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Financial Tips for Your Side Hustle

Here is the final installment in our “financial tips for” different industries—Financial Tips for Your Side Hustle. This article is for anyone building a business on the side of a full-time job or on the side of another business.  Creating a side business and growing it to allow you to replace your 9-5 and go full time into entrepreneurship is an exciting journey. Here are a few financial tips to help you make that happen.

 

Financial Tips for Your Side Hustle

 

 

Start Your Separate Personal Financial Identity immediately

 

From day one, treat your business as a business. Separate your banking, get a debit card for business expenses, and have all income from all sources deposited into the account. Just point your PayPal, Stripe, Square, or whatever you use to the business account.  Pay your expenses from that account. You will file a different tax schedule when you own a business. Keep receipts and treat it like the real business it is right from the start.

 

 

 

Have a Pricing Strategy That Gets You Into Profit Quickly

 

Many times, when entrepreneurs begin side businesses they start off with pricing that is often too low to make much of a profit. This can be because there is the feeling that the venture is for “extra money,” so making even just a little bit is “fine.” Yet, the best strategy is to be priced correctly from the beginning, so you aren’t just breaking even or worse, losing money with your side hustle.  You are in business to make money, and that means pricing yourself to include your real costs, your paycheck, and some profit to make sure you have capital for growth.  Follow this link (Mastering Your Cash Flow (kartra.com)) for my free three part pricing formula.

 

You don’t have to lose money the first few years in business. See this blog post (5 Tips for Maximizing Business Profits (entremoneycoach.com)) more tips to maximize your profits.

 

 

Set up for your Self-Employment Taxes and pay them at least quarterly

 

Part of treating your business like a business right away is to set yourself up to file your taxes as a business. In the U.S. if you are a sole proprietor that means a schedule C.  When you file that report of self-employment you will need to pay your self-employment taxes. Make it a habit from the start, and you will always be in compliance with the IRS. I learned this lesson the hard way, and ended up owing over $27k in self-employment taxes back the year of my husband’s accident when we lost our consulting business.  We did not set ourselves up, and taxes were an afterthought. Oops.

 

It’s easy to set up to pay your taxes online, visit https://eftps.gov and register. They have to snail mail you a PIN so it takes a few days to set up, but once you are enrolled you can easily make online deposits into your “tax account.” You should deposit 20-30% to start, based on your other job, tax bracket, etc. Visit your accountant to figure out exactly what is best for your situation. But just do it. I withhold when I take a paycheck, I don’t even wait for quarterly anymore!

 

 

If you are going to scale and leave your 9-5 have a plan

 

As you are scaling and building your side hustle to become your full-time gig, I always recommend having a plan. It won’t be perfect, and it will probably change, but you should know your numbers, have some money squirrelled away, and keep debt down so that the payments, if any, are manageable on your new entrepreneurial salary. Plan your income and profit each quarter, knowing how much you need to make to pay everything, including yourself.

 

And know that sometimes businesses take off faster than expected, sometimes they take longer.  Have a real conversation with yourself around what the minimum number of sales or clients you have to consistently have to make a move. It doesn’t always have to be a calendar date! Make your plan around events that happen inside your side hustle and celebrate every milestone.

Financial Tips for Coaches and Consultants

This article is relevant for all service providers, but I’m focusing on coaches and consultants who use the online space to make sales and provide services. Here are a few financial tips for coaches and consultants to make the finances easier, and better, for service providers!

Financial Tips for Coaches and Consultants

 

FINANCIAL TIPS FOR COACHES AND CONSULTANTS

Have a financial structure for money management and taxes right away

 

I see service providers frequently live out of their own personal accounts for a while. It’s so important to set up your business bank account and to create a system for withholding taxes and paying yourself as soon as you can.  Typically profit margins can be larger in the online space, because the cost of doing business is minimal, and I see many entrepreneurs make the mistake of treating their revenue as, “it’s all my money anyway.” This co-mingling makes it difficult to hire contractors, such as a social media manager, because you shouldn’t pay business expenses from a personal account. This can create a tax nightmare.

 

You must pay self-employment taxes on your own paycheck, and if you are using the money in that account, even for business purposes, it be your own personal money. Create a separate financial identity from the start. Get a business bank account. Set up your online deposit with the Internal Revenue Service or your home tax agency and make sure you are withholding and depositing your taxes. Pay yourself every two weeks and let the rest of the money sit in the bank until you get paid again or must pay bills.

 

Calculate everything in your pricing, and know your numbers and your margins

 

My next tip is one that I get some pushback on, I want you to calculate your numbers and know your margins. The reason I get pushback is because people frequently want to “feel” into their pricing, which isn’t a bad thing, but just make sure your feelings are profitable. 

 

I worked with an entrepreneur who was losing money on her most expensive package. By the time we calculated the hours, the services and additional bonuses and things provided, her $1500.00 package had a net LOSS of $80.00 per client. OUCH. In fact, her most profitable package was $195.00. It was extremely hard for her to hear, but it was the truth. Her lower cost packages were covering her losses. She was very frustrated in business, and that was why.

