Money Management
November 11, 2024
If you have worked in formal employment, you probably have witnessed the pressure to try out one or more side hustles. Exploring income opportunities is one of the hallmarks of a capitalist economy, and Kenya has not been left behind. After all, every opportunity that has the potential to bring you some extra cash deserves a try.
Well, I have been employed for the past six years and have had my share of side hustles - some successful, others not so much. More importantly, I have learnt from the ubiquitous experiences of colleagues and come up with some tips I think will be important in your next side hustle.
It is a natural human instinct to go with the tide because there is safety in numbers. However, a side hustle is an act of entrepreneurship, and a unique value proposition is compelling in deciding the growth prospects.
I grew up in an agricultural environment where farmers would grow similar or related products, often resulting in market saturation and lower prices. However, once in a while, a few farmers would, for one reason or the other, turn the tide - say by farming tomatoes while everyone was focusing on onions. It was often the case that the tomato farmer would get a windfall - due to a shortage of the product. Predictably, in the subsequent planting season, the farmers would all resort to tomato farming, and the cycle would hold.
The same pattern can be seen in common side hustles among middle-class professionals with some extra income to try out. For the longest time, the side hustle used to be a small kiosk, then came the matatu boom, the digital taxi-hailing apps - and now Airbnbs are the in thing.
There is nothing wrong with any of these businesses - but does it really make sense to get into a side hustle simply because everyone is doing it?
It can be argued that one would have higher chances of success when they embark on a side hustle because they have a value proposition that makes your product stand out.
For instance, you could have a rural home where you spend only a week in a year - why not spruce it up and turn it into an Airbnb vacation house that you can share with others for a fee?
The common perception is that a side hustle should remain informal and somehow be an extension of you. However, the potential of a good side hustle is limitless. As such, it is recommended that from the onset, you give the business its identity. In Kenya, you can register your business in various forms, including as a sole proprietorship, a partnership, or a limited liability company.
The Limited Liability Partnership Act of 2012 made it possible to register a partnership that has limited liability from the partners - unlike the general and more common partnership entities.
The cost of registering a sole proprietorship, the lowest form of a business entity, is around Ksh850 and can be done in a matter of hours through the government’s online service delivery platform, eCitizen.
The costs vary depending on the type of business entity. It is advisable that you consult a professional to understand the best form of registration for your business - including options of shielding your personal assets from business liabilities.
Getting your papers in order goes a long way in streamlining your relationship with stakeholders. For example, if you transact with organisations, most will prefer dealing with a business entity instead of an individual.
The same applies to the relationship with the Kenya Revenue Authority (KRA) - registered businesses can legitimately hire employees and submit taxes such as PAYE and income tax as opposed to individuals.
In the same way that a side hustle should not be an extension of you, it should not be an extension of your personal finances. A clear demarcation between your personal expenses and the side business' assets and liabilities cannot be overemphasised. The obvious benefit is that it makes tracking financial performance easier hence the need to have a business bank account and dedicated bookkeeping.
Businesses grow through credit - with the right opportunity, the value of Ksh1 million today could be worth double the amount in a month’s time. The best way to guarantee that your side hustle has access to convenient credit is by building its own credit portfolio.
Channeling your business transactions through a bank makes it easier for investors to verify your books. The same applies to banks - they have customised credit facilities for businesses.
A bank statement would go a long way in assessing the business’ creditworthiness. If you already own a business, Money254 is a platform where you can compare all the loan options that your business qualifies for here.
One of the greatest sources of competitive advantage to any business is expertise. If you have a particular skill that you have mastered better than the existing businesses - you will have a head start. The same applies to something you are passionate about - it often brings out your creative juices because, in some cases, you do not even realise that you are working. Consider the example of Phil Knight - an American billionaire who co-founded Nike.
According to his memoir, Shoe Dog: A Memoir by the Creator of Nike, Knight worked as an accountant in the 1960s but had been an athlete the decade before, when he developed a love for Japanese running shoes. He used his passion for sports to found a business that used the Japanese running shoe design to come up with a side business that grew to the giant that is now Nike. In this case, his passion was track sports, while his main job as an accountant gave him great business expertise.
Time is a limited resource; as life would have it, we all get an equal bite of the cherry. The side hustle, by its definition, suggests you have a main source of income - or a main job in the Kenyan context.
The promise of the side hustle outgrowing your main job and delivering the much-needed financial freedom often deludes one from compromising the main gig. Others spread themselves so thin that both engagements end in premium failure.
The world’s richest entrepreneur, Jeff Bezos, revealed in a recent book -Invent & Wander: The Collected Writings of Jeff Bezos - that he purposes to have eight hours of sleep because with that “I think better. I have more energy. My mood is better.”
Plan your time well to avoid burnout or shortchanging your employer. Avoid conflicts of interest between your main employer and your side business and if in doubt, seek clarification from your employer and make all the necessary disclosures.
Yes, side hustle can be great. In fact three is always the potential to turn that side biashara into a profitable full time engagement complete with tens of employees and you can quit your employment if you so desire?
But, you cannot afford to fall for side hustle mistakes such as keeping it overly informal when you are investing a significant time on it, combining your personal finances with the side hustle’s and compromising the main gig among others.
If you have not thought out the objective and end goal of having one, you would rather take a step back and plan this all out rather than jump into the bandwagon of ‘I must be doing something on the side’.
Good luck!
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