On the podcast yesterday, I told the story of my wood shop experience in Junior High. We had to design and build a project. I decided I was going to make a book shelf – it was going to be pretty cool, have a space for my stereo speakers.
I had it all pictured out. So I started cutting, and finishing the wood and all, put it all together. It sort of resembled what I had in mind but in a lopsided kinda way. The moment I put any weight on the shelf, it collapsed. It did this house of cards kinda collapse.
I skipped a step. I just dove in. I didn’t take the time to really make a plan.
Making a Business Plan
That happens a lot when people run a business. It especially happens with gig economy businesses. You just dive in and do the work and don’t think much about what it is you’re doing and where you’re going with it.
Michael Gerber wrote a book called The Emyth Revisited. The link here is to the Audible version of his book – usually when I link a book I’ll do it to the Audible version just because I’m such a huge fan of audio books since we’re in our cars so much anyway. (Full disclosure – I am an Amazon affiliate, I may get a small commission when items are purchased from my affiliate links).
Anyway, E-Myth is short for Entrepreneur Myth. The idea is most business owners are not really entrepreneurs. They don’t really have a plan to what they’re doing, they just do it. In fact he uses the phrase “Doing it, doing it, doing it.”
Ultimately, that’s why a lot of businesses fail. They just do it. They don’t think about the business of running their business. All they’ve done is just created another job. The ultimate premise of the E-Myth is that business owners need to work on their business, not just in their business.
That’s kind of what we’re doing here in this class. It’s all about working on our businesses.
It starts with a plan
This is why I wanted to start off talking about developing a business plan. I know, the last thing you think about for gig work is a business plan, right?
What we’re talking about here is nothing formal. It’s really more about building a foundation for what you’re going to do. For the next few days we’ll talk about different things that would be part of a business plan. What this does is give you a basis on which you can go back to time and again to keep you centered.
I think the other thing it does is, it causes us to think through some things we don’t usually think through when we’re just doing it.
In the end, it helps us get serious about the idea that we are running a business. And maybe in doing so, it helps get us on the road to what we can do with that in the future.
Here’s what we’re going to look at when it comes to the plan:
Who are you? Your business type
Why are you? Your mission statement
Where are you? Your market
Where’s the money coming from?
Your Business Goals
Your Exit Strategy
We’ll get into the first part of the plan for the rest of today.
Who Are You? What Kind of Business Are You Running?
I made the point in the introduction that when you’re an independent contractor, you’re operating as a business instead of as an employee.
You’ll hear me refer back to my telecom days a lot. Forgive me if I go overboard on that. Much of my time in telecom was starting and running a phone system business with my dad and brothers.
That telecom experience is maybe a good point of reference in understanding what that means, that we’re contracting as a business. Say you run a small insurance office. You need phones for your employees. You could do it yourself with one of your employees. Your office manager is pretty good with tech stuff. So you have him pick up phones at Office Depot, do some research, a little Youtube, whatever, and have him hook the phones up for you. And by the way, he’s falling behind on all the other stuff because of the time it takes.
Or you could hire our company to come out and set it all up for you. That, or you hire our company to fix all the problems your office manager created because Youtube didn’t help him as much as he thought it would.
That’s kind of how it works with us as contractors, though it’s a bit more layered than that in the gig economy. Doordash could hire employees to do their deliveries. Instead, they chose to use contractors. Using contractors, they can pay by the task instead of giving you a salary. By nature of you accepting the contract, you’re agreeing that you’re doing the work as a business and not as an employee.
A brief comparison between contractor and employee.
I said it was a bit more layered than that. That’s because generally there are laws about when you can use individuals as contractors and when you can’t. A lot of companies use contractors to do an end around on the requirements and expenses that go with having an employee.
That’s ultimately what AB5 was about in California. If you had heard about it, Uber and Lyft had come within hours of shutting down in California because of court cases around that. California is saying that gig companies in general are breaking the law when they use independent contractors, that they should be required to use employees.
I won’t go further into that – other than to say keep an eye on things like that. If your state or even the federal government further restrict the use of independent contractors, that could impact our ability to earn as we’re able to right now.
Advantages of being an employee
As an employee, you have a number of protections. An employer has to provide the minimum wage and overtime. If you are using your vehicle for deliveries, the employer has to provide reimbursement for those expenses. Depending on the state and other factors, other benefits may be required including medical insurance and paid time off.
The employer also has to provide other protections. Anti-discrimination policies, family medical leave and sexual harassment protections are stronger for employees. Companies have to provide insurance including workers compensation. Employers have to match your contribution to social security and medicare taxes.
As an independent contractor, you’re completely on your own.
Advantages of being a contractor
As an independent contractor, your biggest advantage is freedom.
You can set your own hours. Where and when you work is completely up to you. There is no supervisor micromanaging you. You get to make your decisions about what to wear and about how you perform the tasks you agree to do.
You can work as many hours or as few hours as you desire. If you choose to work more than 40 hours, that’s your decision, you don’t have to get permission.
Because you are a business, the gig company now becomes your customer, not your employee. That’s a huge change in the dynamic of the relationship. It also means you can have other customers, and it is entirely up to you how you juggle those customers.
