Simon Says: Start a Side Business and Transition to Full-Time Success (With an Accountant’s Perspective)

Introduction

Starting a side business can be an exciting journey, but it’s not without challenges. Many entrepreneurs focus on the big ideas and overlook the details that can significantly impact their success, like managing finances, taxes, and long-term planning. That’s where working with an accountant can make all the difference. In this blog, we’ll explore how to start a side business, the tools to use, and how an accountant can help you navigate the complexities of growth, success, and value creation.

1. Choosing the Right Side Business: The Accountant’s Perspective

While selecting a side business often begins with passion and skills*, an accountant can help you evaluate the financial viability.

• Profitability Analysis: Accountants can assess which business ideas are likely to yield the highest returns based on industry trends and your financial goals.

• Startup Costs and Budgeting: They provide insights into the costs associated with starting, ensuring you set realistic financial expectations.

• Market Research Support: Leveraging data, accountants can guide you in understanding market opportunities, reducing the risk of investing in less profitable ventures.

2. Setting the Foundation: Getting It Right from Day One

An accountant helps ensure you build your business on a solid foundation by addressing crucial aspects often overlooked by new entrepreneurs:

• Legal Structure: Choosing between sole proprietorship, partnership, or corporation impacts your taxes and liability. An accountant helps you pick the right structure for yourshort and long term goals.

• Tax Compliance: Side businesses come with tax responsibilities that are easy to miss. An accountant ensures you’re aware of deadlines, deductions, and quarterly tax payments. Examples are payroll remittances, WSIB, Sales tax (HST), tax instalments, other provincial and municipal obligations.

• Accounting Systems: They’ll set up tools like QuickBooks or Xero tailored to your needs, so you can manage cash flow effortlessly. Setting up a proper system to manage your income and expenses saves you time and money down the road when you get busier and do not want to miss a single deduction.

3. Managing Finances Early On: Why It Matters

Poor financial management is one of the top reasons businesses fail. Accountants ensure your finances stay on track:

• Budgeting and Cash Flow: They help you create budgets and track cash flow, ensuring you always have a clear financial picture.

• Tax Deductions: Many side hustlers miss out on deductions for home offices, mileage, or equipment. Accountants maximize your savings while keeping you compliant.

• Profitability Monitoring: By reviewing your financial reports regularly, accountants can highlight areas where you can cut costs or increase revenue.

4. Growing Your Side Business: Strategic Insights from an Accountant

As your side business gains traction, growth brings complexity. An accountant can help you:

• Scale Efficiently: By projecting revenue and expenses, accountants guide you in making sustainable growth decisions like hiring or investing in new tools.

• Pricing Strategies: They analyze your costs and competitor benchmarks to ensure your pricing is competitive and profitable.

• Tax Planning: Growth often means higher tax obligations. Accountants can help you plan for these and avoid surprises at year-end. This also allows you to refocus on what your goals are so that your accountant can help align your business objectives with your goals.

5. Knowing When to Transition to Full-Time

Deciding when to leave your 9-to-5 is a critical moment. An accountant can provide a data-driven approach to help you decide:

• Financial Readiness: They’ll assess whether your income is stable enough to cover personal and business expenses.

• Risk Management: Accountants help you build a financial safety net for emergencies or seasonal fluctuations.

• Valuation of Your Business: If you ever consider funding or partnership opportunities, accountants ensure your business is properly valued and presentable to investors.

6. Adding Value Beyond Numbers

Partnering with an accountant is more than balancing books—it’s about unlocking growth and success:

• Time Savings: They handle the complexities of finances, letting you focus on growing your business.

• Expert Advice: Accountants serve as advisors, offering insights into areas like retirement planning, insurance, or succession planning.

• Building Value: Accountants don’t just track what you earn; they help you strategize how to build a business that increases in value over time.

Conclusion

Starting a side business is a rewarding challenge, but working with an accountant can elevate your chances of long-term success. Whether it’s setting up your finances, guiding you on when to transition to full-time, or scaling for the future, their expertise ensures you avoid costly mistakes and maximize your growth potential.

Ready to take the first step? Contact us today to discuss how we can help you turn your side hustle into a thriving business. 

*Note that there is a clear definition between operating a business and a hobby business. The CRA disallows any expenses associated to hobby businesses. One of the main criteria’s to achieve a business status where your expenses can be tax deductible is the lack of motive to earn more income, irregular operating hours and ongoing operational losses. Best to speak with an accountant to determine the feasibility of your business before the CRA assesses it for you.