 

You need to know how much you need to make, how much you are legitimately profiting, how many things you need to sell, and at what price, to grow your business strategically and sustainably. Please get your numbers.

 

Stop feast or famine with payment plans and signature offers

 

Coaching and consulting can be feast or famine, and the income can be very unpredictable, especially when you are starting out and haven’t built up your client base. To stabilize your income quickly, please have payment plans available for anything you offer over a certain dollar amount. You get to decide, but I have a client that offers at least 2 payments for anything over $299.00. I have another client that starts at $500.00 and still another that starts at $1,000.00

 

When you offer payment plans you are giving people access to your programs and services at a price point, they can more easily afford, and you get to project income out into the future. Just make sure you cover any additional interchange fees, the fees charged by the bank for running the card each time, in your pricing. Based on the dollar amount, that may be just a few dollars. Again, this is your decision.

 

I know there are some people who do not recommend extending payment plans beyond the length of the program or service the client is buying.  I understand that there is a risk that they will get the service and not pay the remainder. But, while there is a little risk that someone will not honor their payments, generally people follow through, and if you have good policies and procedures surrounding payments (discussed below), you can protect yourself from these instances.

 

Have policies to protect you from chargebacks and from giving refunds if you do not offer them

 

Do not accept anything without a payment agreement. I have a podcast episode, “Get it in Writing” that talks through the basics of what should be in an agreement. I want to talk here specifically around payments. Protect yourself from chargebacks. That is where someone complains to the credit card company or payment portal, and the company gives them the money back- straight from your account. If you do not have anything in writing that says, “no refunds” or “all sales are final” then you will not win against the payment vendor.

 

Make sure that your terms and conditions are required for EVERY sale you make. Take the time to draft them or have an attorney help you and post them inside the sales process. For longer programs or bigger ticket items, send a follow-up agreement in writing to clients. There are a few people in the world that will try to take advantage, and having good, clear, and acknowledged policies surrounding payments will protect your income and your business.

 

Coaches and consultants need to protect themselves financially. I have a special place in my heart for this group of entrepreneurs, because it’s where Mike and I started with UNEQ Consulting in 2011, and I wish I would have had these tips, and had taken this advice back then.

 

 

Author’s Note:

If you enjoyed this blog about Financial Tips for Coaches and Consultants, feel free to visit my other blogs and resources

When you aim at nothing, you will hit it every time” – Zig Ziglar

This is the quote that reminds me to set my business goals, and that includes financial goals.

Some entrepreneurs are a bit timid in setting income goals because they just want to sell as much as possible. Others set super stretch goals that they will never reach with the belief that “if you aim for the moon and miss, you will land among the stars.

I understand both approaches. I want to offer you an approach that falls somewhere in the middle.

 

If you don’t typically set goals right now

 

How much money do you want to make, and in what timeframe? That can feel like such a loaded question.

Does reading that have you thinking, “What if I set it wrong? Too low or too high? Am I going to be disappointed? What if I miss it?” right away.

I hear you. The fact is goals don’t have to be arbitrary or decided by throwing a dart at a bunch of numbers. Here are a few questions to help you narrow down a good goal.

 

1. What am I offering, how much does it cost?

 

How many can I sell? This question will help you look at your capacity to make more money. This may be limited by your time, by your production model, or by your own working guidelines.

If you don’t know the maximum that you can comfortably make with each offer in a month, you can’t begin to set a goal, because you can’t figure out what to sell and how many.

 

2. What is my best sales month ever?

 

What made it so good? Was it a new ad? Did you host a challenge? What was it?

These questions can help you to examine what you did in your best sales month, and whether you can duplicate it or do more now. What are you available to do to hit your goal this month?

 

3. What is the purpose for the money?

 

Having a purpose can definitely help you gain clarity on your goals. If you to make $3,000.00 so you can launch a new thing,  then that’s a pretty clear purpose for the money.

Get laser focused on what you want the money for and what it is going to do for you and your business when it is earned.

 

If you set arbitrary goals that you always miss

 

First, follow the questions above! And check on your capacity, availability, and purpose for the money and the goal.

Then ask yourself if it would be better to keep the lofty goal as a “best” goal, but add in a “good” and a “better” goal that is more attainable.

For example, if you set your goal at $10k for the month, but your best month has been $2k and you don’t have the availability to do more than $6k, you can set a “good” goal at $3k (attainable) and a “better” goal of $6k, the “best” (or stretch) goal of $10k.

There is a real psychological boost to you as an entrepreneur as you reach your financial goals. For each of the three goals, make sure you have a clear purpose for the money.

It takes just a few minutes to set your financial goals. It can be for the week, month, quarter, that is up to you. But make sure you have something to aim at and then define the availability and steps you need to take to hit your mark.

By the way, The Profit Accelerator is open again! Grab one of the 12 spots inside the signature program that has helped entrepreneurs focus on making more money and keeping more profit in a six-week sprint. Visit https://entremoneycoach.com/accelerator to learn more.

Wishing you the best with your business goals!