Deciding between the two
My opinion is that the freedom is non-negotiable.
If an AB5 type law passed in California, my delivery days would be done. I absolutely refuse to be an employee of any of these companies.
Let me put it this way: I’m okay with not being able to trust them when they are my customers. I’m not okay with that when they’re my employers.
For you, you have to make your own choice. There are consequences to not being an employee.
There is no guarantee. These companies owe you nothing until you actually complete a delivery. Are you okay with that?
There is no minimum wage.
These companies don’t have your back.
I’m okay with all that. If I’m taking control, that’s all up to me anyway.
Business ownership types
I wouldn’t call independent contractor a business type. It really boils down to a description of your relationship with the company that is paying you. They are paying you as a business. It’s up to you to figure out what type of business you are.
Some business terms and classifications
Running a business is a broad term. There are a number of legal definitions. What I’m giving is more of a descriptive definition than a legal definition. If there’s confusion or need for clarification, this is a good one to bring up in the facebook group – and I know a couple of you might be better at describing all this than I am, so feel free to chime in there as well.
This is the definition that fits most of us the best. It essentially means you are an individual acting as a business. You don’t have any legal structure around your business and your profits are taxed on your individual income taxes.
The best way I can describe this is if you get together with another person to operate your business. The business is in both your names (or all three or four or whatever). Generally there’s an agreement between partners and may or may not have any legal structure.
A corporation is where the business becomes a legal entity of its own. You would create a corporate name and it has its own legal identity. There are several types of corporations, with too many differences and advantages to go into here.
Different corporation styles are treated differently for taxes. Some have a legal structure on the one hand, but taxes still come out on the personal income tax for the owner(s). Others, the profits of the business are taxed on their own at a business rate.
A DBA is NOT a different business type. But some people might think of it as one, so I list it here. DBA stands for Doing Business As. It’s more of a legal name – actually more of a legal alias – for your business. If you’re a sole proprietor, it could be like Ron Walter DBA Beaker’s Bikes. “Beaker’s Bikes” would be the brand name for the company.
Sometimes you’ll see a corporation with a corporate sounding name use a DBA with a more market friendly or brand name. Maybe something like (totally made up) Kerygma Holdings DBA Frank’s BBQ. Who would buy Barbecue from a place called Kerygma?
A DBA probably isn’t that useful for gig workers. The name of your company is essentially meaningless.
Entrepreneur in its simplest definition is someone who’s in business for their self. That’s where the Entre in EntreCourier comes from.
There are a lot of different takes on what an entrepreneur is. Some think of people like Travis Kalanick who built Uber, where it’s all about raising capital and building big companies. Michael Gerber argued in his book that I mentioned earlier that most business owners are not entrepreneurs, because they never really developed an actual business, it’s more like creating their own job disguised as a business.
Are we entrepreneurs? I think it depends on how you approach it. Some would say if we never really developed the business model ourselves, we couldn’t really call it that. I’m not sure I could argue with them. Others would say it’s a state of mind , that if you’re doing more than just doing work and getting paid and treating it like a business, you could call yourself one.
A franchise is where someone else has created the brand and the business model and the way of doing business and put it in a package. You pay a fee for the rights to use the brand name but you own the business.
A lot of the restaurants we deal with are franchises. That McDonalds or Applebees store you pick up from might actually be owned by someone locally, and they pay for the right to use the name.
For a lot of people, a franchise is a great way to go into business. They don’t have to put the time into figuring out the branding or marketing or any of that. In fact the corporation gives them all the steps to how to run the business. They just have to operate it.
I made that one up. Surprise, huh?
Maybe that’s a term that could describe a gig worker. There are some elements of being a franchise, and some of being an entrepreneur.
It’s like a franchise in that we didn’t have to come up with the business model. It was all developed by Grubhub or Doordash or Uber Eats or any of the others we deliver for. We don’t have to do any marketing – they get all the customers and the restaurants and just throw out deliveries to us.
But we have more freedom than a franchise owner. McDonalds is very strict about their procedures. You can’t just go out and add Pad Thai to the menu if you own a Mickey D’s franchise. We don’t have to follow any rules about dress code or anything, and we can bounce between different delivery companies all we want.
I think that freedom and ability to strategize how to handle the different opportunities might put us closer to the entrepreneur designation than most people would think.
Since I’m throwing out terms here and there, I’ll mention this one.
I think this describes a significant portion of couriers (if not the majority).
They think of Doordash or Grubhub or whomever in terms of “we.” They think in terms of loyalty. They are afraid to step out and deliver for another platform because they could get in trouble. They worry about ‘how are we supposed to…”
And they think they’re supposed to get a wage and benefits.
I don’t blame people for thinking this way. Look at how these Gig companies advertise for people to deliver for them.
This looks like an employment ad, not a business looking for other businesses to contract with them.
That’s my beef with these gig companies. They don’t want you to think like a business owner. They want to pay for a contractor and get an employee wannabe. The way they communicate and punish and try to control how people do their work, it’s no wonder so many think they’re just another form of employee.
Because of that, I another term for employee wannabes.
So now that you know how I really feel…
What are you?
Who are you?
What is your business?
You don’t have to have an answer to that right now. But it’s good to start thinking in those terms.