Why your side hustle is killing your cash flow

So you have a side hustle – heck, most of us started the same way. Working in a “day job” and starting a business on the side. Using the cash from the day job to fund the start-up we hope will soon take off and then we can kiss goodbye to the 9-5 and finally be our own boss. Who wouldn’t want to live that dream?

“Time and time again we see people with a fabulous idea, they invest thousands of dollars into their side hustle – and within 6 months they are tearing their hair out. Complete and utter exhaustion and frustration at a bank account with nothing in it.”

Why does it happen so often? Why does starting a side hustle kill your cash flow? Surely, if you have a full time job elsewhere that is bringing in the bacon, you have plenty of left over cash to fund your start- up and you have a product or service people want then it is all smooth sailing?

In theory this makes sense, but there are a few fundamental issues that most start-up business owners are forgetting to think about. So before you invest all your hard earned salary from Job 1 into business idea #2…consider the following:

1.If you didn’t have spare cash before you started your side hustle, you will have even less after you start your side hustle. Let’s face it, when we are paid a salary each week or month – we are great at spending it. By the time you cover mortgage, rent, child care, school fees, living expenses, personal expenses and if you are lucky an annual holiday – there generally is not a lot left over. So where is “all the extra cash” that you are going to use to invest into your side hustle? Well most times that comes from savings, not regular monthly wages. So if your savings are low to begin with, then cash flow problems are bound to occur.

2. Start up business do cost money to start. Even if you are a tight arse (no stress – I am too and proud of it) or do things in the leanest way possible, you might have to buy stock, get insurance, pay for professional memberships, undergo training, invest in advertising – or all of the above. And that is before you even make any sales. So money is walking out the door before money is coming back in. Starting a business generally is not a “free and easy way to make money”. Understand the costs first, plan for them and spend your money in a strategic way will help you to get through.

3. There are only 24 hours in each day. When we work in a full time or part time capacity, often there is a theory that we can run our own business outside of those hours. Now this might be true if you don’t want to have a social life, don’t have a family, don’t have friends, don’t want to sleep and generally want to be a slave to your work. If your start up business relies on you personally to generate income, then that can make it difficult if you are only working whilst everyone else is sleeping. Instead, you need to think about how your business can generate sales without it being 100% reliant on you as an individual. You want to be making sales whilst you are at your full time or part time job or whilst you are getting what little sleep you can manage.

4. Do you really need that crap? Seriously, when money is scarce, you should be protecting it like liquid gold. Instead, we see business owners invest thousands of dollars in areas that are not impacting at all on the ability for their business to make sales. In those early days, you need to restrict the bleeding of money, and only make purchases if you have done an analysis to determine the financial impact or the return on investment.

5. Learn to fly before you jump. I know there are so many quotes flying around saying “jump off the cliff and work out how to fly on the way down”, but when it comes to cash flow we highly recommend learning to fly before you jump, otherwise the crash landing can really hurt. This may mean doing market research to your target market (and not just randoms on Facebook who won’t buy your products anyway), doing some planning, doing a budget or doing a cash flow forecast. It might also mean getting some trusted people on our team who understands this stuff. If this is not your jam, find someone who bloody loves numbers to help you out. A small investment early on could save you thousands of dollars down the track (not to mention save you bucket loads of stress).

6. Pricing is not a guessing game. Please, please, please I beg you to think about your pricing before you go to market. For example we have just seen a cake maker decide to charge $45 for a really lovely looking cake. She asked “randoms” if that price was fair. For starters, no price is fair if you are not covering costs and that includes your time to make the cake. It took her over 2 hours to make, bake decorate and deliver the cake to the customer. So adding in the cost for ingredients plus a markup and she suddenly saw the price needed to be way higher to break even. Randoms outside your business do not know your costs, and if you don’t know them (accurately), then really, the answers you get for pricing are just random numbers that mean nothing. Know your costs, know your time spent and use that as a minimum base. Losing money on every product or service you sell will not result in a financially sustainable business.

Running a start-up business is hard bloody work. Five years in and I still have “what the fuck am I doing moments”. But thankfully they do not revolve around cash. If it is one thing I do well, it is planning the absolute shit out of everything I do around money. It brings me peace of mind and lets me sleep at night.

“The titanic didn’t sink because it hit the iceberg, it sunk because it didn’t see the iceberg that was right in front of it so it didn’t have time to avoid it.”

For some people, money creates a negative mindset before they even begin, so we suggest before you start your side hustle, you need to get comfortable talking about money, you need to own up to where your money is going and not hide from it, and you need to have the balls and confidence to put the brakes on if things are not working. If you can make friends with your money habits, you are already ten steps ahead of your competitors.


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