Many people have an entrepreneurial streak but are not ready to switch from full-time employment to starting their own business. They might need the security of a regular pay cheque or think their idea is too risky for a total commitment. A “side hustle” can be a good compromise.
“There are two great Australian dreams”, says Trent Innes, managing director of accounting software firm Xero.
“One is to own your own home and the other is to be your own boss. In terms of social trends and new technology, I can’t think of a better time to be an entrepreneur.”
Innes points to a recent report by Xero, The Ageless Entrepreneur, which shows nearly a quarter of Australians already have a side business on top of their regular income and a further 38 per cent hope to start one.
While many want an additional income stream to deal with increasing living costs, the most common reason for wanting to start a business is to try something new.
“Technological change has been a key driver, from setting up a business to doing the administration to using digital marketing tools,” Innes says.
“With online-based businesses [being] the second most popular form of earning income on the side, claiming 29 per cent of the market, this is a clear trend.”
How to set up a side hustle
In his new book Side Hustle*, start-up consultant Chris Guillebeau sets out a plan to get a part-time venture up and running in 27 days, with minimum financial investment.
Guillebeau believes the best way to start is to list all the things you like to do, not just the obvious ones. A second might list the skills you already have, not just those related to your day job or education. Combining the two lists can generate ideas and possibilities.
Having a side hustle can provide security through a time of life transition.
“A lot of side hustles come about from people solving problems or otherwise making some kind of improvement that has value for potential clients or customers,” Guillebeau says. “So, don’t just think about your passions – also think about what frustrates you and what could be done better, cheaper, or more efficiently.”
The process he suggests involves developing a set of possibilities: choosing the best one after some investigation and research; assembling the mechanical elements, including pricing and workflow; choosing marketing tools to reach potential customers; and then refining the model, focusing on what works and discarding what does not.
Deciding what form your side hustle should take
Guillebeau discusses side ventures ranging from teaching how to play guitar to making specialised cakes. Some side ventures have been built around innovative apps. The sharing economy – exemplified by Airbnb – has added a whole spectrum of other possibilities and in some cases an existing marketing and pricing infrastructure.
“Some people use the side hustle primarily as a creative outlet, something that utilises a different skill or part of their brain than they use for their regular job,” Guillebeau says.
“For others, having a side hustle can provide security through a time of life transition.”
Whether a side hustle derives from a hobby or to meet an unfilled market niche, it must be treated as a business, with a means to track progress. Given its smaller scale, it is sensible to focus on only a few key performance indicators (KPIs). Keeping the structure simple is also important, especially if the time available to devote to the business is limited.
However, even a straightforward sole trader structure requires proper accounting procedures.
“If you don’t have a way to get paid,” Guillebeau says, “you don’t have a business.”
How accountants can help new businesses
Side hustles offer a new niche for accountants to act as advisers, as long as they recognise their unique characteristics. For example, they can offer advice on available technology, possible networks and customers, and how much time, energy and capital the venture might require.
Innes notes that he has seen successful ventures started by everyone from teenagers to retirees. Age is no barrier.
“Some start as a side project and ultimately become a fully-fledged business,” he says. “Ensuring the right foundations and advice is crucial to success. Technology allows small businesses to operate with global reach, if that is what they want.”
Most of all, a side hustle can be fun. If it fails, very little has been lost.
“Always remember that it is different from other start-up ventures or corporate businesses,” Guillebeau emphasises. “You don’t have to listen to experts or follow conventional wisdom. You don’t have to ‘scale’. There is no single ‘right way’. There is only the right way for you.”
6 tips for creating a side venture
• Start with a list of what you like to do and cross-reference with a list of your skills
• Select one idea from several possibilities
• Determine how much time, energy and capital you want to commit
• Examine relevant technological tools
• Set up an appropriate accounting system
• Develop a limited number of KPIs to track progress
*Chris Guillebeau, Side Hustle: Build a Side Business And Make Extra Money Without Quitting Your Day Job, Macmillan, $30, 258 pages, ISBN 9781509859054. A copy of this book is held by the CPA Australia Library.
Is refirement the new retirement?