Planning to start a small business
People like using big words such as budgets, business requirement specifications, business plans and arabica. Sadly, for most of us, we don’t have a clue what these are. We want to make money from a side hustle, but the jargon freaks us out.
In this post, I want to discuss budgeting (and how to charge clients), as well as how to plan for your side hustle.
Remember – if you fail to plan, you plan to fail!
Income from your business
In my article “You are a business“, I explain that you need to run yourself and your personal finances as a business. In the same light, you need to run anything you do for money as a business.
A side hustle or side business is no different. You are required to do a trade off – money for time you could’ve spent with your friends, family or drinking coffee. It’s therefore exceptionally important that you make money from what you’re doing – and that your business is conducted with a specific purpose.
Planning your side hustle
With organic side hustles, we find that people come to us and ask us to offer our services to them. This is awesome, yet can often spiral out of control.
For example, a graphic designer can easily create business cards for clients – even though their core side hustle is advertising. The issue is 5 years down the line they find themselves with 24 243 453 453 453 453 534 business cards in their portfolio. It’s exceptionally difficult to break into the advertising market with that portfolio!
Whether organic or intentional, it’s important to plan your side hustle. Simon Sinek did an excellent talk on Ted about this. He explained we need to start with the why.
We need to focus on why we do something – our vision.
How we will achieve that is next, and only third in line is what – our product or service.
The reason is people will buy into our dream, not our product. For example, many people can create business cards, sell nyaope or kopi luwak, do coding, be a vendor or sell mobile phones.
Once you’ve defined why, how and what – you will be able to focus on who you want to become.
Keeping your future in mind will assist you in building the business you want.
It’s your choice to sometimes do something outside your vision – as long as you remember that it’s not who you are.
You need to spend money to make money – right?
Okay, in some industries you might need some.
I do believe that with some innovation and creative thinking we can all get a business off the ground at a minimum cost.
Have a think about what you’re able to do to move yourself forward in your hustle.
It’s possible – how will you resolve it?
Should I use my retirement savings to fund my business?
Many people think they should use their retirement savings or emergency fund to start their business.
Don’t do that.
The issue is that we all think we’re seasoned veterans in business – and then we lose our life savings in the business.
Think a bit about how you can move your business forward without spending large amounts of money.
Think about what you actually need – it’s often a lot less than what you think!
Budgeting for small businesses
If you don’t like complicated calculations, you can always just look at money in and money out – income and expenses. This is if you don’t have assets and other things.
On the other hand, you might need to do more complex calculations for yourself, investors and SARS. A business works with loads of different sheets and statements. The one below is one I quite like. It has an income statement and a balance sheet.
In the income statement, you can see your income (money in) and expenses (money out). You should be able to do quick math to see if you’re making a profit or a loss.
The balance sheet will give you an idea about your assets (things I have) and liabilities (things I owe). In general, you should start with as little as possible in the liabilities column, as this will directly affect the health of your company.
Profit, viability and scalability
Don’t spend years planning.
The most important things that you need to know is:
- Will I be able to make a profit?
- Does someone want to buy my product or service?
- Will I be able to scale it to make it more profitable?
Once you’ve answered yes to these, you can move forward to find your first client. this will prove the second point.
Knowing where you’re going is important.
Counting the cost is even more important.
Make sure you know where you and your side hustle is going.
Don’t overcomplicate things.
Article reposted with permission from Frugal Local.