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4 Common Side-Business Problems (And How to Fix them)

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Ryan Ong

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Side-business is a mysterious thing. It might make you thousands, cause a huge loss, or earn you a public caning. Like with my my car decoration service. “Spray paint the car first, then try to charge the owner?” Damn right. It’s called outreach selling. But seriously, you don’t need to go as far as I did to mess it up. Here are some common problems ready to go wrong with any side-business:

 

1. Your Side-Business Has No Economy of Scale

Running a skill-based side-business is cheap. When the product is your own expertise, overheads are low. There’s just one problem: No economy of scale.

Let’s say you’re a baker, and make Singapore’s most awesome wedding cakes. They’re totally kick-ass: People take a bite, then get married just so they can order one. Bun as orders crowd your mailbox, you’ll notice this phenomenon:

Whether 10, 20, or 30 people place orders, you won’t make more money than if you bake four cakes. Why?

 

Wedding cake that looks like a building
In this economy, even architects need a side-income.

 

Because you can only bake four at a time. Sure, you can line up customers on a waiting list; but while they’re on the list, you’re not making their dough (Heh, See what I did there?)

This is also true for writers, web developers, tuition teachers, etc. All the work and talent come from you, and it’s not as if you can transfer your skills to a hired assistant. Your only recourse is economics: As demand rises, be sure to raise your prices.

You’ll lose some customers this way, but it’s fine. It’s not as if you could have catered to them anyway.

 

2. Accepting Brand Benefits, or “Why Am I Bankrupt?”

Singaporeans like to squeeze small businesses. If you run a side-business, they’ll assume you’re so desperate, you might even do things for free.

Oh wait, not for free. For, uh, “brand benefits”. For example:

Say you’re a freelance Public Relations writer. You can write press releases so good, you make the Exxon oil spill look like a public health benefit. Some companies will want to hire you alright. For the princely sum of $0.

 

Business people
Wow, this business puts the “free” in freelance.

 

Listen to Felicia Chang, a freelance PR consultant who actually receives such offers:

Singapore companies like to bully freelancers and small businesses. They want free things, and they’ll say, oh, you get brand benefits; it’s as good as payment. Their rationale is that you can say you did something for a big company, and you will get famous.

It’s rubbish. You can’t buy anything with brand benefits. And in fact, people actually think less of you if you do things for free, or too cheap. If you want to get your name out, I suggest you ask for more money and pay for an ad.”

 

3. No Acquisition / Retention Planning

Customer acquisition is when you spend money to find new customers. Customer retention is when you spend money to keep existing customers.

Most side-businesses overspend on customer retention, giving absurd discounts because “this was one of my first customers”. That alone is bad; but side-businesses also make a habit of underpricing (see point 2).

Already, the customers pay too little. And then your side-business loses more money to retain these underpaying customers. It’s the express train to bankruptcy, with the brakes pulled off.

 

Nurse and smiling patient
…and we have a repeat customer discount, so come again!

 

Understand that a low initial price is a customer acquisition strategy. Giving discounts to existing customers is a retention strategy. When you run a small side-business, you cannot afford to do both. In general, it makes sense to start with customer acquisition, then switch to retention.

So you could have a low initial price to attract customers, and slowly raise it. But you’d be willing to raise prices even for former customers.

 

4. Time Constraints

Most side-businesses close down because of time constraints.

It can be a waste, especially if your side-business is proving lucrative. The simplest way to manage this is to groom some help. Once you earn enough, see if you can hire part-timers or students to maintain (but not run) the side-business. It’s a simple process:

  • Set up automated systems for payment and invoicing (ask your bank)
  • Write a FAQ for your hired help to memorize
  • Write clear protocols for hired help to follow, when dealing with sales

 

Mixed martial arts fight
I’ll write you a FAQ, and you’ll stand in for me. It’s real easy.

 

Alice, who runs two pushcart stalls as a side business, says:

I almost had to close my stalls, because I got a promotion and my workload increased. But I realized that the most time-consuming things, like recording inventory, are actually not urgent or difficult. Anyone can do them, it just takes time.

So I delegated the time-consuming stuff to a friend I hired. And I’m free to make the critical decisions only, which don’t actually take much time.”

So learn to delegate a little. Remember, better to have small hiccups in your side-business than to close it down. Or if you need more help, follow us on Facebook for side-business advice.

Image Credits:
meddygarnet, avlxyz, AGmakonts, timefornurses, fightlaunch

Do you have problems with your side business? Comment and let us know!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.