Note from Larissa… I was challenged to write an article about the book “Profit First” from the perspective of a gig worker. As many of you may know, I have been a gig worker for sometime now and I have my fair share of gripes with the industry. However, Profit First’s unique system is certainly applicable to being a gig worker and if implemented correctly could set many workers free from the problems with gig working. Let’s just say I will certainly be looking to consult with a Profit First Professional to understand this innovative system.
Profit First is an innovative system that reframes accounting to work with human behavior that heavily borrows ideas from the greatest generation. The author, Mike Michalowicz, describes his mother sorting money into a series of envelopes which helps her understand her financial reality at a glance. Michalowicz instructs business owners to create a series of bank accounts that act similarly to those envelopes, and this is where Profit Firsts earns it’s name. Instead of thinking that profit happens after expenses, Michalowicz has business owners allocate a percentage of their revenue as profit. This brilliant strategy forces business owners to determine which business expenses are necessary instead of spending money frivilously. The results are tremendous, and thousands of businesses have switched to Profit First because it works. As previously mentioned, I was challenged to apply Profit First to my own gig-working. I decided to do a thorough investigation, and as I read through the content it became clear how intuitively the system is designed. I would say that there are three core tenets that are applicable to gig – working:
Small Plate Theory – We need to ensure that we do not have access to 100% of the revenue we earn. If we have money, we’re going to spend it, and simply putting it out of sight will enable us to “get creative” and be frugal.
Mastery Before Variety – While it’s tempting to offer exciting new services to our clients for a quick pay day... those new services come with their own set of expenses. We need to be careful to ensure that all of our offered services are actually profitable.
Cut Costs, Brutally – The bread and butter of Profit First is understanding what is needed for operation. Any expenses will take away from our profit, and that shouldn’t be acceptable.
But knowing these tenets of Profit First didn’t give me a road map to apply that to gig-working. Afterall, I’m a woman typing articles in Google Docs, and as a PC building enthusiast I don’t necessarily consider my computer a business expense because I like spending my profit on parts. Then it hit me: an average gig-worker is working on a myriad of different platforms. Upwork, Fiverr, Gigworker.com, Jobble, and these platforms operate by taking a percentage of your revenue. Upwork’s service charge is 10%, and that’s generous compared to other platforms. Clearly, these platforms are taking my Profit First, and following the core tenets that must be unacceptable.
How do I cut those costs to make my business more profitable? Two things come to mind: outgrowing the platform, and building services charges into my rates. I can immediately see the arguments against that: “You’re crazy, Upwork, Fiverr, and other platforms are the only place I can find work.” Or, “I need to charge a competitive rate or clients won’t work with me.” Michalowicz has an entire chapter dedicated to responding to those arguments, and to be honest, those arguments are flawed. Think about it, we’re gig-workers, not employees, and we don’t necessarily need to be ‘fair’ when quoting a wage. We need to be fair to ourselves first. We need to understand that clients looking to use gig-workers as pseudo-employees ought to be avoided, and understand that higher a gig-worker ought to be expensive. The nature of gig-work is a client has a project with a tight deadline, and they can’t spare anyone to do that work. That isn’t a position that clients should expect to pay low rates for.
And if you want to break away from platforms that are taking away from your profit? I would encourage you to add your clients to your social network. As you complete projects, your reputation will grow, and your clients are more likely to directly message you to do more gigs. Gigs that aren’t necessarily connected to those platforms and won’t be subjected to their fees.
With those revelations in mind, I would encourage anyone to work with a Profit First Professional. It's a tricky system, and no system fits every business. You might have expenses in your industry that I can’t consider. Thankfully, Profit First is designed to be customized for your business and a professional can help you set that system up. An article really cannot encapsulate the depth of this system, but I know the intuitive nature and core tenets can only help gig-workers.