Small Business Labs

CNBC's Ultimate Side Hustle Guide for 2021

The number of people who have side hustles (also called side gigs) has been growing rapidly over the past 5 years.  

The reasons for this growth - and how to start and run a side gig - are nicely explained in CNBC's extensive field guide The Ultimate Side Hustle Guide.

Key quote on why more people are starting side gigs:

"Starting a side business is one of the smartest financial moves you can make right now. With the economy shaky, no one can have too much income diversity. Even people in seemingly secure public sector jobs have been hit with furloughs and layoffs since Coivd-19 struck ... Even if you aren’t worried about job loss, a side hustle can be a great source of extra income to pay down debt, save money and invest."

The guide goes on to provide practical and useful information covering everything you need to know to get going on a side gig.  The guide's topics include:  

Which side-hustle you should launch?

How much will a side gig cost you?

Getting a side hustle started

Figure out when and where you will run your side-hustle 

How to develop a budget and financial plan

Don’t forget tax planning

Open a separate checking account for your side hustle

Create a simple record-keeping system

Getting set up

Winning your first customers

Keep your business thriving

Even experienced side hustlers will find this information useful. And, of course, those new to side gigs will find it invaluable. 

The World Economic Forum's 2021 Global Risk Report

The World Economic Forum's (WEF) Global Risk Report identifies the top risks faced by businesses and society over the next decade.  

This the 16th year WEF has issued a global risk report and the results come from an extensive risk survey of a wide range of risk related professionals.

As the WEF chart below shows (click to enlarge), they group the risks by likelihood and impact.

The highest likelihood risks of the next ten years are extreme weather, climate action failure and human-led environmental damage.  Others include digital power concentration, digital inequality and cybersecurity failure.

The top spot on the highest impact risk list are new infectious diseases. COVID-19 has obviously changed the view of infectious disease risk, which came in 10th in the pre-COVID 2020 report.

Other top risks by impact include climate action failure and other environmental risks, weapons of mass destruction, livelihood crises, debt crises and IT infrastructure breakdown.

Overall, environmental and climate change risks stand out in terms of likelihood and impact. 

One could also easily argue that climate change is leading to increased infectious disease risk, so the risks related to environmental degradation are potentially even greater than described.

The report is long (97 pages), detailed and since it focuses on downside risks, depressing.

But as COVID-19 has shown us, it's not good to be under prepared for major risks.

Wunderman Thompson's 2021 Future 100 Trends Report

The 2021 edition of the annual Wunderman Thompson Future 100 report was released last year.  It's one of our favorite trend reports. 

Here's how Wunderman Thompson, a global advertising and marketing agency, describes the report:

The Future 100: Trends and Change to Watch in 2021 highlights emerging consumer behaviors with 100 trend predictions from Wunderman Thompson Intelligence.

Trends span culture, tech and innovation, travel and hospitality, brands and marketing, food and drink, beauty, retail, health, work and finance.

Each includes an original analysis of why it matters for the organizations whose products and services we use daily.

This year’s report also includes 21 exclusive predictions from leading experts across industries to mark 2021.

As with past years, the 2021 report is beautifully produced and long - over 200 pages.  

This year's report has more on work and entrepreneurship than prior years.  This is partially due to the pandemic, which has accelerated the blending of work and life.

It well worth skimming for anyone interested in trends.

The Important Role Small Businesses and Independent Workers Play in Corporate Ecosystems

McKinsey's Ecosystem 2.0: Climbing to the next level summarizes ecosystem 2.0 as:

In the emerging world of Ecosystem 2.0, data are the holy grail, the breakdown of sector borders is a given, and successful players try to lock in control points to expand horizontally and vertically across the grid.

The article chart below (click to enlarge), which shows the 7 largest companies in the world by market capitalization, really jumped out at us. 

The reason is small businesses and independent workers are important business partners for all 6 ecosystem companies.  They are also important end customers for these firms.

The ecosystem roles small businesses and independent workers play varies across the 6 companies.   

Examples include using their marketplaces to sell their products and services (Amazon and Alibaba marketplaces; Apple and Google's App stores), acting as value added resellers (Microsoft and Apple) and providing value added services (marketing help for those using Facebook and Alphabet's ad and marketing services). 

And in most cases, SMBs and independent workers are integrated into the ecosystems of these companies in multiple ways.  

There's also a large and growing number of other ecosystem companies that are reliant of SMBs and independent worker business partners.  This includes well known marketplace firms like Uber, Etsy and Upwork as well as firms like Schwab, who has thousands of small and solopreneur wealth managers as part of their ecosystem.  

In fact, there are ecosystem companies in almost every industry and most have SMBs and independent workers as important ecosystem partners.  

The rise of ecosystem companies is one of the drivers behind the shift to barbell industry structures.  

