Working in the Gig Economy: Tips on How to Launch Your Business by guest blogger : Lucy Reed
About Lucy Reed:
Lucy Reed has been starting businesses since she was a kid, from the lemonade stand she opened in her parent’s driveway at age 10 to the dog walking business she started while in college. She created GigMine because she was inspired by the growth of the sharing economy and wanted to make it easier for entrepreneurial individuals like herself to find the gig opportunities in their areas.
Working in the Gig Economy: Tips on How to Launch Your Business
Whether you’re newly out of work, looking to grow your income with a side hustle, or seeking a path out of the 9-to-5 grind, the gig economy could be a good fit. No longer the purview of musicians and artists alone, the Bureau of Labor Statistics defines a gig as any “single project or task for which a worker is hired, often through a digital marketplace, to work on demand.” While the gig economy is most commonly associated with sharing economy apps such as Uber, signing up with an app isn’t the only way to get started in the gig economy.
Most sharing economy services focus on giving rides, running errands and providing home-based services such as handyman work, pet care and child care. However, the gig economy also holds opportunity in fields like media and communications, computer and information technology, arts and design, and construction. Here are some jobs you might be surprised to find in the gig economy:
- Graphic designer
- Web designer
- House painter
- Technical or content writer
- Cyber security specialist
- Software developer
Whether you’re offering a highly skilled service like software development or walking dogs for your neighbors, consider skipping the apps and setting up your own business. Digital marketplaces offer a convenient entry into the gig economy because they match you with clients so you spend less time marketing yourself and more time earning money. However, apps frequently charge a fee for this service. If you market your business and find clientele outside of these companies, you’ll enjoy a higher profit margin for your work.
Speaking of profit margins, gig economy workers must factor overhead costs into the profitability of their chosen gigs. Running a gig-based business, whether through an app or independently, means you’re responsible for all expenses incurred. While many expenses are deductible, they still put a dent in profit margins. These are some overhead costs gig economy workers should plan for:
- Vehicle expenses: Whether your car is the tool with which you perform your business or just something you use to run business errands, you’ll put miles and wear and tear on your vehicle while working gigs. As the Insurance Information Institute explains, you may need to purchase additional auto insurance as well.
- Home office expenses: Many independent workers perform business from a home office. Plan on setting up a room in your home dedicated solely to work so you can manage distractions that hinder productivity. Expect to incur one-time costs for office furniture and equipment to make your office comfortable and professional, as well as ongoing expenses like a high-speed Internet connection and utilities.
- Self-employment taxes: When you work for a traditional employer, your company pays half of the FICA tax you owe to the IRS. But as an independent worker, you’re responsible for the entire 15.3 percent tax. Set aside funds each time you get paid so you can cover your tax burden.
- Healthcare: As an independent worker, you don’t have access to an employer-sponsored health plan. As a result, you’ll likely pay more for health coverage than you’re accustomed to. If you belong to an industry-specific organization or union, you may have access to discounted rates through a group plan.
- Retirement savings: Gig economy workers have to plan for the future, too — and without an employer to match retirement contributions, you may need to save more to hit retirement goals. Look into retirement plans for independent workers and decide how much you’ll save.
On-demand apps take one big task off of gig workers’ plates: customer recruitment. But they do so at a cost, and (in most cases) you’re still on your own to figure out insurance, taxes and other details of self-employment. While workers in highly trust-based fields including ride sharing and vacation rentals can still benefit from working through an app, many gig economy workers can fare better by bypassing apps and working for themselves instead.