Managing your money and learning how to save effectively is a major first step, but in order to significantly grow your wealth, you need to increase your income. One way of doing this is to develop an additional source of income outside your main job – in other words, a Sideline Business.
Why Start a Sideline Business?
Living off a single or joint income is pretty risky, even when the economy is in good shape. To reduce this risk, it makes sense to have a number of different income streams that make up your overall income.
This means that if you lost your main job, you would not lose all of your income, buying you precious time to find alternative employment.
A sideline income can also help you on your way to financial freedom by generating extra money to pay-off debts or build up your savings and investments.
Finally the work that you do on your sideline business could potentially lead to other business opportunities that are far more profitable than your main job, allowing you to earn more, quit the rat-race or settle into a career that better appeals to your interests.
Types of Sideline Business
There are three broad types of sideline business:
- Running a freelance consultancy or service-company based on a specific set of skills or knowledge that you possess (for example copywriting, architecture, DIY, property maintenance, arts & crafts)
- Creating or purveying niche products that you then sell through different channels (such as a mail-order website, a farmers or craft market, or supply to local shops)
- Developing a publication, website or web app from which you can generate either advertising or subscription income (such as a trade magazine, a popular blog, a niche classifieds directory or a whizzy iPhone app)
The type of sideline business that you choose will largely depend on the skills and experience you have, the amount of start-up cash you have available to invest, the amount of free time you have to run your business and to a certain extent the level of personal interest that you have in the work you will be doing.
Identifying a Profitable Niche Market for Your Sideline Business
Notice the word ‘profitable’ in the title? Many good businesses have been built around people’s hobbies and interests, but just because you happen to like making sea-shell plant pots, does not mean that there will be a long queue of people around the corner waiting to buy your creations!
To find the most suitable niche you need to identify candidate business ideas and then assess them for profitability.
The following questions will help identify candidate business niches:
- What experience / specialist skills / knowledge do you have that you could sell?
- What trends / gaps in the market have you noticed recently?
- What problems are people complaining about?
A really good way of identifying profitable niches that I recently read about on PotPieGirl.com is to browse the magazine aisle of your local newsagent, where you will find publications catering to all sorts of niche interests.
For a publisher to invest in the production of a magazine for a niche, there has to be a profitable market behind it, so each magazine represents a potential market that you could investigate.
Find out more by clicking on: How to Find a Profitable Niche Market When You Are Clueless.
Once you have brainstormed a list of business ideas, use the following questions to assess each one and identify the most suitable for you:
- How easy is it to get started?
- How much competition is there?
- Who are the customers, how much will they spend, when and how often will they buy?
- How much will raw materials / suppliers cost? How easy are they to deal with?
- What contacts (potential suppliers and customers) do I have in this business area already?
The aim is to whittle your list down to a suitable candidate business idea, ready for you to start-up.
Starting Up a Sideline Business
Once you have identified your business idea, the best thing is to start small and begin testing it out. Many people fall into the trap of focussing all of their time on planning and designing their new business, when really they should just get out there and find customers; enabling them to:
- Gauge the level of demand and competition in their business niche
- Work out their costs and pricing structure
- Further develop their experience, skills and expertise
- And most importantly, start making sales / delivering contracts in order to make some money!
Often a simple flyer or website, explaining the service provided, is adequate at this stage and a good source of initial customers can be sourced from friends, family, neighbours and colleagues.
Once you have got the business started, strive to deliver exceptional customer service each time you come into contact with your customers; whether you are decorating a cake for a special occasion, writing a blog post or resolving a problem. This is what will set you apart from the competition and allow you to benefit from word-of-mouth recommendations.
Refining and Growing Your Sideline Business
Having proved to yourself that your sideline business idea can generate an income, it is time to invest more time and money into growing it.
Some key areas to think about include:
Branding & Marketing
The name that you give your business will be a core part of your overall brand, so it is important to get it right. This guide will help you choose a name for your business.
