According to the Bureau of Labor Statistics, the US unemployment rate was 6.7% in December 2020, with approximately 10 million Americans unemployed. This is almost double what it was in February 2020 before the pandemic.
With so much financial and economic uncertainty, Upwork says 12% of the entire US workforce became freelancers last year and 86% of all freelancers are optimistic about the future of this career path.
If you are one of the millions of Americans who have started or spent more time on the side job since the onset of COVID-19, protecting your growing small business from unexpected challenges and making money no matter what is crucial is crucial.
Maintain an adaptive mindset
McKinsey suggests that the safest and most COVID-19 safest companies can transform the existing skills into innovations or solutions to adapt them to the current landscape.
As a teacher, for example, you can adapt by earning extra income and teaching students online. If you live in an area where many restaurants and shops are still closed, you can use your free time to deliver groceries, takeaway meals, or ecommerce orders.
If you keep adapting, your focus will shift from “I don’t know what to do” to “I can do this job for myself”.
Create a budget and stick with it
This may sound like the boring part of a side hype – but it can’t be overlooked. When funds are low thanks to COVID-19 or some other unforeseen challenge, a good budget will keep you afloat and make sure you are well prepared before the challenge arises.
A good budget doesn’t have to be complicated. Use an online accounting tool to record some key financial details, including:
- Monthly incoming cash flow
- Total cash
- Outbound cash flow, including fixed (monthly) and variable (changing) costs
Don’t ignore business insurance
If you want to minimize the overheads of your ancillary business, you may have gone without corporate insurance, but that’s a mistake. In the event of a disaster, corporate insurance is essential to protect your assets. As USA Business Insurance experts suggest:
“While business owners may assume the risk of greater liability is minimal, it happens to them and individuals or companies [must] Take out insurance policies precisely because they are unexpected. “
Prepare for the unexpected by protecting your business from unforeseen setbacks. A simple liability policy can be all you need.
Check out the small business grant options
Help is always available, and when a disaster strikes it helps to have the groundwork done in advance. Check out these private and federal small business grants and bookmark the ones that apply most to you. If necessary, you can go to the application and apply it right away to make sure your sideline is taken care of.
Prepare for the tax season in advance
Don’t forget to save money for taxes every month. They don’t have a company that takes these taxes out for you – and you don’t want to get in trouble trying to tax-make the money when an event like COVID-19 occurs. Use this tax calculator to find out how much you have to put away each month.
But don’t stop there.
- Determine which tax authority (1099, LLC, S, or C Corp) you want to register your ancillary business with.
- Open a separate bank account for your business finances to protect your personal assets and to prove that the sideline is generating income.
- Know what expenses to write off (e.g., home office space, phone / internet, utilities, mileage, travel expenses, marketing, equipment / supplies, courses).
- Keep a record of all business cash flows (e.g. receipts, bank statements, tax forms).
Whether you started your side business in response to the global pandemic or took an existing side business to the next level in the past year, making your small business COVID-proof is important. Regardless of what 2021 has in store for the economy, proactive measures will always keep your side on the road to success.
Jessica Thiefels is the author of 10 Questions that answer life’s biggest questions, podcast host of Mindset Reset Radio and founder and CEO of Jessica Thiefels Consulting, an organic content marketing agency. Follow her on Twitter @JThiefels and connect on LinkedIn.