A guide to earning additional income
With South African salaries slowly falling behind the rising cost of living, side hustles are becoming a practical and increasingly popular way for enterprising people to make up the shortfall.
Over the past five years, nominal take-home pay rose by 22.8%, but cumulatively inflation has increased by 26,6%, effectively reducing salary earners’ spending power by nearly 4%.
Add to this other pressures such as rising electricity and other service costs, tax bracket creep and finding a way to top up the monthly pay cheque becomes increasingly necessary.
Side hustles gained traction during the COVID-19 lockdowns, as people stuck at home had the time to explore new ways to supplement their income.
Research indicates that now between 14% and 16% of middle-income households earn additional income from one or more side hustles.
Specialist loan provider DirectAxis’ Gavyn Letley says starting a side hustle might seem increasingly appealing to cash-strapped consumers, but doing it successfully requires some thought and planning.
Some considerations include the following:
· Define the nature of the business: Side hustles are more successful when they align with your interests, expertise, and the need for a product or service. Basic market research is never wasted. This should determine the need for the business or the problem it will solve and the competitive environment.
· Understand the costs: Before launching or structuring prices, consider the costs, which include:
ü Startup costs such as buying equipment, software or setting up a website; operational expenses such as internet and phone costs, transport, rental, transport, insurance and buying inventory.
ü Legal and compliance fees for registering the business, obtaining permits and setting up an accounting function or tax structure and professional fees for external consultants.
ü Branding and marketing costs for social media advertising, search engine optimisation, website hosting, logo design and promotional material.
· Prepare a business plan: Summarise the nature of the business. Then define the target audience and the best marketing tools to reach them effectively. Use the cost breakdown to determine a pricing strategy and budget.
· Obtain the finance: Most people starting a side hustle to make ends meet don’t have sufficient disposable income to fund the business. DirectAxis’ data and client feedback indicate that personal loans are a popular funding mechanism because the application process is simple and quick, and the money is transferred immediately after the loan is approved.
· Start small: Don’t invest too much upfront. Test the concept before scaling up.
· Make use of free resources: Use free online tools, courses and social media platforms to build knowledge, better understand the market and how to run a successful business and grow the brand.
· Manage the finances: Keep careful track of expenses, pricing and profits to maintain cash flow.
· Stay committed: success takes time, so persevere and adapt to challenges.