These industry structures consist of a relatively few giant corporations on one end, a narrow middle consisting of a shrinking number of mid-sized firms, and a large and growing number of small, micro and one person (solopreneur) firms on the other end.

See our Industry Structure section for more on this topic.  

Business Applications Continue to Surge

There were 1.15 million applications to get a business tax ID (EIN) in Q4, 2020.  This is an impressive 27% increase compared with Q4 of 2019.

As the U.S. Census chart below shows, business applications fell from Q3 by 28%.  But Q3 of 2020 was a blow quarter by any measure.  So despite the quarter over quarter decline, the Q4 numbers still show very strong growth by historical standards.

When we reported on the Q3 numbers last November, we said:

It's too early to know if this surge is a one-time event, or it signals a substantial uptick in small/solopreneur business formation going forward.  

Two quarters is still not enough to declare a long term surge in small/solopreneur business formation.  But it's enough to say we're likely going to see a substantial near-term increase in small business formation over the next 2 years.

See our post the Q3 business formation numbers for more detail on the data.  

Poshmark and the Rise of Social Selling

Poshmark is a social e-commerce platform where people buy and sell secondhand goods, mostly used clothes.  It went public last week and closed its first trading day worth $3 billion.  

In the Barron's article Poshmark CEO Sees Huge Market for Used Goods. Investors Agree the firm's CEO described the trends driving their growth and opportunity.  Key quote:

In a Zoom interview on Thursday with Barron’s from his office in Redwood City, Calif., Poshmark CEO Chandra said the company is riding three trends: the acceleration of e-commerce; consumers embracing social selling; and the growing market for second-hand goods. He sees a huge opportunity, and one the company is only just beginning to tap.

While we track all three trends, consumers embracing social selling is a powerful trend that we regularly see in our research.  

Social selling is defined a variety of ways, but at a high level we like LinkedIn's definition:

"Social selling is about leveraging your social network to find the right prospects, build trusted relationships, and ultimately, achieve your sales goals."

Social selling isn't new. 

The traditional direct selling industry (also known as multi-level marketing) has been around at least since the 1940's, with well known brands such as Avon, Tupperware and Mary Kay.  

The direct selling industry is also large, with about 6.8 million direct sellers serving about 37 million customers.  

But the growth of social media has made it easier and cheaper for consumers to leverage their networks to sell things.  This has expanded the interest in social selling.

The chart below (click to enlarge) is from the MBO Partners State of Independence study series.  It shows the percent of independent workers who said social media was their top source of customers (orange) and one of their top 3 sources (blue).

As the data shows, the use of social media by independent workers (self-employed, freelancers, independent contractors, etc.) to find customers has substantially increased since 2014. 

Especially interesting is the percent of independent workers reporting social is their top source of customers has gone from effectively zero in 2014 (it was .3%) to 10% in 2020.  

Social media is just one part of social selling - there are obviously other ways to leverage a network in the sales process.  

But as this data shows, social media has become an important customer acquisition tool for a growing number of independent workers.  We expect this growth to continue.

What is Good Information Hygiene?

Edelman released their 2021 Trust Barometer, which is an annual global study on the level of trust citizens have in institutions.

The Trust Barometer focuses on trust in governments, corporations, NGOs and the media and Edelman has conducted this study for two decades.

Not surprisingly, the past year was not a good one for institutional trust.  Key quote from Edelman:

After a year of unprecedented disaster and turbulence – the Covid-19 pandemic and economic crisis, the global outcry over systemic racism and political instability – the 2021 Edelman Trust Barometer reveals an epidemic of misinformation and widespread mistrust of societal institutions and leaders around the world.

The Trust Barometer has lots of good information and is well worth reading.

But we were particularly struck by Edelman's concept of "information hygiene" in this year's report.  

According to Edelman, "good information hygiene means having regular engagement with news, engagement with differing points of view, verifying that information and not amplifying or spreading misinformation."

They measure information hygiene across 4 dimensions:

1. Regular engagement with news: Do they stay informed?
2. Engagement with differing points of view: Do they avoid information echo chambers?
3. Information verification: Do they avoid assuming something is true simply because it supports their point of view?
4. Avoids spreading misinformation: Do they check information veracity before forwarding content to others?

Unfortunately, as their chart below (click to enlarge) shows, only 26% of Americans practice good information hygiene.

We constantly run into examples of bad information hygiene in our work. 

It's stunning how often we're presented with information and data that are obviously wrong -  and easily proven wrong with minimal fact checking.  

The culprit is is almost always bad information hygiene, which often manifests itself in the form of confirmation bias.  

Bad information hygiene is obviously a huge societal problem and there are no easy fixes. 

