Economic Emergence of Micro Businesses and Side Hustles
What are Micro Businesses and Side Hustles and where did they come from?
Complex, long-term trends in technology and economics have led to inefficiencies in the effectiveness of government and privately financed initiatives to spur job creation in recent years. Relief via stimulus, which was provided to consumers to assist with the short-term circumstances of the coronavirus lock-down, has only added fuel to the fire of the already red-hot growth of inflation and therefore everyday cost of living. The resulting scarcity of permanent, secure jobs has made them much more desirable in recent times.
However, there are some individuals that, by their own personal circumstances, priorities and/or values in life, may not realistically have access to the prerequisites for, or simply may not desire to, obtain a permanent employment position as their long-term living plan. These individuals may seek full-time employment but may not see it as a “career” as such, or perhaps, were following a corporate career path, and had the sudden realisation that the journey and the returns may not be entirely for them, or at the very least, that it might be worth exploring an alternative, concurrent path.
These individuals are not isolated in their thinking. Google Trends show that search results for “FIRE movement” (Financial Independence Retire Early), which (the following is a simplistic explanation of), simply put, encourages individuals to be financial frugal, prudent, and most importantly educated and aware of how their savings capability can accumulate and how that accumulated amount can be leveraged to generate cash-flow. By looking at that cash-flow and comparing it to what your household needs on a week-by-week (or month-by-month) basis, you can get a heuristic understanding, or otherwise a useful metric, on how close your overall wealth is to obtaining that “break-even” point of wealth (where your everyday necessities and a buffer for uncertainties is covered). Dependent on your personal definition of “everyday necessities” and your level of professional qualifications, employ-ability, and value in the job market, you may find that you can obtain this level of personal expense coverage faster than you may have intuitively expected.
As the above paragraph alluded to, professionals at all levels are considering the fire movement, because of its focus on cash-flow and maximising the benefit of your time (by not working at all, or, like many people, working a proportionate amount of your waking hours to meet the work-life balance) – it really comes down to your ultimate personal preference, current level of wealth, and discipline in your financial frugality and stick-ability to your plan. Hopefully this has begun to demonstrate that, regardless of your current wealth circumstances, income or value in the employment marketplace, that you can take a more cash-flow based focus to your personal financial circumstances and make an attainable goal that allows you to get more out of life – whether it’s through fire lifestyle or by generating additional income through other ventures.
Speaking of other ventures, the most popular additional income creating activity for either of the above circumstances would be to create a side hustle! Side hustles, closely following the Gig Economy, are recent innovations in the international employment and contractor relationship dynamic, driven forward to progressive risk-taking technology companies such as Uber, Fiverr, and other side hustle websites.
Hopefully from the above we have made it clear that side hustles or alternative ways of making money to supplement your primary job source, are fundamentally about two things; firstly, having a cash-flow based focus to your personal finance (day to day and investments too), and secondly, quantifying and compartmentalising your time to aid with planning but also to discipline yourself.
As an aside, when people make a genuine effort to embark on this process, they often find that their schedule is more full than they would have otherwise expected, and therefore, when free-time arises, it is more valued and tends to be spent on more valuable activities, and those activities can be enjoyed more because you’re doing them with the peace of mind that you’ve ‘taken care of’ your cash-flow to the best of your immediate ability and knowledge.
As we’re currently experiencing the highest cost of living in recently recorded economic history, for those that find themselves in their late youth or early adulthood, would not be looking forward the same type of bright future than what their parents and grandparents would have, in-fact, the short and medium-term personal economic situation of many people is uncertain and often reliant on not much more than faith. These economic and psychological pressures have given birth to a novel new market which fills a gap that was previously never serviced. These markets, known as gig economies and side hustles, and catered to by those who’s direct economic time, or time otherwise not available due to employment, and is demanded, typically by those who earn above average salaries – such as in the case of the relation of the average distributed taxi driver and their customer respectively. Previously there was no technology and participants willing and available to provide these services at a more accessible price than predecessor taxi companies. Various conditions and human ingenuity opened this market internationally and brought the aforementioned terms into the common business vernacular.
Now that we understand the conditions that lead to the various gig economy markets opening, it is important to distinguish what is meant by a side hustle versus a small (or, in the context of this article), more accurately referred to as a micro business.
So, what is the difference between a side hustle and a micro business?
