Today’s new self-employed, ‘small business’ owner: You rent your spare room on Airbnb while you dog-sit two puppies through Rover, and cook dinner for strangers who found you on EatWith. You drive someone to the airport through Uber, and on the way back, you stop and put an IKEA desk together for someone who found you on TaskRabbit.
You’re a superstar of the new economy – the “Gig Economy.”
This may sound like an awful way to earn a living, but more and more people are dependent on these new platforms to earn all or some of their income. (In fact, Florida and California have declared that some Uber drivers are employees, not contractors.)
While the term “sharing economy” has been used to describe this new business model, there’s nothing altruistic about it. People who need something – a ride, a room, a task – pay someone to provide it. The ‘middle man’ – platforms providing the connections– take fees on every transaction.
So before you start to hustle for gigs from these platforms, think about it as a business. Here are seven tips to help you succeed:
- Be realistic. You’ll likely earn a lot less than most platforms claim and have costs that significantly eat into your income. If you provide rides, you’ll pay for gas, tolls, wear and tear on your car, and very possibly higher insurance costs (if you can get insurance at all). If you rent out a room or your home, you’ll have laundry, cleaning, higher utility bills, some breakage or theft.
- Keep track of money. Get a bookkeeping program and track all your expenses (they’re tax deductible) and all your income. If you drive for a ride company like Uber or Lyft log how much you drive your car for business versus personal use. Set up a separate business bank account and use one credit card solely for business expenses. And remember, as a self-employed worker, you’ll have to pay taxes to the IRS quarterly. Set aside money for this monthly.
- Get insured. Most personal insurance policies don’t cover incidents when you are being paid – an Airbnb guest slipping on your bathroom floor may not be covered by your insurance since they’re paying you to stay there. Your auto insurance is likely not to cover you if you’re working for a ride company at the time of an accident. Closely examine the insurance offered by the platform you’re interested in – to see what and when it actually covers. For instance Airbnb’s insurance is secondary—it only kicks in after your own insurance. While that may be fine, it’s likely to mean months of negotiation before anyone pays for that big hole guests put in your dining room wall.
- Get healthcare. If you don’t have a day job, you’ll need to take care of your own benefits. Thanks to the Affordable Care Act, you can get health insurance even as an individual. And hey, with all those people in your car or home, you’ll get far more exposure to germs and may need the doctor more often.
- Provide a little extra. If you’re renting out your home, perhaps you want to provide a welcome basket of goodies for your guests. If you’re driving people in your car, maybe you want to offer bottled water or a chance for them to charge their phone. Make sure everything is clean and neat.
- Create a customer database. Although customers find you through these services, it’s more profitable if they return to you directly. So give out your own business card, and whenever appropriate, ask for satisfied customers’ contact info, create a database and use an email newsletter service like Mailchimp to keep in touch.
- Be careful. Strangers are coming into your car or into your home. While some platforms do basic background checks on providers, none do on customers. Don’t rely on the platform to protect you. Be cautious and use your own judgment if a situation feels unsafe.
The bottom line: You can make some money in the gig economy, just know what you’re getting into. If you don’t have better options for paying your rent, you can start working right after reading this column.
Copyright, Rhonda Abrams, 2015
This article originally ran in USA Today on June 26, 2015