Not All Side Hustles Are Created Equal
The term and concept of “side hustle” have become a pretty ubiquitous idea in today’s western culture and with the increasing income inequality and stagnant wages in America, it’s no wonder why. The reality is that millions of people are trapped at the bottom of the income gap and stuck in a cycle of living paycheck to paycheck, and they want to break out of that.
I recently got into a bit of a LinkedIn debate with someone about side hustles. He was adamantly opposed to any types of side hustles. Advocating that if you’re serious about a business idea, you’re going to go all in. You’ll “hustle” at your current job and make enough savings to be able to quit your job and focus solely on your new venture. I find this problematic and unrealistic for a lot of reasons… But I don’t want to get into all of that. Suffice it to say; it only takes a few Google searches to find out that many of the world’s biggest companies were started as a “side hustle.” Ironically, this person was the founder of a Shopify development company, and some of his own clients commented that they had started their businesses as a side hustle.
The Light Side and Dark Side of Side Hustles
So let’s talk about side hustles. How they can be helpful, profitable, or a distraction — because not all side hustles are created equal. The primary distinction that I want to make is the difference between side hustles that can increase in value for you over time and ones that are just generating cash by exchanging your time for money. I think this is an important distinction because the concept of side hustles has recently been co-opted by the sharing economy unicorns through their marketing efforts.
I’ll just go ahead and state that I don’t think services like Uber and Instacart are side hustles. They’re part-time jobs. That’s not to say there’s necessarily anything wrong with a part-time job. I think there’s a lot of value in people being able to flexibly exchange their time for making money whenever and wherever they want. You may even make some connections that help you in an actual side hustle. But I don’t believe these are valuable as a long-term investment of your time because you’re not building or growing anything and as your reputation increases you don’t have control over the price you charge. So these jobs are solely a transaction of exchanging your time for someone else’s money.
An easy way to determine if something is indeed a side hustle or not is to ask “Over time, can I make more money for my time from this or am I simply exchanging my time for a fixed amount of money?” If the answer is no and you’re merely exchanging your time for a fixed amount set by the platform, then it’s not a side hustle. It’s a part-time job.
In the case of Uber it might be easy to view your rating as building your “reputation” and something that is growing, but in the case of a platform like Uber, the star ratings are only a grade of whether you’re going to get kicked out or not. The reality is that a 5-star driver can’t charge any more than a 4.5-star driver. Passengers can’t even pick their drivers based on their rating. And especially in the case of Uber, your reputation isn’t an asset. But a bad reputation is a liability (because you’ll get kicked out if you don’t maintain a high enough star rating). Yes, there are tips in Uber now, but that doesn’t get you very far in increasing the value of your time.
A service like Airbnb is a bit of a grey area because you can set your own price. As your reputation increases, you can most likely charge more, but there’s a pretty hard cap on what people will pay for your rental. And what you have to watch out for on platforms like Airbnb is platform dependency. When you’re doing Airbnb, you’re pretty much just working in the short term rentals business (something that existed long before Airbnb), and Airbnb is providing you leads. If all your clients are coming from Airbnb, then your business has a lot of risks associated with that platform dependency. If something happens to Airbnb or if Airbnb makes a significant change to their platform, like an algorithm change that so many startups are known to do these days, then you’re up a creek without a paddle.
And sometimes on platforms like Airbnb, you also have to worry about reputation damage that you have no control over. I recently had a situation on Turo, an Airbnb-like service for car rentals, where a renter left me a 4-star rating. They had rented my electric vehicle, and despite all the information and warnings in my messages about how and where to charge and to never to go below 50 miles range, they ran the car down to 0 miles of charge (i.e., empty) and just barely managed to get to a charger before it totally broke down. The person even apologized for not reading the directions and wanted to rent the car for another day. But for whatever reason, Turo wouldn’t let them request an extension, and ultimately they kicked this person off the platform.
