If you’re looking for a great way to settle debt, start investing or to provide for luxuries, why not offer your skills or services by starting a side gig?
Two of our contestants, Nono and Catherien, have side businesses that generate extra income. Neither of them has plans to grow into a full-time business, but they provide extra cash flow to pay for bills and buy a few luxuries.
Nono started her own range of bodycare products in 2018, called Salt and Light. She makes products for men and women, including foam bath, lip balm, bath salts, soap bars, hand cream, body butter and massage oil.
“I used up my savings in 2018 to start this business. It cost me about R20 000. I use mainly social media and word of mouth to promote products. The vision is to hand over an asset to my children.”
Initially Nono funded her business from her own pocket. But this year it has started to cover its costs and make a small profit.
Catherien sells biblical
oils, such as frankincense and myrrh, and this provides extra money to
supplement her family’s household budget.
She recently started to sell a range of vitamins and health products, including cleaning products. Any profit she makes is a saving so that she can decorate their new home.
HAVE A PLAN AND A BANK ACCOUNT
Before you start a business, you need to do your homework and make sure you understand whether this is going to provide you with a real income.
You need to fully understand your costs, including your time, petrol and data. Often people realise too late that the business is actually costing them money.
You need to have a different bank account for the business so that you keep it separate from your personal finances. If you keep treating your business as an emergency fund to pay for ad hoc personal bills, it will be difficult to get a handle on your profitability. You can run the business as a sole proprietor without forming a Pty Ltd, so you do not necessarily have to open a business bank account.
A low-cost bank account will suffice if the business turnover is less than R1 million.
Consider hiring a book-keeper if the business can afford it, or invest in a proper accounting system.
Catherien found that she was spending hours trying to keep up with her admin. A simple solution was signing up for the accounting programme Wave, which is free unless you wish to add an employee payroll. The programme is sufficient for most small businesses and issues invoices and reconciles payments.
Nono hired a book-keeping company, which manages the books and tax returns.
“This was getting too stressful for me as I work full time as well. It has proved to be a great relief to me because I can easily create invoices on my app and all records of the payments are on the app as well.”
Decide what platform you want to use for your orders.
Social media sites, such as Facebook and Instagram, offer great marketplace applications. However, both Catherien and Nono say WhatsApp works well for their businesses.
Catherien recognises that she needs to be more active in getting her product on to social media, but at the moment word of mouth and selling her products at a local community market are providing sufficient turnover.
Be aware of tax implications. If your business is structured as a Pty Ltd, it would have its own tax number and tax liability. However, if you run it as a sole proprietor – or just as a side gig – any profit would be added to your taxable income. It is important to keep proper accounting records as you can deduct all business expenses from your income as well. This includes travel for deliveries, data and any other input costs.
PROFIT WITH PURPOSE
Make sure you have a goal for the profits you make, otherwise it just ends up in your household spending and you do not feel the real benefit. Whether you use it to pay debt, invest or to go towards your holiday fund, know what you want to do with it.
Nono draws only R300 a month from her business, but she has earmarked this to pay off her debts. Catherien uses R5 000 a month to supplement the shortfall in her household finances while her husband’s business gets back on its feet. However, any profit she makes above this goes into a savings account towards furniture for their new home.
Both Nono and Catherien are in the enviable position of seeing an uptick in their businesses because of the outbreak of the Covid-19 coronavirus.
“I’ve started to make hand sanitiser and within two days of making 100 units we were sold out. It’s great but I have run out of plastic packaging,” says Nono, who is able to receive orders via WhatsApp and couriers her products to customers.
Catherien’s line of vitamins and cleaning products have been a huge success. She has seen an uptick in demand for the oils – which boost immunity.
She has doubled her turnover as a result and has been able to continue operating throughout the lockdown.
In any crisis there is opportunity. Lockdown created a new demand, encouraging customers to switch from traditional products in retail stores to new brands through e-commerce.
“My customers love my cleaning products and I don’t believe they will switch back to what they used before,” says Catherien.
Research conducted by consulting firm McKinsey has identified that customers are less likely to return to major shopping centres after lockdown, preferring to stick to their smaller local shops and online suppliers. This is likely to spawn a whole new sector of small business e-commerce that can flourish without the overheads of rental space and large stockholding.
Read more about the how you can turn your finances around here
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