How to Start a Side-business With Minimal Money Risk

Ryan Ong

Ryan Ong

Last updated 06 March, 2018

When starting your side business, follow these 6 tips to avoid making money mistakes that could hold back or derail your progress.

It’s an eternal conundrum: you need to start a side-business to make money, but you need money to start a side-business. The only real solution is to compromise: go slow, and ramp up the business as the money comes in. This way, you won’t lose a huge sum all at once:

6 Ways to Minimise Your Money Risks

There are six important ways to minimise your money risks, when starting your side business. These are:

  • Invest as you grow
  • Exchange equity for skilled labour
  • Optimise your payment methods
  • Pick your loans wisely
  • Cover your costs with a deposit system
  • Check legal liabilities in your contract

1. Invest as You Grow

Minimise your initial capital investment. For example, don’t immediately assume you need paid Google ads, professional photographers for illustrations, the country’s top web designers, etc.

Many huge businesses today were established over time, by gradually reinvesting the profits; UPS started out with little more than a few hundred dollars and a bicycle, for example.

Instead of setting aside a massive sum, and declaring you’ll use it all for your business, work the other way: determine what your business needs, and then rank them in order of priority. As you make your first few deals, re-invest the returns into upgrading your business.

The idea is to make your side-business “pay for itself”, rather than taking out loans to use as capital. It does mean you may not see a profit, for as long as the first or even second year; but it ensures you won’t be in debt if you decide to shut things down.

meeting glass door - SingSaver

2. Exchange Equity for Labour

If you need skilled labour but can’t afford to pay cash yet, consider offering equity. You don’t need to think in terms of partnerships - remember you can offer a bit of equity for crucial, one-time jobs.

For example, you could offer a certain amount of shares in your business, for the one time job of making your first prototype, or coding your website. Alternatively, you could offer them a percentage of sales, if you’re asking for a really big job (e.g. illustrate your whole product catalogue).

The downside is that, if your business is very successful, you could be drastically overpaying. If your side-business grows into a big company, the person you gave a thousand shares to might be able to sell them for a fortune.

But the upside is that, if the business flops, you won’t lose much actual money.

3. Optimise Your Payment Methods

When buying things for your business, it’s important to use optimised methods.

For example, if you spend at least S$1,000 month on your business operations, you will want to put the cumulative expenses on a cashback credit card. At just three per cent cashback, that would get you S$300 every month.

(Pay back the card immediately, to avoid interest).

Likewise, you should always consider the exchange rate, if buying from abroad; or the impact of using a Multi-Currency Account, so you don’t need to pay for Forex rates.

The way you pay your bills can cost or save you money, and you should research to find the approach that’s best for you.

Woman computer screen - SingSaver

4. Pick Your Loans Wisely

You should never finance your side-business with credit card loans, as the interest rates are around 26 per cent per annum. And while straight up business loans are best, you usually can’t get such loans until your business has been profitable for at least two years.

In the meantime, you may be forced to rely on personal loans, or fixed instalment loans, for cash. If you do so, always check the rates on sites like Find the bank that charges the lowest interest rate (it changes every month).

Avoid using licensed moneylenders, as the interest rates are extremely high (sometimes as high as 48 per cent per annum). In addition, they tend to stack hidden fees, such as administrative charges, on top of the existing loan.

While family may be willing to give you interest-free loans, we suggest you avoid it. Don’t mix business and family that way, to minimize future conflicts.

5. Cover Your Costs With a Deposit System

As a new side-business, you probably have operating costs. For example, if you’re painting someone’s walls for them, you’ll need to buy the ladder, paint pots, brushes, etc.

Always charge a deposit that covers most or all of the initial costs; the rest of it can be paid to you later. This ensures that, if the client fails to pay, you won’t lose money from having bought all that equipment.

Be especially careful to do this when taking on big projects, with huge upfront costs to you. For example, if your side-business is to run family day events for corporations, you probably have costs that range into tens of thousands of dollars; someone has to pay the caterer, pay for the venue, pay for the necessary permits, etc.

You’ll need a deposit to cover this, just in case the client pulls after you’ve paid for them.

man signing a contract - SingSaver

6. Check Legal Liabilities in Your Contract

It’s advisable to pay a one-time fee to a lawyer, to draft a standard contract for your deals. In particular, you want to minimise or remove legal liabilities.

For example, if your side-business is to code websites, what happens if the payment portal malfunctions? Some demanding clients may include a clause, that allows them to recover lost monies from you.

Always check what you can and can’t be held legally liable for, when you work for a client. As a starting business, all it takes is one lawsuit to bring things to a crushing end. It’s usually best to avoid working clients who saddle you with big legal liabilities; the risk is too high.

Read This Next:

5 Money Hacks Every Self-employed Singaporean Must Know

Common Money Mistakes You Make Upon Retrenchment

Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.


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