When deciding on your brand name, you also need to find a domain name for your website that matches it. Here are some tips for choosing a business domain name.
The other core aspect of your brand is your logo. It is important not to scrimp on your logo design, as this could provide customers with the wrong impression. Fortunately there are a number of websites like 99designs which allow you to procure low cost logos directly from freelance designers.
As a sideline business, your marketing budget will be very limited or even non-existent. Every penny counts and any money spent on marketing will come straight out of your budget – so consider each marketing opportunity very carefully.
There is a detailed guide on BusinessBalls.com about advertising and marketing, but the two areas that a sideline business owner should really focus on are Internet Marketing and One-to-One Networking.
This means that your website will be a fundamental part of your sales and marketing activities, so aim to use it as a sales funnel, which will capture customer enquiries and convert them into business leads.
To do this you may want to invest more time or money in upgrading your web presence and you should also think about using social media sites, such as Facebook, StumbleUpon! and Twitter as part of your overall strategy.
There is not enough room in this post to go through the in’s and out’s of Internet Marketing, but it is a very well documented area, with many excellent sites to advise you on strategies and tactics that sell. As a starting point, I recommend you look at the following resources:
One-to-One Networking is all about meeting new people and building relationships that will lead to new business opportunities. This might take place at organised business networking events, or you could be more creative and find other opportunities to meet potential customers.
Online networking through forums and social media (Twitter, Facebook, blogs) can also be just as effective. The sites listed above will provide more detail, but the key secret to successful networking is to offer people something of value (good advice or a free product or service), which will have them rushing out to recommend you to their friends and colleagues.
Accounting & Tax
Maintaining full control over your business finances is just as important as using a budget to manage your personal finances.
For example you still need to ensure your income is higher than your outgoings in order to generate a profit, so you need to track every item of expenditure (such as marketing and equipment costs) very closely.
The good news is that you do not need to purchase expensive software for managing your finances, as a simple spreadsheet will usually do the trick. For templates take a look at Sample Forms for Small Business Bookkeeping.
Here are some useful resources to learn more about basic business accounting:
As well as protecting your profits, you will all also need to keep a record of all your incoming and outgoing transactions for tax purposes. Try to keep records from the point of your first transaction, so that if the business takes-off you have all the information you need to sort through the tax admin at a later date.
In-depth and official information on tax and accounting can be found on Business Link.
As your business becomes more established, there are going to be a number of activities or processes that you will repeat over and over again, such as:
- Quoting and estimating
- Tracking time and resources
- Billing and invoicing
By investing the time now to document and standardise these processes, you will save yourself a lot of hassle in the future. A good starting point for managing your processes is the Beginner’s Guide To Freelance Business Processes.
The last thing you want from your sideline business is to land yourself in hot water, so it is well worth familiarising yourself with the key legal issues that you could encounter as the business grows.
Begin with this guide: A Legal Checklist – six things you must consider when going freelance.
At some point, you may want to change the legal structure of your business and establish a Limited Liability Company, as this provides a number of benefits to the business owner.
The following two guides will help you to decide if changing your business structure is right for you:
Tools & Equipment
Regardless of what sideline business you start, you are going to need certain tools and equipment to carry out the work.
But, in many cases you probably have everything you need from your current day-to-day activities and as your business has a very limited budget, you really want to minimise this sort of expenditure.
Here are some ideas to help you save money on tools and equipment:
- Can you borrow the tool from a friend whilst you do the work?
- Can you make use of the client’s tools or equipment to do the work?
- If you have to purchase equipment, be sure to build some of that cost into your pricing structure
- Also be sure to buy quality tools and equipment. Whilst they will be more expensive initially, they will last longer and help you do the job better
When Is The Best Time To Start A Sideline Business?
The very best time to start a sideline business is now! Regardless of when you are reading this post, the sooner you get out there, find a business idea and begin selling it, the sooner you will be making money.
As the business grows, you can worry about refining it with the points mentioned above, but to begin with just take your idea and start selling!