Entrepreneurship is often synonymous with the concept of the American Dream. Every year, millions of workers decide to start their own companies that are built on things that they are passionate about.
Is there something that you are passionate about, but you do not want to leave the comfort of a regular job? Then it may be time to start a side business from your home. Side hustles are a great way to bring in additional income while also doing something that you love. Maybe there is an industry need that you have discovered, and you want to provide it for people in the form of a product or service.
Unfortunately, 50% of new businesses fail within five years, so there is clearly a difficult path to success when creating a new brand. Here are a few tips to keep in mind when you are considering how to build and finance a side business.
Small Business Loans
Once you have a solid idea and a business plan for your solo venture, it is time to consider how you may overcome those startup costs. Most businesses have to spend some money before they can start making money, which could include web domain fees, supply chain costs, salaries/benefits, marketing expenses, and more. You may not have the savings necessary to fund these aspects of the company.
Fortunately, small business loans are available to new entrepreneurs that require financing. You could borrow up to $50,000 with a small business microloan as long as your personal finances are in order and you have a solid business plan.
Track All Your Financials
Running a business is not as simple as performing a service and getting paid for it. Every data point that involves an exchange of currency needs to be tracked. This will become incredibly important for setting a budget and paying state taxes to run your business. When tax time comes around, if you have failed to track your company’s finances to the smallest detail, you could end up getting punished, even if you still maintain a regular job.
Right off the bat, there is going to be a self-employment tax that you will have to pay on the income that you earn from the side business.
Figure Out How You Will Receive Payments
Your point-of-sale system is an important decision early in the process of building a new business. Are you going to invest in a card reader that can be connected to your phone for in-person sales? Will there be an e-commerce platform on the website for online transactions? Will you set up a business account on Venmo without a phone number to protect your personal information on this financing platform?
Determining how your business will make sales and earn revenue is a decision that needs to be made early on so you can accurately track your finances.
Come Up with a Budget
Many small businesses do not make a profit for years and even operate at a loss for the owner in the early days. Coming up with an accurate budget is the best way to determine what level of revenue is needed to maintain operations. There are tons of budgeting tools on the internet, many of which are free, that you could utilize to break down your various expenses and calculate how much funding is needed for various initiatives.
Remember that you have to spend money to make money, and creating a detailed budget can show you what the company’s financial goals must be to stay in the industry.
Seek Outside Investors
Another funding option that many entrepreneurs do not consider is an outside investment. While you can rely on your savings or a business loan to fund your new side hustle, there is also the possibility that other people who believe in your dream are willing to provide additional funding.
The key to securing new investors for your side business is to convince them that you have a clear plan for success. Writing a business plan that includes financial projections, market research, product details, and a unique selling point can show potential investors that you understand the audience and have a plan to gain a foothold in the industry. That might be enough for them to provide you with funding for business operations.
Spend Plenty of Time Researching and Planning First
The reason why a lot of side hustles fail early on is because the owners did not plan very well. By spending a lot of time researching the industry, understanding the target audience, and planning your finances, you will be in a better position to hit the ground running and secure funding for the brand.
Although this is just a side hustle at the moment, it could develop into a full-time entrepreneurial adventure, so it makes sense to do things right from the beginning. Study the market, optimize the product offering, secure funding, start considering how to track your finances, and think about your point-of-sale platform.
