I side hustle extensively.
Several readers have asked me lately about which side hustle they should be pursuing. The truth is I don’t know. The hustles I embarked on were a result of unique circumstances surrounded me at the time as well as my personal skills and experience. Since this varies wildly between individuals, what worked for me may not work for others.
So instead of writing a typical post about the “top 10 side hustles you can start doing right now”, I will give you a framework about the features of various side hustles and help you to decide what might be suitable for you.
The “speed-rate-scale” (SRS) dilemma
Every business falls under what I call the “Speed-Rate-Scale” (SRS) framework, which determines the profitability and growth of the business. By the way, I will be using the word “work” throughout the post, which encompasses all revenue producing activities (employment, services, products, commodities for rent).
Speed – how quickly could you convert your work into cash.
Rate – how much could you charge per unit of your work.
Scale – how much / quickly could you increase the revenue without incurring additional time and cost.
What tends to happen is that these 3 factors are often in direct conflict with each other: what brings in cash quickly often attracts low rates and cannot be easily scaled up.
For example if you decided to start as a part time cleaner as your side hustles, which is often a cash-in-hand business (you get cash as soon as your work is done). The speed of payment is super fast and yet the unskilled nature of the work makes you a commodity therefore you tend to compete with other cleaners on pricing alone, leading to a race to bottom and attract low rate. Given the work depends on you as an service provider, you are physically limited by the number of hours in a day and hence you cannot scale beyond 24 hours multiplied by your rate. The potential earning of this side hustle doesn’t get me out of the bed.
On the other hand, imagine if you owned an online cleaning agency which matches cleaners with homeowners (e.g. Handy, Task Rabbit). Then the speed of payment will still be fast if you opted for a prepayment model, once the platform has been built. However the process of building the platform and attracting the first customers takes significant amount of time and resources which the cleaner side hustle would not have to bear, thus raising the barrier to entry. The rate will remain quite low as you are taking a commission on what’s already a low rate. Yet the business can scale up easily because it is leveraging the labour of many cleaners on the platform. The only limiting factor is probably your computing power and customer service capacity. That is a much better side hustle if you can afford to invest time and capital.
As you can see, there isn’t a silver bullet and your ideal hustle will depend on how you balance the SRS dilemma.
1. High speed, high rate, high scale
These are the dreamland for businesses and to-date I am not aware of a single venture that could be easily built to generate cash, be strong enough to fend off competition to sustain high rate and be sufficiently competitive to scale rapidly.
I think the closest to this would be if you had inherited a profitable multi-billion business from your parents and are sufficiently skilled to self manage or hire professional managers and then just wait for dividend payment.
Examples: unfortunately I don’t think it exists unless you inherited a business.
2. High speed, high rate, low scale
So the first thing that came to my mind was prostitution:
Cash in hand
Relatively high hourly rare if you are young and attractive (£100+ per hour)
Incredibly difficult to scale (you are limited by the number of orifices in your body).
Presumably selling the body isn’t your thing, the next closest side hustle I can think of is real estate investment.
Assuming you have chosen a desirable location, then the void period should be small and you will be immediately generating rental income. The rate is fairly high given the time spent on management per year is usually less than 40 hours. If you decided to invest in crowdfunding property platforms or REITs then the income will be entirely passive.
The bottleneck with property investment is that the maximum return is fixed by the market dictated yield and its rate of capital appreciation, which in the long-run is in line with the general economic growth. This means the ability to scale is entirely dependent on the number of properties you own, which is limited by your input capital. Unless you are awash with cash (or have an awesome bank willing to lend you an unlimited amount of money) then this may not be a hustle that brings you significant net income.
Examples: real estate investing, prostitution (only kidding).
3. High speed, low rate, low scale
Uber drivers, Task Rabbit taskers and cleaner are what comes to mind.
As discussed previously, these hustles have extremely low barriers of entry and the skill differentials are marginal, therefore you can only compete on price alone. Consequently the rate is low and as you are the sole revenue generator, scalability is severely limited.
Examples: Uber, cleaner, Task Rabbit handyman.
4. Low speed, low rate, low scale
It’s quite rare to encounter a side hustle like this as the 3 “lows” make it extremely unattractive. The only thing I can think of is an unskilled being a manual labourer, which I assume isn’t something you want on top of your day job. So avoid these like plague.
Examples: manual labourer, but try not to do this one.
I’ve now covered the obvious ones. However things get a bit more exciting when we start flicking the high-low switch into some unusual permutations.
5. High speed, low rate, high scale
These usually involve the trading of products where an active market exists. Side hustlers would typically buy a commodity product (e.g. concert ticket) in advance with the anticipation of price appreciation before selling. Given that there’s an inherent value to these products, speed of transaction tends to be high and thus payout is quick. They can be easily scaled up as the unit cost tends to be low (vs. property at least) and one person can buy multiple of them.
However the commoditised nature of these products exerts a restrictive pressure on your pricing thus your margin will be in line with the market and is extremely limited.
Examples: day-traders, ticket master
6. Low speed, high rate, high scale
To be able to charge an above average rate (i.e. premium), your product / service must be valuable and exclusive. It must bring benefit to certain people which they cannot obtain from elsewhere.
To scale up easily, your product / service must not require the presence of yourself during the process of fulfilment and delivery.
The first thing that springs up to my mind is selling digital products to the likes of e-book as well as becoming a white label product vendor through e-commerce.
Such ventures take a remarkably large amount of energy and cost to create momentum as there’s heavy upfront and ongoing marketing costs required, thus the payout time is long. However once it has penetrated its target audience, then the incremental revenue should largely translate into profit, which enhances the ROI. Furthermore since you sell through digital platforms then there is no requirement to man the shop and thus scalability is never an issue.
Examples: e-book, e-courses, e-commerce.
7. Low speed, low rate, high scale
This avenue relies on high volume to succeed and it is usually digital. A popular blog is an ideal candidate as it receives high traffic, which means it can insert affiliate links and adverts (e.g. Google AdSense), which monetise clicks and sales conversions. Each individual click may only be pennies however when accumulated over time leveraging the high visitor volume, the absolute £$ value becomes serious.
8. Low speed, high rate, low scale
This route is feasible when you possess a specific skill that is high in demand and the supply is relatively scarce. This means you can charge a premium rate. Freelance consulting is a prime example. As a business consultant, I can perform complex financial analysis, modelling as well as creating business strategies, all of which require high levels of cognitive skills that can command a premium in the market.
The only problem with this side hustle is that up scaling is incredibly difficult. Consulting is still trading time for money and thus you will hit an upper ceiling eventually. The only way to mitigate this is by setting up your own agency, which is an avenue that I’d like to explore in the future.
So here you go, not a a comprehensive list of side hustles for you to choose but a framework that you can use to embark on your side hustling journey.
Which quadrant are you on currently? Please comment away.