Are you thinking of starting your own small business/side hustle? Maybe you are can see yourself quitting your job one day to run your business full time.
Starting a business can be challenging and knowing what things you need to focus on upfront is important.
To run a successful side hustle, you need to put a good foundation in place
Below are the things you need to put in place:
1) Creating a good business plan
If you have been thinking of starting a side hustle, you may want to put a business plan in place.
Don’t let the word business plan scare you. A business plan is only a road map for your side business. You need a plan in place, which focuses on key things to help you build your business successfully. It does not have to be 50 pages long, just a short statement – could be one page long, but the important thing is it’s focus on the important aspects of your business. It will definitely change over time, therefore don’t put too much time into that drives you away from the main goal.
It is all about putting your ideas on paper and starting out, and you will be surprised at how other things will follow as your business comes to life.
It will help you see what you want and what you don’t want in your business and you may even begin to come up with new ideas as you go along.
How To Create A Business Plan!
The following topic areas and questions will help you create your business plan.
i) The executive summary
This is just a summary outline of what your business is about and what problems your product or service is solving. This is generally just a one page document and you may come back and develop it after you have completed some of the other areas of your business plan
ii) The products and services you’ll offer
What are the products or services you will be offering your customers?
Are these products/services in line with the problem your business will be solving?
How will you price your products or services? Is there a market rate for them? How will you be selling these products? These are very important questions that will lead to success in your business.
iii) Who is your target audience / avatar?
Who will you be selling your product or service to? This is called your target audience/avatar (their demographics i.e., where they are located, their age group, their income and why they will be interested in your business.
Who is your ideal client and how will you attract that client to yourself?
iv) Your model of operation
How will you deliver value with your product or service? What experience will your customer have after consuming your product or service?
This will help you package your product or service in a way that will align with the experience you want your customers to have
Do you have an online presence, would you need a website in place, what other online media will you need? Have you considered what your brand will be?
When you have your side hustle up and running, you will be able to establish processes as build your business
v) Start -costs and financing your business
This is the most important part of your business planning.
It is important to know what the start up costs for your business will be, will your business need any registrations? Are there any registration fees needed, branding costs, website development costs?
Who will be funding your business, will it be yourself? Are there any other funding sources you can find? Do you think you will need a partner/partners or other people who can invest in your business?
vi) Running Costs / Cash Flow
This is also known as the working capital for your business, your cash flow is how much you need to keep your side hustle running day-to-day.
Cash flow is king for any business to succeed. Businesses don’t fail because they are in debt or anything else. They fail because of cash flow.
These are the costs that you will incur in your day-to-day operations, called your operating expenses. These expenses will help you determine how much you’ll need at a minimum each month to keep your business going.
Staying on track with your cash flow is the most important part of running your business and that is where you need to think about budgeting. Budgeting will allow you to manage the finances of your business properly and keep you on track with your expenses
vii) Who will your competition be?
This is one area of business that nobody likes, unfortunately no body escapes it. Therefore, your business plan will be incomplete identifying your competition, at least some of it.
You need to identify where your competition is located? What is their size? What are their strengths and what are their weaknesses?
With these in mind, how can you differentiate yourself from them and make what you are offering better?
viii) Your Profit Forecast
This is determined by how you intend to get your products or services to your customers. When you have a forecast of what your revenue could be, then you can also forecast what your business profits could be.
2. Choose What Type of Business Entity You Want to Set Up
After having your business plan in place, you want to ensure that you have your side hustle set up appropriately taking into consideration legal and taxation implications. This is called your business structure.
There are different types of business structures you can choose from that are recognised by HMRC
These include Sole Proprietorship (or sole trader), Partnership, Limited Liability Partnership (LLP), or a Limited Company.
Talking to an accountant will help you determine what business structure is most suitable for your needs.
Let’s summarise the different types of business structures below so that you have an idea of what they are:
– Sole Trader
The sole trader is a ‘self-employed’ person. That means your business is you. Legally, you are not separated from your business.
Tax wise, you will need to register with Her Majesty’s Revenue & Customs (HMRC). This registration will provide you with a Unique Tax Reference Number (UTR) and will enable you file a self-assessment tax return to take care of your taxes. As a sole trader, you pay tax and national insurance contributions based on the profits generated in your business.
– Partnership
As you may have established from the name, in a partnership you run your business with a partner or multiple partners and there is a partnership agreement that binds the partners together. You and your partner are all personally responsible for your business. You share the business profits and each partner pays the tax on their share of the profits.
Limited Liability Partnerships (LLP)
Here the number of partners is not limited but at least 2 of the partners have to be responsible for filing the annual accounts.
The legal structure of an LLP protects its members’ assets, and limits them to whatever amount they have invested in the business and any personal guarantees they have given, hence the term, limited liability in the name.
– Limited Liability Company (commonly called Limited company)
A private company is an incorporated body and it limited by shares. This means that the company has shareholders as opposed to partners. The liability of the shareholders is limited to any money that they originally invested in the company, that means, that, the shareholders assets are protected in case the company doesn’t succeed.
Company directors run the company on behalf of the shareholders and a company is registered with the Companies’ House in the UK
It is worth checking out with your local council if there are funding opportunities for the product or service you want to provide.
Conclusion
Now you have all the basic information you need to successfully set up a side hustle.
The next step is working on it to make it a success.
Patience and hard work is needed to build a successful side hustle and it may grow to become your full time business one day.
Don’t waste any time, go ahead and take the steps and get your side hustle up and running
If you are in business and is not sure of managing your cash flow, contact us on info@mysavvyfinance.com and we will be willing to help.
