Forget “the great resignation”. It appears that more people have decided that getting a side hustle is a smart way to improve their earning capacity in 2022.
ING research has found that nearly half of Aussies (48%) either have started, or plan to start, a small business on the side, whether it’s selling stuff online (37%), investing (30%), freelance writing (13%) or creating art (13%).
Business adviser Craig West, the founder and CEO of Succession Plus, says a side hustle often starts because the business owner has a passion or skill set that is in demand or is perhaps a hobby or interest.
“Most people go into business because they are good at something and enjoy it. More recently, because of lockdowns, people have been looking for both something to do and some extra income.
The continued growth of the gig economy also drives this kind of side hustle.”
An Actuaries Institute research paper recently found that the gig economy grew ninefold between 2015 and 2019 to $6.3 billion, with a gain of 32% in 2019. At the same time, the advances in technology – such as cloud accounting, mobile payments and online stores – have made it much easier to establish a side hustle.
Best of both worlds
With one in three small businesses expected to fail in the first year of operation, a side hustle is a great way to ease into self-employment. West describes it as a “best of both worlds” option.
“Many people are inherently risk averse, and therefore stopping work completely is far too risky. So, starting a business as a side hustle after hours without giving up full-time employment is a safe option.”
There is also the $64,000 question: when do you know that the side hustle will be
viable? West says once the earnings from the side hustle replace or get close to your current income, this is an excellent indicator a business concept has legs.
“But often it is not all about income – maybe you can earn 75% of the income in 50% of the time – or maybe it is about flexible work time and location, and spending more time with kids, especially with [more people] home-schooling,” he said.
Do your research
Before focusing on a side hustle full-time, West advises budding business owners to undertake research, including preparing a simple business plan.
As part of the planning, they should scope the market for the product or service they plan to sell, and discover what the competitors are doing, the pricing expectations for the product or service and the best ways to market the business.
“I would recommend a person considering a side hustle do their due diligence like anyone considering any business opportunity,” says Anne Nalder, founder and CEO of the Small Business Association of Australia.
“Most importantly, ensure they have at least 12 months of finance behind them if things don’t turn around as quickly as expected. “Depending on your paid job, see if you can obtain 12 months’ leave just in case things don’t turn out as well as you wished. This will enable someone with a side hustle to return to their previous job.”
West urges budding side hustlers to seek sound advice about accounting and tax matters, such as whether to operate as a sole trader or company.
Don’t forget that any cash earned from a side hustle must be declared for tax purposes if your total income is over the $18,200 tax-free threshold, so be sure to set aside some funds for tax time. Furthermore, if the side hustle earns over $75,000, you’ll need to register for GST. Also, seek advice about any potential superannuation or workers compensation responsibilities.
West also recommends getting advice on legal issues, such as customer agreements, online sales terms and conditions, warranties, and product and public liability insurance.
“It’s not much good starting a side hustle and getting sued because of an accident, for example.”
Will it be a success?
West says the success of a side hustle will be determined by whether it solves a problem, how many people share this problem and what a client will pay to fix the problem.
Nalder believes a balanced lifestyle is critical to juggling a paid job and a side hustle.
“This will involve working out how many spare hours can be applied to the side hustle,” she says. “It would be a huge failure if the two were not balanced, as the full-time job and side hustle would suffer. A side hustle is a good way, though, to supplement income [from a paid job].”
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