Regular readers know we somewhat regularly write about biases and how we try to overcome them in our work.  A big part of this is practicing good information hygiene, which we will continue to do.

Side Hustle Stack - A Directory of Gig Platforms and Marketplaces

Side Hustle Stack describes itself as:

"... a resource for finding various platforms to earn income—ranging from side hustles to building a full-time standalone business. With COVID-19, many people in our communities are looking for ways to supplement their income, and we wanted to create a resource for those looking for work."

The site currently covers about 200 different platforms and marketplaces and the chart below (click to enlarge), which from the Side Hustle Slack homepage, shows the categories they cover.  

Since we follow this space, we do our best to keep track of new gig work marketplaces.  But honestly, we haven't heard of most of the gig work marketplaces listed on this site.  

That's because there are now literally thousands of such sites, with more being added all the time. And almost all of the new marketplaces target a specific vertical market of niche.

These sites are part of the rapidly growing set of infrastructure and support services that make it easier and cheaper to start and operate a full or part-time microbusiness.  

Yet Again, Flying Cars are Predicted to be Just Around the Corner

Both the New York Times and the BBC have recent articles claiming that flying cars, in the form of flying taxis, will soon be common.  And it could be true this time.

The reason we say "this time" is people have been predicting flying cars will soon be in the air for over a century.  So far, they've been wrong.

Both Ford Motor Company and the Curtis Aircraft Company built flying car prototypes as early as 1915. 

The picture below is from a 1917 newspaper article and shows the Curtis prototype, which, of course, never went into production. It's also unclear whether or not it ever got off the ground.  

And in 1955 the Smithsonian Magazine predicted that by 2000 atomic powered flying cars would be common.  Their flying car picture, which doesn't looks very aerodynamic, is below.

         

More recently, the concept of the flying car has gained traction with many predictions they would soon be ferrying passengers around and avoiding crowded city streets. 

The picture below is from Uber's Elevate air taxi effort and according to Uber in 2018, their air taxi services would be in trials in multiple cities by 2020. 

In case you wondering, there are no trials underway and Uber sold its air taxi group last year.

But despite 100 or so years of the flying car predictions not coming true, they likely will over the next decade.  And as Uber and others have predicted, they will likely come in the form of flying taxis.

BBC's The flying car is here - and it could change the world claims, well, that flying cars already exist. Key quote from the BBC article:

In fact, flying cars are real – and they could shape how we commute, work and live in the coming decades. Advances in battery energy density, materials science and computer simulation have spurred the development of a range of personal flying vehicles (and the navigation systems that will allow them to run), from electric gliders to fixed-wing craft and quadcopter drones.

They are correct, flying cars are real - if prototypes and very limited production models count.  

But we still have a ways to go before we get to flying taxis being common.

Air taxi demand and economics are yet to be proven, air traffic control is still an issue and so are a large number of safety issues.  It's also not clear when regulators will allow a bunch of air taxies overhead in highly populated areas.  

However the technology has reached the point where flying taxis are likely going to happen over the next decade, and maybe even in the next 3-5 years.  

And since we've been waiting over 100 years, that's pretty soon.  

Ten 2021 Future of Work Predictions from MBO Partners

Last week MBO Partners released their annual future of work predictions for the coming year.  Their forecast themes for 2021 are:

Ten: Dip & Climb  
Nine: Happiness & Health  
Eight: Gen Z Arrives  
Seven: It’s All About Control  
Six: Exports Not Imports  
Five: Make It A Trillion
Four: Side Hustle Nation  
Three: Virtual Just in Time Orgs  
Two: Radical Remote Work 
One: Gunning for Growth  

One of the most interesting from our perspective is "Virtual Just in Time Orgs". MBO Partners describes this as:

Before, to build a larger business, an office, a staff and a payroll was needed. With the advent of new work platforms that enable real-time teaming between independents, we’re predicting a rise in the virtual, just-in-time organization – where talented individuals come together to deliver work and then disband until the next project arrangement. They maintain more control and flexibility, lower margins and raise efficiencies and satisfy their client’s needs for great results. With teaming on the rise (20% did so in 2020), we think that it’s only a matter of time before virtual reality is surpassed by virtual corporations.

Virtual corporations and related new forms of organizational structures have long been forecast to replace traditional corporate structures.  

One of the most popular futurist forecasts in the late 1990s was that large corporations would soon disappear and be replaced by virtual corporations made up of lots of independent workers.  

Obviously, this didn't happen - or at least hasn't happened yet.  In fact, large corporations have gotten much larger since the 1990s.  

But there clearly is a strong trend towards virtual microbusiness formation where independent workers, through teaming, outsourcing and the use of nonemployee labor are creating virtual organizations with the reach and capabilities of larger traditional businesses.

We'll have more on this trend in the near future.

MBO Partners is an Emergent Research client.