Side hustles are concerned with performing smaller-scale commercial activities in your time outside of your otherwise agreed to ‘common working hours’ (or ‘shift work’). Although you will likely have to formally register with your gig economy technology market provider, in many cases you may not be formally running a business and paying tax.
Obviously, that isn’t a great or advisable position to be in, but rest assured that even if things are working for you on a casual, small or micro-scale that there are many friendly, relatable accountants and bookkeepers that can help you formalise and get things straight – something we’d recommend to do from the outset for peace of mind – but also just acknowledging the reality of the informality of some of these ventures at the outset.
When considering a new software for your operation, you should always look for those that have similar values and don’t just look good, but “feel right” for your organisation (no matter how small). With that in mind, you should ensure that you want to use mobile capable software for building your website or other marketing material to represent your efforts.
What is the definition of a micro business?
Micro businesses are a recent definition formulated to provide a more accurate definition to distinguish and partition less formal, more grassroots inspired, often home operated (SOHO), sole individuals from the wide spectrum of businesses and operations we classify as “small”. Depending on your country of operation, a “small” business can be anywhere from 5 to 100 staff – that is simply not transferable as a useful term to discuss and compare economic and business activity – hence – we now use the term micro businesses, and it is reasonable to expect in coming years that we may look to further segment this group (such as with ‘side hustle’, although arguably that would fall under contractual employment depending on your definition of such).
If it is not clear, individuals may also perform multiple side-hustle, gig-economy jobs and sometimes even multiple micro businesses to either fully provide for or provide a major supplementation to their primary employment. It is always a balance of their desire for personal spare-time and accumulation of wealth to ideally be reaching a place where your cash-flow returns can exceed your required expenses (more on this later).
We realise that, with the prominence of discussion forums such as anti-work, there is a growing understanding that the phrase “common” is anything-but when it comes to employer expectations, but that discussion is outside the scope of this article.
What is the difference between a micro business and a small business?
As a solution to distinguish newer and less formal businesses from the wide range and capabilities of the largest class of business size “small”, the micro business represents a typically very low income business, run from home, perhaps less ambitious overall in the size of revenue it hopes to achieve, but instead fulfilling the operator with satisfaction in other ways, such as simply by being able to provide a valued service to a customer-base that may be otherwise serviceable or a service that would otherwise not exist.
Earning little money, or being under-ambitious, isn’t a prerequisite of a micro business, and its somewhat disingenuous to suggest that this is all that differentiates it from a small business, the reality is just that they’re smaller than smaller, often less formal, may not even be economically viable, or may only be economically viable as supplemented by a prior income or perhaps through historically accumulated personal wealth that already supplements living costs.
Either way that people find themselves running a side hustle, micro business, or something in-between, it is often observed that older more experienced individuals will gravitate towards a slightly more formal micro business, seeking slightly more rigidity and certainty, and younger individuals will naturally err towards side hustles, but as those side hustles expand, grow and naturally start to formalise through transactions and contracts (implied or expressed), they may find themselves naturally evolving into micro businesses.
The above is just our opinion, and we appreciate its subjective and that the debate is not settled, but we hope that provides some light and ideas of how to distinguish between small businesses and micro businesses. Small businesses are typically more formal and larger. Side hustles are sporadic, often opportunistic, and naturally less formal. Somewhere in-between sits the micro business, that either evolved from a side hustle or was the starting point of the entrepreneur. There is no right or wrong, it is all about your personal style of managing your businesses and ventures.
Regardless of the size of your venture and how established or formal your operation is, you should be well represented online, so use dazzly, which is a micro business website builder, to create a fantastic website and lead to pack!
In conclusion, we hope the above article highlights the changing nature of employment towards the prevalence of micro businesses, side hustles and less formal entities. With this change, in the face of extraordinarily challenge economic circumstances, has led to a mass-realisation that valuing one’s ultimate resource time, changes ones perspective when applying this lens and value towards ones personal finance. No matter whether you are a well paid financial professional or an under educated recent arrival to a new city, the gig economy, side hustles and micro businesses will be relevant to everyone as otherwise tangible and real opportunities continue to evaporate for the working class with no rhyme, reason, or hope for reversal from traditional sources or trends.
This is part one of the Micro Business and Side Hustles articles - please share this article if you enjoyed it and we intend to release a second part later in 2022.