The term ‘slasher’ has been coined for someone who has multiple jobs, and it is a trend found primarily in middle- and upper-income earners as a way to supplement their income. The majority have a sideline business that is not related to their current job, and would like to turn this business into their main career.
Monique is a classic slasher. She is employed – Monique is a bookkeeper – yet she dreams of turning her sideline businesses into a career.
Monique is currently one of six contestants taking place in the six-month long Absa City Press Money Makeover financial wellness boot camp with personal finance guru Maya Fisher French.
Monique’s direct-selling beauty product business is a form of multilevel marketing, so she can boost her sales by recruiting salespeople beneath her.
This type of business is ideal for someone with a full-time job as it can be done over weekends and evenings, and can produce a reasonable income with a well-managed team.
However, Monique has come across a few challenges.
Until recently, the structure of the business was such that she had to supply the stock to her sales team. This meant that she needed access to cash flow of about R50 000.
As she did not have the capital to carry the stock, she funded this through a revolving loan. If her sales team underperformed, she did not receive the necessary income to settle the debt, so her interest bill kept growing.
There were also cases in which some of her team members would sell a product but not pay the money over to Monique.
The first question her adviser, Jacques Venter, asked was whether this business was really making money – because, like so many small business owners, Monique had not separated her personal and business finances.
If you are continually dipping into the business to meet household expenses or not drawing a salary from the business, you have no idea if it is worth your energy and time.
“Monique has now realised how important it is to separate her business account from her personal account. This forms the basis of good planning, control and management for both household and business,” says Venter.
Elton Govender, from Absa business banking, says managing your cash flow is an art: “You need to have monthly savings to see you through the tough months, but make sure that you replace the savings as soon as possible.”
He adds that, if the business continues to make a loss, you need to assess it as if it were a new business and decide on the following:
1. What do I need to change to make the business successful?
2. Do I need to reinvent the business or change the course of the business? For example, do I go from manufacturing coffee and selling to a distributer to selling directly to the consumer?
“If there are no options, do not be afraid to close the business and try something completely different,” says Govender.
Fortunately for Monique, the company changed the structure of the sales model in October and the agents now purchase their own stock. This has been an interesting exercise for Monique as she could immediately see the weak links in her sales force.
“Some of the team members left because they did not have the capital to buy their own stock,” she says.
But these were mainly people who did not pay her for their stock.
“Previously, I had to write off money that was never paid to me. Now I have got rid of people who were costing me money.”
Although her sales initially declined, Monique has been able to focus on her own direct sales.
Now that she no longer carries her agents’ debt, Venter says it is easier for her to plan her stock levels and cash flow.
“She does not need to run around and collect money or deliver stock to clients. She has more freedom now and is not burdened with lots of unnecessary responsibility and admin, which has also contributed to a less stressful environment at home.”
The change came just in time for Monique to capitalise on the festive season as her product is an ideal Christmas gift. In the new year, she will have the time and energy to look at new sales channels, such as creating her own website and using social-media platforms such as Instagram to market her products.
“I am gradually getting to what I should have been working towards. Although I could have done it on my own, working with Jacques has made me focus, and I am taking the time to look after my money,” she says.
SIDEBAR:
HOW TO MAKE A SIDELINE BUSINESS WORK - TOP SLASHER TIPS:
1. If you are looking at sales-related businesses, avoid one where you need to carry stock unless you have capital. Funding stock on a revolving credit basis will erode your profits and increase your risk.
2. Always separate business and personal accounts. Pay yourself a salary from the business, rather than dipping in on an ad hoc basis.
3. Do your research and write a proper business plan. Even if it is just for yourself, it will help clarify your vision.
4. Be prepared to work those extra hours required to make the business successful. There is no such thing as passive income – there is always work to keep the business growing.
5. If you are starting a business that requires upfront capital, be prepared to make financial sacrifices until the business is able to generate a profit. The more you invest in your business and spend on maintenance, the longer your business will be around to fund your lifestyle.
6. Do not buy fancy, depreciating assets to show off to family and friends. Live within your means.
7. Save as much as you can for that rainy day and do not lend your resources to anyone – no loans to family and friends.
8. Monitor your bank account and ensure that you collect all your income from debtors and pay your creditors on time.
9. Ensure that your SA Revenue Service payments are up to date and do not try to cheat the taxman. Make provision for tax payments every month by transferring any tax due into a separate savings account each month, so you can make sure that you have the money to meet your tax obligations.
*Monique’s surname is withheld for privacy purposes.
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