Financial planning for side hustlers

With many around the world experiencing pay cuts, reduced working hours, or short-time, there’s been a massive global shift towards developing a side hustle as an extra source of income during uncertain times.

In this article, we explore a range of side hustle options available in this country, some options for financing a start-up business, and what to consider from a financial planning perspective if you are generating income from another source.

Lockdown, work-from-home and changes in our daily routines have created fertile ground for innovation in the side-hustle space – and because so many small businesses suffered the brunt of lockdown, there has been a significant shift towards supporting local business, which is of course great news.

Side hustle options

There’s been a rapid rise in side-hustles such as queuing services, virtual assistants, online tutoring, au pairing, and personal shopping. Safety concerns in the e-hailing space have given rise to shuttle services exclusive to women and children, although these are currently only available in major areas.

The shift from the likes of Gumtree and OLX to the ease of selling products on Facebook Marketplace has also created an opportunity for people to make a living by selling second-hand goods online.

A major global consequence of extended lockdowns is the massive rise in social media usage, which in turn has created more jobs for content managers, specifically for small- to medium-size businesses. The big shift towards online shopping as a result of the pandemic has also opened up opportunities for drivers and courier services.

For those trying to monetise a hobby or interest, the Etsy platform is a great option for selling homemade items such as jewellery, leatherwork, crafts, art, and fashion. During the hard lockdown, many Pilates and yoga instructors moved their lessons online which opened up a whole new world of online gyming and working out which has endured even after lockdown restrictions have been lifted.

Monetising YouTube channels and Instagram pages

Appealing to many – especially the younger generations – is to try and monetise a YouTube channel or Instagram page as a source of generating passive advertising-income, although earning a decent living in this manner is somewhat difficult to achieve. According to an April 2021 article by Code Fuel, a New York-based digital marketing company, there are currently two billion users on YouTube watching one billion hours of videos every day.

YouTube has its own monetisation programme for creators called the YouTube Partner Programme (YPP) which offers a range of mechanisms for generating income on the platform. However, to become a partner, you need over 1 000 subscribers to your YouTube channel and must have watched 4 000 public watch hours over the past 12 months.

Using the Google Adsense Network, companies create adverts that are placed at any moment during the creator’s video. According to Mint, the average YouTuber makes between $0.01 and $0.03 per advert that is viewed in full and can go up to $5 per 1 000 video views for top YouTubers. Stats show that if you have 100 YouTube viewers, only 15 will watch the entire length of the advert which is usually 30 seconds. Experts therefore advise that if you want to make decent money you need to have at least 20 000 subscribers to your channel.

An appealing way for younger social media users to make extra cash is by becoming an Instagram influencer, although this is also relatively difficult to achieve.

According to California-based digital marketing company Omnicore Agency, there are currently just over one billion Instagram users at present, with 500 million daily active users. They predict that by 2022, global spend on influencer marketing will be worth around $15 billion. Their research shows that nano-influencers (those with between 500 and 5 000 followers) make around $114 per video posted on Instagram, $100 for an image and $43 for a story. Power users – those with between 30 000 and 500 000 followers – make an average of $775 per video, $507 for an image, and $210 for a story.

Should your salary fund your side hustle?

If you have a business idea and are confident of its success, it may be difficult to know just how much of your income is safe to channel towards your business venture.

Before deciding how much of your disposable income you can use for business development, there are a number of other factors that should be taken into account, such as whether you have any liquid investments in place, the size of your emergency fund, the time available to invest in your business idea, and your monthly living expenses.

Ideally, you want to remain in a position where you can continue to comfortably cover your monthly bills, with a little extra room to move. Most importantly, before committing too much income towards your side hustle, take time to develop a business plan and strategy to ensure that your idea is viable and has a reasonable chance of taking off.

Where to access funding

If you do need additional funding for your start-up business, there are a number of ways to achieve this, although start-up capital remains a major challenge for entrepreneurs. While it is possible to approach banks for a start-up business loan to cover the costs of setting up the business and getting it operational, the application process can be time-consuming and frustrating especially where an entrepreneur needs quick access to capital in order to implement a business idea.

This has given rise to a number of businesses that provide alternative financing options, including companies such as Fincheck, Lulalend, Fundrr, Merchant Capital, iKhokha and Zande Africa, all of who have different criteria for funding. For instance, Zande Africa provides assistance for the procurement of stock for spaza shops, whereas Merchant Capital serves retail business owners.

The government has also launched a number of programmes to help entrepreneurs with their business start-ups, including the Industrial Development Corporation, Small Enterprise Financial Agency, Isivande Women’s Fund, and the National Youth Development Agency.

Should you register the business?

Whether or not you need to register your side hustle depends on the nature and size of the business, your future growth projections and business strategy, and whether you intend to take on business partners or shareholders at some point in the future.

If you are running a business as a sole proprietor, such as if you’re selling second-hand items on Facebook Marketplace or doing online tutoring, you will not need to register your business. You will, however, need to ensure that you declare all income generated when filing your personal tax returns.

On the other hand, if the growth projections of your business plan indicate that you will need to hire staff and/or take on shareholders or partners, or if your business involves patents and copyrights, you may need to consider registering your business as a private company. To do this, you will need to register through the Companies and Intellectual Properties Commission (CIPC).

If you are confident in your brand and/or the uniqueness of your product offering, it is absolutely essential to get legal advice on how to protect yourself.

Sadly, there are plenty of examples of young entrepreneurs who have had their ideas, brands and product concepts mimicked by big retailers.

Should you leave your job?

Leaving full-time employment to pursue a business venture is always risky and it’s important to get your timing right.

If you’re confident in your business plan and model, and early indications are that your start-up is poised for success, then it is advisable to ensure that you have built up sufficient emergency reserves to cover your living expenses for the period in which you estimate it will take to reach your previous level of earnings.

Remember, if you’re leaving full-time employment, you will lose any group life and disability benefits that you once enjoyed, so be sure to take out sufficient cover in your personal capacity. Securing an income protection benefit while setting up a business may be challenging, so consider opting for a capital disability benefit until you can declare regular earnings.

If a side hustle is not for you …

If setting up a side hustle is not an option for you and you’d prefer to explore options for generating a passive income, there are a number of ways to achieve this – the most obvious one being to rent out a room in your home or a granny flat, which can be lucrative especially if you live in a sought-after area.

You could also consider registering as a sales consultant for a reputable network marketing company such as Honey Jewellery, Miglio, Avon, Sh’zen or Tupperware.

That said, be very cautious of pyramid schemes and multi-level marketing companies that claim to be product marketers but who in actual fact reward for recruiting new ‘marketers’.

A popular way of generating some passive income, especially in the bigger centres, is [through] vehicle advertising.

If you’re tech-minded, creating an app could allow you to generate sales by running in-app adverts or having users pay a nominal fee for downloading the app, and then building incremental features to keep the app relevant. That said, apps change in popularity and the success of your app can be short-lived, so this is not a sure way to generate an ongoing passive income.

Now you have extra money

If you are fortunate enough to be generating an income from your side hustle or early start-up, avoid falling into the trap of ‘lifestyle creep’, but instead seek to find a balance between investing in your personal capacity so as to grow your personal wealth outside of your business interest, and reinvesting into your business so that you can keep innovating and growing. In the age of disruption, even the most robust businesses need to continue adapting, reinvesting and reinventing.

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