Statistics released by the Office of National Statistics (ONS) last week show that the pandemic has driven the highest spike in start-up businesses for the first time in a decade. Despite ONS finding that 600,000 employees had been brought back from furlough on 12th April, the ‘passion economy’ – consisting of side hustlers and self-employed individuals – is growing at speed, showing a real trend toward people starting their own businesses and pursuing their passions during lockdown and beyond.

Recent research conducted by Mettle, the digital business account backed by NatWest, and YouGov found that the top 10 motivations for going solo are as follows:

1. A desire for increased flexibility and freedom (57%)

2. Wanting to change work/ life balance (38%)

3. To have more purpose (24%)

4. To find pride and fulfilment (23%)

5. To earn more money (23%)

6. To pursue a passion (23%)

7. To have financial independence (23%)

8. To be more creative (21%)

9. Feeling underappreciated in a previous role (20%)

10. The desire to create something from scratch (18%)

As the world of work continues to evolve and lockdown restrictions ease, the passion economy is only going to grow further as more and more people seek alternative opportunities to traditional employment, or look to supplement their primary income, as the world of work has truly been disrupted.

Launching a business is an exciting time. Here are the top five things that you should consider ahead of taking the plunge and starting something of your own:

1.     Form your plan of action

You’ve got the passion or the idea, but how do you get from there to a plan of action?

First things first, you need to define your product or service by identifying the problem you’re solving or addressing, and understand the market landscape you’re launching into. Whether it’s a crowded space or you’re the first person to venture into a new area, understanding where you sit in this wider landscape will allow you to identify the opportunity to start and grow your business effectively.

Understanding your audience that you will be selling to is also key. Once you’ve got this, how you market your product or service to your target customer will be much easier to define and activate. Determining your pricing strategy is also essential when first starting out, your understanding of your audience and the market will guide you through this process.

And, most importantly, you’ll need a name. It’s always a good idea to check out whether website domains and social media handles are free for your chosen business name too, allowing you to cement your business and kick start the process of owning the name. Depending on the size of your business, it is also worth checking trademarks of any business, service or product names.

There are many resources to help you get started - the UK Government page has a great business planning downloadable template that ensures you’re on top of key aspects such as financial predictions, management and sales.

Remember that even if your initial plan isn't where you end up, it will help form direction and acts as a good starting point for your side-hustle.

2.     Decide how you’ll run your side-hustle

While coming up with creative ideas and pursuing our skills or passions is easier for some, it’s important to consider the many hats you’ll have to wear as a self-starter. When you first start out, you’ll be the product developer or service provider, head marketer, chief financial officer, website designer and more.

A great place to start with this is free online resources that help you to upskill in areas you may have less expertise. Checking out self-employed or start-up forums are also a good way to connect with others to share advice and resources.

3.     Speak to experts

When starting something of your own, it is always useful to hear from others further along in the journey. From sharing learnings, top advice or key watch-outs, to speaking with other experts, you can sense check your business idea and plan and factor in aspects which you may have not previously considered.

Consider where you may need support too. For many, staying on top of financials or designing a website may be a daunting prospect. Don’t be afraid to reach out to your own network to see who may be able to lend their skills to get you up and running.

Many financial institutions offer free online support for entrepreneurs to help them navigate business planning and banking. These services act as a useful sounding board to help you start, run and grow your venture.

4.     Set up your business bank account

A common mistake made by SMEs, self-employed and side-hustler individuals is using their personal banking platform to run their business. Whether due to high fees or lack of support for your kind of business, traditional banking services may not be the right fit for your venture.

It’s important to keep your personal and business finances separate to ensure you’re fully tax compliant. It will also allow you to keep a better handle on financial business aspects such as invoicing, payments and cash flow.

Digital services are a great place to start, allowing you to manage everything from one central platform instantly via your phone or desktop. Aside from the accessibility, digital services provide you with quick, online support services and allow you to set up an account much more rapidly than in-branch.

5.     Register your business

Once you’re all set up and running, next it’s time to consider whether you want to register your business.

Becoming a limited company means that your venture will pay corporation tax on your  profits; this means you’ll pay tax on your profits whereas if you aren’t registered, your income will be taxed alongside any personal income. 

In addition to these tax differences, becoming a limited company means that you can sell shares in your business to generate investment and also provides you with limited liability protection. This means that your company becomes a separate legal entity from yourself, so that your personal assets will not be at risk should your business run into any financial or legal difficulties.

However, if your side-hustle is more of a passion than a fully-fledged business, becoming a registered business may not be the right route for you. Limited companies typically come with higher levels of financial admin and taxation monitoring and regulation. Registered businesses also have less privacy when it comes to business accounts as your financial and taxation information will be published via Companies House where anyone can access them.

It’s best to look at the goal and purpose of your venture and assess which option (limited company vs. sole trader) is the most appropriate fit for you.