While it may seem like a modern concept, the term “side hustle” has been used since as early as the 1920s to describe work earned outside of one’s primary source of income. Back during the Prohibition Era and through the sixties, side hustles often meant shady business done on the side to bring a few extra dollars in. However, for more than 70 million modern Americans who work freelance gigs—that’s approximately 45 percent of the U.S. workforce!—, the era of working just one job to make ends meet is long gone, especially in a market that’s currently growing stagnant in wage growth.
The name of the game for financial success is multiple sources of income.
Now, this isn’t to say that your side hustle needs to remain that: You may be in a unique position where you’ve discovered that not only might your side gig have legs to become a more serious and scalable venture but also that you’re passionate about the work you’re doing.
Whether you’re an independent jewelry maker who’s looking to expand your brand or you’re a web designer who’s ready to go independent, you have the opportunity to start your own small business with just a little more hustle and a lot of smart budgeting and financial planning.
The “Hustle” in Side Hustle: What Do I Do to Budget vs. What Do I Outsource?
Developing a new business, no matter how small, is no easy task. In most cases, you can’t do it alone, nor should you try. You need a supportive and trustworthy team to back the hard work you put in and complete ancillary tasks that may be outside of your scope of expertise or interest.
For most small business owners, bookkeeping and financial planning are tasks that usurp huge amounts of time that can be better spent on winning new clients and refining business models. Still, money and its management, especially budgeting, are essential in determining how much needs to be invested into a new enterprise, how long it will take to see returns, and how viable your business is in the long term.
So, what exactly should you be doing to begin a robust financial plan? And how can professional accountants and bookkeepers take you to the next level?
How to Begin Budgeting
You can get started with budgeting on your own. In fact, this work is a critical first step to understanding whether or not your side hustle is capable of becoming a full-fledged business.
Here’s how to start:
Step 1: Understand why budgeting for your side gig is so important.
If you see the income that your freelance work brings in as just extra cash, it’s time to switch your mindset. As an aspiring business owner, you should see this cash flow as not money you spend for yourself but as financing for your new venture.
By budgeting your side hustle’s income, you can begin asking pointed questions and, based on your answers, set preliminary goals. Ask yourself:
- How much money do I spend on overhead each month? (That’s ongoing business expenses that are not charged to a particular job or service and, thus, do not generate profit.)
- Approximately how much do I make per side gig?
- How much of my primary income do I use to cover expenses for my side gig?
- Considering the difference between my side hustle’s expenses and revenue, how soon do I see my business breaking even without subsidies from my primary source of income?
- Given everything, what business goals are achievable for me in the short term and what should be left for when my business has grown more?
By answering these questions as specifically as possible, you’ll establish a sense of your new business’s financial future as well as a means to keep yourself on track.
Step 2: Build a preliminary (and conservative) budget.
Budgeting for your side hustle isn’t all that different from budgeting for your personal finances in that it simply breaks down to how much you spend (expenses) vs. how much you earn (revenue).
Always begin with clarifying what you have and what you need. This means creating a list of basic items or services your specific business must acquire to get off the ground, which may include:
- Equipment you need to perform your service or develop your product.
- Promotional content such as business cards and flyers.
- A web domain.
- A brand logo.
These items are most often paid out-of-pocket. Thus, accounting for them should help you understand how much of your money is going out the door in the first phase of your business rollout and how much you’ll be spending on regular expenses per month thereafter.
To remain disciplined and prepared for unforeseen circumstances, always develop a conservative budget in which you slightly lowball your anticipated earnings and, reversely, slightly augment your anticipated overhead spending. The keyword here is slightly: Don’t tinker with your projections so much that it throws off realistic calculations. Just make a plan that keeps cash flow on the tighter end, which will allow you to handle sudden lags in work or surprise expenses, such as equipment repair, without panic.
Step 3: Let the professionals take over.
So, you have a starting budget to transition your side gig into a viable small business, and it’s time to get to work. Now, in addition to your financial plan, there are many important factors you must solidify, namely your product, your vision, and your consumer base. As your new venture’s owner and creator, these areas are where you want to expend most of your time and resources: Refining the quality and value you bring to your clients and carving out the space your business will occupy in the current market.
Anybody would be hard-pressed to achieve their vision when they’re stuck in the weeds with constant bookkeeping, which, in most cases, is unlikely to be their area of expertise anyway. That’s why the key to developing a viable small business is in knowing exactly where to hustle for yourself and where to outsource the hustle to more qualified professionals.
An experienced bookkeeper helps declutter and streamline your financial landscape and scale your business to the next level. Keep in mind that, just as you’re a professional in what you do, bookkeepers are experts at budgeting, financial planning and management, payroll, tax filings—all things related to your earnings and expenses! They work efficiently and with foresight earned through years of training and experience that’s tailored for small businesses.
Take Accounting Off of Your Plate and Into the Cloud
At Lloyd & Hodge, we specialize in CPA services and stay ahead of the changes that affect your business when it comes to bookkeeping, tax management, payroll and budgeting. Our cloud based accounting software makes tracking your finances easy and on-demand, and our team is always on hand to support your financial health.
Contact us today and learn how we can help save you time and money, and get back to doing what you do best – running your side hustle.