4 ways to turn your side hustle into a full time business
For Aussies with an existing side hustle, self-isolation may just have a silver lining. With more spare time on our hands than ever, this could be a good opportunity to ramp things up a notch for your YouTube channel or Etsy jewellery store.
There’s no denying this is a tricky next step. As much as you may have dreamed about becoming your own boss, the actual process of going full-time with your small business can be challenging, especially as coronavirus leaves thousands unemployed.
“This is a difficult period for a lot of small businesses out there but we’re also seeing incredible innovation in the face of COVID-19,” says Prospa’s co-founder and Chief Revenue Officer, Beau Bertoli.
“Many entrepreneurial business owners are finding creative ways to deliver new services or transforming existing products to meet community needs.”
“If you’ve spotted a genuine opportunity to expand your side hustle, you may consider investing in new equipment, designing and building a website, or creating a marketing campaign to boost brand awareness.”
From revamping your budget to taking out a business loan, the right financial preparation can mean a smoother transition from your 9-5 job onto the road less travelled.
1. Whip up a new budget
With the full-time self-employed life comes a more unstable income stream as well as a whole new set of expenses.
In your new set-up, you’ll most likely be paid per client or project. Your costs will also go up as you expand the business.
So, to make better sense of your new financial situation, whip up a business budget! This will help you map out how much money you’ll bring in each month, as well as where those funds will go.
A useful budgeting method is to divide up your expenses list:
- Determine fixed costs. These stay the same every month, so they’re the easiest to identify first. Examples: mortgage/rent, utility, internet, phone, insurance.
- Add in variable costs. These items don’t have a fixed price tag and will move up or down depending on the state of your business. Examples: stock, staff wages, marketing.
- Predict any one-time spends. Some may be unexpected, while others may be months in the planning. Examples: computer, furniture, office supplies.
2. Open a business bank account
As the saying goes, don’t mix work with everyday life - and for good reason! No one wants to be looking at a messy bank statement that lists both your grocery bill and your inventory purchases.
The rule of thumb is, if you qualify for or already have an ABN, then you should have a dedicated business bank account for your side hustle.
So what are its benefits? For one, a business bank account will save you or your accountant heaps of trouble come tax time, given that you need to separately report business income to the Australian Taxation Office (ATO).
A business bank account can also reinforce the legitimacy of your brand, as it records transactions under your business name rather than your own.
3. Park your profit in a business savings account
Rather than leaving your money inside a bank account earning little to no interest, stash your profit in a business savings account instead.
The good news is you’ll find yourself spoiled for choice, as there are many different types of savings accounts to pick from, depending on your money needs and preferences:
- Bonus interest accounts: These offer some of the highest interest rates around. Just bear in mind you’ll need to meet certain monthly conditions (e.g. making no withdrawals, depositing a minimum amount) to hit the maximum rate.
- Instant access accounts: These suit business owners searching for a no strings attached option. While they typically have lower rates than bonus interest accounts, you can enjoy more flexibility, including being able to withdraw money whenever you like.
- Business savings packages: These help to keep your business banking in one place. They combine your transaction and interest earning needs into a single account, although the catch is, there’s usually a monthly fee.
- Small business term deposits: These protect your business savings from falling interest rates, but the money will be locked away for the duration of the term. Any early withdrawals will lead to hefty penalties, so make sure you’re confident you won't need to touch those funds for a while.
4. Consider taking out a business loan
While business loans aren’t for freelancers or entrepreneurs just starting out, they’re a great option if what you’re looking for is extra finance to take your side hustle to the next level.
As Prospa’s Bertoli explains, “[if] you’ve had a side hustle on the go for a while and have recently identified a profitable opportunity to take this full-time, a loan or line of credit can help you expand.”
Online applications can take as little as 10 minutes, while you could be approved in 24 hours.
Just bear in mind you’ll need to first meet the lender’s eligibility criteria. For instance, to apply with Prospa, you must have a valid ABN, be an Australian citizen or permanent resident and be able to demonstrate at least six months of trading.
Recently, non-bank lenders including Prospa were also added to the government’s SME Loan Guarantee Scheme. Under this scheme, the government will guarantee 50% of all new three-year unsecured business loans of up to $250,000 from participating lenders, between 14 April and 30 September.
Keen to expand your small business? Get started with some of the business loans below, or compare even more options over at our business loans comparison table.
Page last updated September 26, 2020
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