And in the end, that person left 4 stars for the rental. No explanation. No fault of mine. Out of 15 reviews, the only 4 star review. Seems a little unfair, huh? And despite all the circumstances, Turo wouldn’t do a thing about it when I asked to have it removed. That sucks, but its a great example of the platform risk I take when using Turo. You can give perfect service, but at the end of the day, the platform has all the control. Personally, I don’t put Turo in the true side hustle bucket. I think its more of a part-time job.
Real Side Hustles
So I’ve talked a lot about what doesn’t make for a good side hustle. Let’s look at what does make for a good side hustle!
I think the core component of a good side hustle is to find something that, over time and with work, makes your time more valuable. Something where the time to money conversion isn’t a fixed rate set by another company. Something that could potentially become your “main hustle.” (i.e., your full-time job) and if you spent 40hrs/week doing that work then you’d be satisfied with that.
Product-based Side Hustles
There are a couple of ways to go about that. One way that’s been massively popularized over the past few years is to go the product route where you’re selling or creating products that if you were able to sell enough of, could scale up to the point where you’re making a decent living. And eventually, it could even become an independent business that needs less and less of your time. This is the kind of business Tim Ferris describes in the 4 Hour Work Week. I think this route is still achievable, but because there are so many copycats the market is pretty saturated now so it’s much more difficult than its made out to be in books like the 4HWW. On the bright side, the barrier to entry into online products and eCommerce is lower than ever through services likes Shopify and Squarespace so you can try your hand at it without much risk or investment, just like the businesses I referenced at the beginning.
Services-based Side Hustles: The Craftsman Method
The product route isn’t the only route though for building a good side hustle, and it’s not the method I took. There’s also a much less commonly known route, what I like to call the “craftsman” method and its the route I took even though I didn’t think of it in that context at the time. I had read the 4HWW and was following its plan by getting my job to let me work remote, but once I had more freedom and control over my time, I found I didn’t have the desire to sell some random product online. So instead I chose to invest my time in building my skills and reputation as a web developer rather than selling a specific product. (I think I figured too if I ever wanted to sell something, at least I’d have some of those eCommerce skills!)
When I got my first part-time web development gig at the age of 16, I was only making $7/hr. Even less than the average Uber driver makes right now! But the critical difference is that web developers with skills and a solid reputation *can* make way more than that. After college, I ended up working full time in the IT world but continued to do web development on the side. So web development was my side hustle for over ten years. Initially, it wasn’t a speedy progression, but over time I started to see the value of my time, skill and reputation increase. And the more effort I put into it, I could see the more my value increased. By the time I was able to quit my full-time job I was charging between $60-$80/hr and had enough work to fill my schedule for at least 40 hours/week. Honestly, once I had made that transition, I had already fulfilled my dream. But there was still room to increase my hourly rate more as demand grew until I reached pretty much the peak market rate for the service I was offering.
The Next Level Craftsman Method
But the craftsman route isn’t even just limited to the number of hours you personally have in a day at the highest market rate. As a highly reputable craftsman, your skills can also be leveraged by hiring other craftsmen and providing your value in more of a leadership capacity, which is where I found myself eventually. Ultimately, you’re still responsible for the quality of the work of your team, but you’re not doing every single piece anymore. Truthfully, that was not my dream or plan at all when I started doing web development. My aspirations were just to be able to make enough money doing freelance web development to replace a full time IT salary. But eventually, the demand just got so high that I felt that I couldn’t increase my price anymore or risk losing clients that I loved working with. So I had to scale up and create a team to be able to keep working with these clients and be able to occasionally take on new clients that wanted to work with me. In hindsight I realize that what I stumbled into doing isn’t even a novel concept. Lots of traditional craftsman like plumbers or carpenters start out just on their own and eventually build a team around them.
In future posts I’ll go to go into more detail on the craftsman building process, the value of your reputation, some of the pitfalls, and why its useful to start broad, but eventually specialize and find a niche (in my case, Magento/Shopify eCommerce web development).