Always maximize your profits
Businesses exist to earn profits (not revenues), which is the net income for the gig worker.
The reality is that the gig worker must give the business the respect it deserves. Starting and running a business is not child’s play. It is a serious business.
Many people think that earning revenues is the key to their success. It’s not when we take the expenses side of the equation into account.
Remember this equation:
Revenues / monies received
[Minus]
Expenses / cost (cash and non-cash)
[Equals]
Profit (net income)
You can increase your profit by increasing the revenues or monies received from your customers and reducing your expenses in delivering the services or products to customers.
The net effect between revenues and expenses can either be a profit or a loss to you.
Profits can only be generated when monies received by you are more you’re your expenses.
Conversely, if you do incur more expenses than the monies received, you will certainly experience a financial loss, which is not a good position to be in. This means that you are paying more money out of your pocket than you are receiving money from your customers.
Unfortunately, at the start-up stage, it is normal that your expenses will be more than revenues because you are only starting to market yourself and your offerings and slowly getting customers to buy from you. Depending on your market and the product or service, the time taken to get to a cost recovery position is variable.
Therefore, it is so important for you to manage your cash flow well so that you can pay your bills as you start and establish yourself and your gig.
Fundamentally, gig workers must always remember two key principles:
1. Increase their revenues or cash collections from their customers as soon as possible. Product or service pricing is vital to maintain a healthy gross profit.
2. Minimize or maintain their expenses including tax liabilities. Watch our for those non-cash items like wear and tear for your vehicle which will only materialize later on. These are not immediate cash items like fuel cost that you pay along the way.
Increasing your revenues and cash collection
There are various strategies to increase your revenues:
1. Time is money (being productive with your time).
2. Play the game to win (over your competitors).
3. Go to where your customers hang out and always follow the money.
4. Cultivate a healthy pool of repeat customers.
5. Upsell your services.
6. Advertise your services.
Time is money
As the saying goes, time is money.
Unfortunately, with the gig economy, you are trading time for money.
You are actively contributing your efforts to earn money or active income for yourself.
In contrast, passive income includes rental income from real estate investments, dividends from shares, and profits from a website.
Passive income is not directly linked to your efforts.
When thinking about the gig economy, always compare the hourly profit (not revenues or sales) that you are or will be earning to the minimum wage rate of the country you are living in. This will give you a good indication of whether the money generated from the gig economy is worth your time and effort.
If your hourly profit is well below the minimum wage rate, then the gig will not be worth your time and effort.
Play the game to win and profit from it
Depending on which platform or marketplace you choose to offer your services, you must always play the game to win.
Like in any game, there will be rules of the game.
There are strategies to maximize your chances of success and income for yourself.
Do take the time to research the key strategy so that it will give you that winning edge.
Your goal is to spend the minimum amount of time on your gig to earn maximum profits. That means a higher hourly rate.
For rideshare platforms, the top strategy is to find those longer rides compared to shorter rides. With longer rides, you make more money in shorter periods. Short minimum fare trips typically do not add up in most markets.
Go to where your customers hang out and follow the money
Existing marketplaces like Fiverr, Upwork, Freelancer, and Uber are great places to source for potential customers. People coming to these platforms are in a buying frame of mind. Your job is to put a compelling offer in front of them so that they open their wallets to pay you.
If you are not using any of these established marketplaces especially when you are starting out and making a name for yourself, then you will need to advertise your services at your local community center, library or even on social media.
These are extra pieces of work you need to do in addition to providing great services.
The downside of established marketplaces is that your competitors can be found easier. These platforms provide some level of transparency in terms of who is offering the same or similar services, their customer ratings, and the price their charge for their services.
While such transparency is great for customers, it is not great for you as a seller. You may need to compete on price especially when it is a common service. This is something you would want to avoid.
Go to where your target customers hang out and promote your services to them.
If you are offering sports-related services, you need to market your services to your local sports clubs and schools. Do remember to seek permission from the owner or organizer prior to doing so.
Be willing to experiment with various ways to create more income for yourself. Testing what works and what doesn’t work is your best approach to making more money for yourself.
The strategies you adopt will ensure that you can maximize your revenues and earning potential.
Using rideshare as an example, here are some specific strategies you can use:
- Be at the right place at the right time. People are always looking for rides when they leave a bar or sporting venue. This may result in longer rides because you are taking your passengers all the way to their house, which can sometimes be a long distance.
- Be aware of what is going especially sporting events, conventions, concerts, holidays, etc.
- If you ever drive during special events, concerts or sporting events you need to know how to navigate the crowds and roads. These events are typically high request, high surge but you have to be able to find your passengers quickly and effectively. Understand your local traffic and have strategies in place to avoid crowded areas that could save you valuable time in picking up and dropping off passengers.
- Always be willing to experiment to create more income for yourself. Try a new time; try a new place; try a new city, etc. It is only through experimentation that you will know yourself better, know what works for you, and know the work you are doing.
- Don’t waste time sitting and waiting for things to happen. Capitalize on airport runs, hang out by hotel districts, and workers riding to and from work every day (morning and evening rush hours).
- Know the cycles and seasons of your business or customer demand. During the evening, people just want to go into the city. At night and overnight, people just want to go out of the city. On a Friday or Saturday night, it’s usually pretty busy. Christmas parties may create increased demand for you.
- Consider doing the graveyard shifts. Be willing to drive during hours when people would otherwise normally not drive, e.g., between 4:00 and 5:00 in the morning. This includes overnights, mornings, holidays, etc. Fewer rideshare cars on the road may result in higher likelihood for you to pick up passengers.
- Use technology (tools of the trade) to get you around and save money. For ridesharing, Waze and GPS are your tools of trade. Most drivers don’t realize this but the number one complaint about drivers has to do with their poor navigation and understanding of the road conditions.