The “gig economy” — the market for individuals providing services or working on projects on a freelance on-demand or short-term contract basis — has been a growing trend, especially during the COVID-19 pandemic.
While there are no official gig economy statistics available to measure its prominence, we can make some assumptions about its increasing popularity based on other available data.
According to information reported by the United States Census Bureau, the number of non-employer businesses (the group of individuals most likely to work on a gig basis) was 24,331,403 in 2015 — that’s 10 percent more than the 22,110,628 non-employer businesses in 2010, so you can imagine what it is in 2020.
Opportunity abounds for independent professionals who take on gig assignments. Many businesses outsource work to independent contractors and freelancers when their staffs are overwhelmed and to avoid the costs of benefits and ongoing payroll that come with hiring new employees.
Who Works in the Gig Economy?
The gig workforce includes professionals in many industries and of varied skill sets. A few commonly associated with the movement include:
• Home contractors
• Entertainers (DJs, musicians, vocalists, magicians, etc.)
• Freelance writers
• Web and graphic designers
• Business consultants
There are also larger companies (such as Uber) who pay workers per gig.
Benefits of Running a By-the-Gig Business
Some advantages of working as an independent professional in the gig economy include:
• You can set your own schedule.
• You control your workload.
• You can choose whom you want to work with.
• You can choose the type of work you want to do.
Pitfalls of Running a By-the-Gig Business
Just as with owning and running any other type of business, working in the gig economy comes with challenges, as well, such as the following:
• No steady paycheck
• No paid vacation
• Seasonal business cycles that might make some months extra lean
• Responsibility for paying your full Social Security and Medicare tax obligation (When you are employed, your employer pays half of the amount.)
• No employee benefits (e.g., medical insurance, 401K, etc.)
• Requires a high degree of self-motivation and self-discipline.
Tips for Running a Successful Gig Business
Here are some recommendations to help you succeed as a gig professional:
• Talk with an attorney and an accountant or tax advisor about the legal and tax obligations you must fulfill when starting and running your business. Some tasks might include filing formation paperwork, obtaining licenses and permits, paying quarterly estimated taxes, etc.).
• If you don’t own or rent office space, have a dedicated space at home from which to operate your business. Doing so will help prevent distractions when you need to tend to your administrative tasks.
• Use caution when using online platforms (such as Upwork, Freelancer.com, etc.) to find work. Some buyers on these websites are looking to have projects done at the lowest possible price. Other freelancers enrolled on the sites don’t help matters by posting unreasonably low rates for their services. If you want to charge fair rates for your services, you might be better off finding clients through other channels (such as networking, referrals, etc.).
• Use tools to streamline your business operations. Numerous online platforms and mobile apps exist to help solo business owners stay organized, save time, and boost productivity. Several that you might want to check out include Quickbooks, Evernote, Google Drive, Trello, Grammarly, Quote Roller and Hootsuite.
• Get clients’ agreement to the scope of work, deadlines and rates in writing. By providing (and getting approval on) all the critical details of assignments in your proposals, you can avoid misunderstandings and missed expectations.
Finally, contact SCORE Mid-Maryland to work with a business mentor. Mentoring costs nothing and it will allow you to gain valuable insight as you start and grow your small business. SCORE mentors have experience and expertise in all aspects of launching and running a business. They can answer your questions, offer feedback, and guide you on your entrepreneurial journey.
Bob Jones is a CPA and financial consultant and serves on the executive team at SCORE Mid-Maryland . He is a certified SCORE mentor. SCORE is a nationwide volunteer network of 280 chapters dedicated to the formation, growth and success of small businesses. SCORE is a formal resource partner of the Small business Administration. SCORE Mid-Maryland provides free and confidential business advice and mentoring to entrepreneurs, start-up businesses and to established small businesses in Washington. Frederick and Carroll counties. More information at scoremid-maryland.org or call 240-215-4757.