The gig economy was growing long before the pandemic hit. Since then, so much of the work that was typically done in an office has shifted to a virtual format. The next freelance job is often just a few clicks away.
What, exactly, is the gig economy?
It’s the labor market in which businesses hire independent contractors and freelancers to fill temporary positions or to do specific assignments. Companies can get more done without the expense of hiring and training a full-time person. Individuals get the flexibility to choose their assignments and set their schedules.
It’s also something of a controversial area as to whether gig workers should be treated as employees. It all comes down to how you’re taxed. Deficit-heavy governments want gig workers treated as employees to increase payroll and other tax contributions.
So, there are lots of pros and cons to consider for both employer and freelancer.
Is the Gig Economy a Good Way to Start Your Business?
Yes, being a gig worker is a good way to test whether you’re cut out for being in business.
- If you already have a full time job, part-time gig work gives you a safety net.
- It lets you test your time management skills.
- It lets you hone your sales skills, your ability to get work.
But there are important differences between being a freelance gig worker and being a business owner.
Requirements to Turn Freelance Work Into a Business
If you’ve decided that the business world is for you, the following four areas are important if you want to create a legitimate business with value.
1 – Legal Requirements
Your business will require some form of legal entity, such as Sole Proprietorship, Limited Liability Company, S Corporation or Corporation. Requirements vary by state. Your legal status determines how your income is taxed.
Be sure to review your situation with your lawyer and accountant before committing to a legal formation. It’s an investment that will pay off in the long run as well as protect you from the start.
2 – Scalability
To create a business that has value, it must be scalable to some extent. In other words, can you increase revenues by adding employees or by outsourcing? If not, your business won’t have much intrinsic value because it relies solely on you or a similar individual to produce revenue.
3 – Systems
“Systems” is an intimidating word that simply means you can describe how you accomplish any given business task. These tasks (or processes) should be documented so that others can step in to do the work.
Systems are what allow you to scale through delegation, automation, or outsourcing. When they are properly documented you essentially have a manual for how to run your business.
Documented systems are assets that add value to your business if you decide to sell.
4 – Commitment and Purpose
Ahh…this is probably the missing ingredient that flattens many would-be entrepreneurs.
When you run a business, there WILL be times that are tough. You might have to spend your last dollar in savings and then borrow on credit cards to meet payroll or pay taxes.
There will be days or weeks where everything goes wrong, and you don’t bring in a dollar in sales.
Without commitment and purpose, you’ll give up and go back to that “safe” job.
With commitment, you’ll see it through.
Purpose, the “why” that drives you, will give you a reason to stick to your commitment. You’ll find a resourcefulness you didn’t think you had that helps you overcome whatever obstacle is in your way.
And THAT is one of the most personally satisfying things about being in business…working through an obstacle to get to the other side. That’s where the other rewards such as peace of mind and financial security are found, too.
And no matter how much money you have, or how clever your business idea, it’s all for nothing if you don’t have personal commitment.
So, if you’re thinking about starting a business by becoming a member of the gig workforce, take a few minutes to review the gig economy infographic below, from our colleagues at TeamStage.
Have a story about going from gig worker to business person?
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