool than everyone's saying the same thing. We built Stoke as a platform for companies to manage, first and foremost, the freelancers that they find and manage. 90% of freelancers within companies joined the company through word of mouth and not through any platform. And so we said, first, we'll help you get all these people that came in through word of mouth and build this talent cloud. And then when you're searching for talent, we're not going to build our own talent pool. We're actually going to integrate with multiple marketplaces. So you don't have to care if that talent was registered on platform A, B or C. All you need to care is that you'll get the right talent to fit your need. The most important advice is if it's a small project, take a risk. Small project, a few hundred dollars. You know, when I started the company and I need content writers, I put posts for $150 for $500. Blog. 500 word blog post. Gave it to three different freelancers, saw three different styles, picked the one that I want, and yes, I ended up spending $300 on people that I never worked with. Was worth it to find the person that wanted 150 bucks. If you're going after an engineering project that you're going to spend $100,000 on, obviously spend some more time talking to them, interviewing them. So again, spend the time to understand how you want to hire them and how you want to work with them. The most important thing is start building your pool of talent and managing that pool of talent more than anything else.

Yeah, okay, good advice. So let's talk a little bit about Stoke talent. So I am interested to know, well, obviously Share with the listener about what Stoke does, but also I'm interested to learn more about the recent acquisition by Fiverr. And was that always in your plan when you started the business?

No, obviously not. I never thought I'm going to sell the company so quickly. We just raised our A around three or four months before we got acquired, so obviously that wasn't the plan. So we built Stoke with the understanding that in order for the gig economy to become mainstream, corporates will need to adopt it. And for companies to adopt it, we'll need to build a platform that's not behaving like a standard marketplace. When you swipe your credit card and someone does your kid's birthday video, like Upwork and PeoplePerHour and Fiverr, and it's like, how do you build a platform that's ready for serious use, if you will? And that's what we started building with Stokes. It's really about meeting the company's needs. You know, it's like teams and departments and approval processes and budget management and building your own personal talent, cloud and internal reviews, things that don't go outside, and processing payments in a different manner. It's really fitting it to how companies think. How do you manage multiple projects? We have companies managing their clients within Stokes, really, how to make it, how to fit it into that paradigm, how to control expenses, because it's difficult to control expenses with freelancers. You almost need a full time finance person. We have an agency just now that onboarded two months ago and saved $8,500 a month because they had a full time person just tracking all the various invoices from the 50 freelancers they work with. So that's that. I started the company and I thought it's going to be a long journey because the market was very, it was very early days. I mean, most companies were still not looking, still aren't looking for a freelance management system. Covid obviously has accelerated things. And I met the Fiverr team multiple times. They're down the street from where our office was and I consulted them a few times. You know, the industry where things are heading towards and so forth. And last August, out of the blue, they called us up and said, hey, you know, we think that the market is maturing in the direction you guys have been talking about. Businesses will start adopting future work is more reliant on freelancers. We want to accelerate our penetration into the market. What do you think about us acquiring you? So, you know, my first reaction was we just raised $15 million. We have enough money in the back we're not in a hurry to sell. But a, you know Fiverr is a great company, let's have a conversation and B, if we can work out what the day after looks like and we can work out commercials, then I'm obligated to building a successful business. Not. And so you know.

What'S in the future. Do you know what the future plans are for Stoke and how Fiverr might use you?

So obviously Fiverr is, is super successful. I'm still at awe at all the achievements this company has been able to create and their market penetration and the volume that we're seeing and the type of companies are using them. But company is generally focused on Fiber. Generally spoke focused on small medium businesses. Solopreneurs, that's been the focus. Our focus is more B2B up the stack companies with hundreds of employees, a few thousand employees. And so obviously there's a lot of synergies there. Fiber has a great talent pool. We have an application for corporates. And now as we're starting to build this B2B business, obviously we have a lot of strong assets that will allow us to go together. Right now we're keeping Stoke as a standalone company within Fiverr. So we're Fiverr owned but we are maintaining our plans for 2022 while starting to build these synergies with the Fiverr marketplace.

Yeah, exciting times and like you say, what a great fit between the two businesses. I've used Fiverr many times for doing various things along the way and found the good, the bad and the ugly from, you know, hiring people on there. So you know, I think with Fiverr, if ever you there was that added you get what you pay for is very true on there. So.

Exactly. It's a, it's a very clear project based delivery, 100%. I think Fiverr represents very well how to do this in project based. I think when you're getting into longer term engagement it becomes a little more complicated.

Yeah, well listen, we could talk for ages about this. It's such an interesting and important topic. In fact I'm just sitting here thinking I need to share this with my private clients, this interview because so many of them, you know, I think always in the business world or specifically in the agency world, the top two conversations are around new business and talent. And I think in the last 18 months they've switched to be talent first, business second. So it's such an important.

We have, we have, we have a large agency or a mid sized agency in Germany. They've completely flipped their Business model since starting work with us. I think it was last November, October 2020. You know, Covid led agencies into kind of, okay, what do we do now? How do the financials. How do we run the business? And if they start working more with freelancers relying on us, and they kind of, you know, the way they said Stoke has become our secret weapon because now we're far more efficient. We're right. Sizing to project. Our margins have improved. Our operational efficiency is in print. So. But it requires a decision. We're gonna. We're really going to go after this thing.

Yeah. Yeah. Good. Well, listen, let me ask you the same question I ask all my guests, which is, if you could go back in time and give your younger self just starting out in business a piece of advice, what would it be?

I'd say two things. Number one is always been networking. I think one of the things that I didn't do well as a younger self was not really invest in connecting and opening. When I say networking is not going out for cocktails and meetups only for that. It's. It's really about networking to learn how other businesses operate, learn how other people have succeeded and failed in learning through that. And the second, and it's probably related, is how to, you know, I'm coming to say personal and brand, although I. I think we're overly used the term personal brand these days. It's not about being vocal and putting yourself out there, but investing in who you are, what it is you know how to do, what do you want to place yourself, I think is super important, but by far, open up, meet up with people, take risks. Meeting up with people, by the way, that's one of my biggest learnings. At Stoke, I was complete opposite than how I behaved. You know, ten years before that. Every meeting that someone wanted to, I took, every meeting I got, every meeting with any person. And 80% of them were successful. Successful in learning, not successful in closing a business. And 20% were a waste of time. But you got to embrace that waste of time as well, because look at the big.

You learn something there, don't you? So about that. I mean, that's why I love doing this podcast, because I learn from people like you every single day, which is fantastic. And it just helps me change my mindset and my view of the world, which in turn helps me help my clients. So if people wanted to find out more about you and about Stoke, where would be the best place for them to go?

We're@stoketalent.com so you're more than happy to check us out. Happy to jump on a call and run a demo or whatnot. I'm mostly on LinkedIn. Jahara Rez feel free to reach out if I can help with anything, provide any advice. By all means.

Fantastic. Well, I will share both of those links in the show notes and congratulations again on the sale. And thank you so much for joining us today and sharing your wisdom with the audience.

Thank you. Thanks for having me. Rob.