Zahir Khoja, CEO, Wave.
Disengaged employees. A looming recession. Bare minimum Mondays and conscious quitting. Let’s face it; people are thinking differently about work.
It has been well reported that the pandemic years have seen a boom in entrepreneurship. According to recent U.S. Census data, Americans formed 5 million new businesses in 2022, a 44% increase over 2019. But what’s becoming even more apparent today is the after-effects of the pandemic, namely, the disruption to in-office, 9-to-5 jobs.
Many Americans are losing faith in conventional employment and feeling stretched thin by high inflation. Qualtrics surveys found that 52% of workers have considered looking for a second job. To find work, people are using technology in new ways to start entrepreneurial side hustles and create a lifestyle that works better for them. In fact, a recent study from my company shows that 51 million people (download required) in the U.S. work independently today, and creators are one of the fastest-growing segments of small businesses.
These trends are sparking a new wave of entrepreneurship and the rise of what some are calling “multi-hustlers.” I would like to look at a few trends that are shaping this group and consider how a new generation of entrepreneurs can set themselves up for long-term success.
Unlocking Entrepreneurship Through Work From Home
Remote work has made it much easier for people to try a side hustle. A recent survey found that 10% of U.S. workers have a full-time job plus a side gig. Add in gig workers (3.6%) and the full-time self-employed (8.6%), and that makes 22% of the workforce who are choosing flexibility and empowerment.
Now that some companies are trying to bring people back to the office, will this reduce the amount of multi-hustling? Overall, hybrid work is here to stay. While some companies are returning to the office for a few days a week, I don’t see us going back to the pre-pandemic “normal.” After three years of greater freedom and flexibility, employers can’t just put the genie back in the bottle. I believe that workers with an entrepreneurial spirit are likely to be more loyal to companies that let them work in flexible ways.
Making Money In Flexible Ways
Mobile technology and online gig platforms have made it so multi-hustlers can take their professional skills directly to the market—whether they’re a web developer doing freelance consulting projects, a carpenter selling woodwork or a personal shopper running errands.
Many everyday business tasks can now be completed entirely from mobile phones, giving everyone a “business headquarters” in their pocket. Microsoft’s survey found that 48% of small business owners are running the majority of their business operations from their phones.
Just like with hybrid work, it’s also hard to see side hustles going away. Among people who started a side hustle to make extra money for the 2022 holiday shopping season, 92% intend to keep doing their side gigs. We are seeing a permanent shift in how people think about their household finances; instead of cutting spending, what if you could go out and make some extra cash?
New Models For Tax And Money Management
If you’re a full-time employee, you get a W-2 form at tax time; but if you’re a multi-hustler, things can get more complicated. This new type of entrepreneurship requires knowledge and planning to ensure your income is properly recorded and that best practices for cash flow management are established.
Along with improving access to “income on demand,” I believe that entrepreneurs should look to new technology and education to get their financial house in order. This can help drive greater digital and financial inclusion and grow your business. Here are four essential guidelines for those within this new wave of entrepreneurship:
1. Separate your business and personal finances.
There are a few ways to do this, depending on how committed you are to being an entrepreneur. You can set up a limited liability company (LLC) or other legal business entity and get an employer ID number (EIN) for tax purposes, or you can do business as a sole proprietor under your own name with your own social security number. But either way, I highly recommend getting a separate bank account for your business income expenses.
2. Get creative with your business offerings but not with your expense deductions.
Personal, living and family expenses cannot be deducted as business expenses. There are also limits on how much you can deduct for business use of your car or home. So while things like local transportation expenses and insurance can be deducted, there are nuances. Check out the IRS website for what can count as a business expense, and talk to a tax professional for advice about your specific situation.
3. Report your business income—including third-party payment apps.
Just because you’re getting paid via mobile payment apps like Venmo doesn’t mean that income doesn’t count for tax purposes. All business income needs to be tracked and reported. The IRS is changing its rules for 1099-K reporting of business income received via payment apps; starting with 2023, gross business payments of $600 or more received from these apps will be reported to the IRS as taxable business income.
4. Take advantage of new sources of funding.
There are several organizations that provide resources, including funding and mentorship, to entrepreneurs who are part of the growing creator economy. For example, my company recently announced the Elevate Creatives Fund in partnership with The Shorty Awards, which aims to give a financial boost to creators looking to grow sustainable businesses. But there are many others as well, including LinkedIn’s Creator Accelerator Program and the COLORFUL portfolio competition offered by The One Club for Creativity.
Just as it’s becoming easier to tap a few buttons on a phone to access income on demand, money management models and tax prep mindsets need to shift. By establishing a separate financial identity for your businesses and leveraging easy-to-use technology to keep good records, even the smallest-scale entrepreneurs can build a strong foundation for future growth.
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