As you start your side-business there are some tips that will help you avoid making money mistakes which could derail or hold back your progress.
It is an eternal riddle: you want to begin a side-business to earn money, however, you require money to begin the side-business. Luckily, the only actual solution would be to compromise: start small, and build up the business as money continues coming in. In so doing, you will not lose a big amount at once:
Ways To Minimise The Money Risks
Below are important ways to help you minimize the money risks while starting a side-business.
Offer Equity In Exchange Of Labour
When you require skilled labor but cannot afford yet, you can think of offering equity. Here you do not need to consider partnerships – keep in mind you could offer some kind of equity for important, one-time jobs.
For instance, you may offer a specific number of shares in the business, for a one-time job that involves coding your website or making the first prototype. Another option, you can offer them a portion of your sales, when you need a really big job done( for instance illustrate the entire product catalog).
But the downside is when your business becomes very successful, you can drastically be overpaying. When the side-business develops into a large company, that person you had given a thousand shares might sell them off for a fortune. But on the flip side, when the business fails, you will not lose a lot of actual money.
Invest while You Grow
Reduce the first capital investment. For instance, do not instantly assume you require paid Google ads, the country’s best web designer’s, professional photographers for the illustrations, etc.
Most big businesses today grew over time, by bit by bit reinvesting the profits; for example, UPS started with a bicycle and some hundred dollars.
Rather than putting aside a huge amount, and declaring that you will use it all in the business, work in reverse: work out what the business requires, and then list them following order of priority. Then as you make the first few transactions, invest the returns back into upgrading the business.
The aim is to have the side-business “paying for itself”, instead of getting personal loans to be used as capital. This means you might not see the profits, for a while maybe the first and even second year; however, it ensures you will not be in debt when you opt to shut the business down.
Use Optimised Payment Methods
It is crucial you consider using optimized payment methods when purchasing things for the business. For instance, when you use up about S$1,000 per month on business operations, then you might consider putting the cumulative expenditure on a cashback card.
With just 3 percent cashback, this will get you S$300 each month. Be sure to repay the card debt immediately, so as to avoid incurring interest.
Similarly, always look at the exchange rate, when making purchases from abroad; or the effect of using Multi-Currency Account, then you will not have to pay for the Forex rates.
Therefore, how you pay the bills could save or cost you money, hence you need to research to discover the approach that will work best for you.
Confirm the Legal Liabilities in Your Agreement
It is recommended you pay a one-off fee to an attorney, to draft you a standard agreement for your deals. Especially, you need to remove or minimize any legal liabilities.
For instance, when your side-business is coding websites, what will happen when the payment portal fails. A demanding client might include a clause, which permits them to regain the lost funds from you.
Always look at what you may or may not be held legally responsible for, each time you work for any client. Yours being a starting business, what it will take is one lawsuit which will bring it to a devastating end. It is normally bested you avoid working for clients who will saddle you with huge legal liabilities; the risks are too high.
Cover Your Costs With a Deposit System
Since yours is a starting side-business, it is likely that you will have some operating costs. For instance, you will need to buy a ladder, brushes, paint pots, if you will be painting someone’s walls.
To start with, make sure you charge a deposit which should cover most if not all of your initial costs; from there the remaining amount can be paid later to you. This will ensure that, when a client does not honor the payments, you will not lose the money used for buying all the equipment for the job.
Be particularly careful and do this as you take on big projects, having big upfront costs coming to you. For instance, when your side business involves running family day events for big corporations, likely you will have costs which reach tens of thousands of dollars; somebody will have to pay for the venue, pay the caterer, pay for all the essential permits, etc.
In order to cover all these, you will need a deposit to do this, this is in case that a client decides to pull out after you have paid for them.
Choose Your Loans Carefully
It is advisable that you avoid financing your side business using a credit card loan. This is because the rates of interest charged are around 26 % per annum. Also while regular business loans offered by banks, moneylenders and other financial institutions are a good idea, you normally cannot get such a loan until the business has been bringing in profits for more than two years.
Meanwhile, you might have to depend on personal loans offered by licensed moneylenders, or even fixed installment loans, for some money.
Even though the family might be ready to offer you interest-free cash loans, it is suggested that you avoid this. Do not mix family and business in this way, you will be able to minimize any future conflicts.