Even before the ongoing COVID-19 pandemic, many people used their free time to engage in their passions. Whether knitting scarves and selling them on Etsy or doing home repair work for neighbors, side gigs are becoming more common for people with standard, 9-to-5 day jobs.
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Side hustles are great options for many people for a few reasons — they serve as an extra source of income, help you make ends meet or build savings for retirement. The money you bring in from a side gig can be used for various purposes, depending on your financial situation and future goals.
Aside from financial gains, side hustles allow you to do what you enjoy and are passionate about, something your day job might lack. It’s common for professionals in the corporate world to switch paths and take on a new business endeavor that’s more tailored to their passions.
Why Are Side Hustles Booming Right Now?
The pandemic has prompted many professionals to reflect on their careers. Some decided to leave their jobs entirely and fully invest time and money into their side hustle.
This contributes to what’s being coined as “The Great Resignation.” It’s a period where an unprecedented amount of the American workforce is resigning for many reasons.
According to U.S. Census data, U.S. Business formations rose by 47% in 2020. This highlights the slew of professionals taking advantage of the opportunity to create companies. However, it can be challenging to know if your side hustle is capable of scaling. You’re likely flooded with questions: Will this work? When do I quit my day job? Is this realistic for my financial situation?
Signs Your Side Hustle Could Be a Viable Business
Here are some telltale signs that your side hustle is ready to be taken to the next level:
· You’ve identified a need in the marketplace, and you can meet customer demands
· Your side hustle has taken on a life of its own
· You are already profiting from your side hustle
· You need a change from your day-to-day routine
· You’re an authoritative force in your industry
· You’ve built a reputation among your competitors
Of course, you could spend hours contemplating every small detail when deciding if your side hustle could be transformed into a real business. It’s also worth noting that how you speak about your gig can impact your perception of if it will be successful or not.
For example, if you continue to call it a side gig, that’s what it will be. If you truly believe in the products or services you offer, you should consider calling it what it is: a business. Dreams only work if you do.
Here are some signs that your side project may not be viable as a business:
· It cuts time into your day job without being profitable
· You create emotional reasons to justify why you have this side hustle
· You lack consistency when working on your side gig
· You’re not ready to put yourself out there
· You’re not meeting an existing customer demand
The decision ultimately comes down to you and your financial situation. It’s best to have six to 12 months of saved income before you decide to take your side hustle to the next level.
It may take that amount of time to earn profits from your business, and the last thing you want is to drain your savings. Financial security should always be a top priority for anyone entering the entrepreneurial landscape. Entrepreneurs need to be wise in their saving strategies to stay afloat if they experience any emergencies.
How to Transform a Side Gig Into a Business
If you’ve decided to elevate your side hustle, you must take steps to ensure you set your business up for success. This way, your company is more likely to survive and thrive in a competitive market.
1. Draft a Business Plan
Without putting your business ideas onto paper, it’ll be challenging to know if this is something worth fighting for. If you do not already have a drafted business plan, make sure you write down all the details you’ll need to know in advance. For example, you should start with your mission statement and the overall goal you want to achieve. It should be followed by an executive summary, company description, organizational structure and a breakdown of finances.
Planning is crucial when launching your business, so taking extra time out of your day to draft a thorough business plan will give you the best start.
2. Perform Thorough Market Research
Market research will play a significant role in determining your target market and help you operate your business as it scales. It also enables you to determine how viable your business plan is.
Suppose your side hustle is selling handmade jewelry to local friends or family members. While this is certainly a good side gig, you may not be tuned into customer needs. Your ultimate goal in market research is to see what your customers do or do not like about your products or services. This will minimize the risks associated with launching a new business.
3. Establish a Legal Business
It’s critical to take the right steps to separate your business and personal finances. Your side hustle may have given you some disposable income, maybe through a payment app like Venmo, CashApp or Zelle. This won’t be sustainable if you’re ready to take your side gig to the next level.
Choose how you want to incorporate your business and whether you want to establish a sole proprietorship, limited liability company (LLC) or partnership. Incorporation may seem daunting, but it’s quite easy as long as you have a couple of hundred dollars to cover fees. You’ll also need to register your business with the state and receive an employer identification number (EIN).
4. Consider Purchasing Business Insurance
Business insurance is a necessity. It would offer protection if your company were to experience an emergency, such as fires, floods or property damage.
While the state you’re in will determine what type of coverage you need, it’s worth investigating and investing in. There are many benefits to having small business insurance:
· It attracts new clients to your business
· It enables you to find and keep new employees
· It protects your business from lawsuits and claims
· It keeps your company profitable year-over-year
· It helps you conform to legal requirements5. Invest in Marketing and Advertising
Every business needs to have a hand in the marketing and advertising landscape. Without these crucial components, how would you attract potential customers? You need to have a viable strategy and choose an appropriate advertising approach when launching your business.
Consider placing ads in your local newspaper or online news source. As your business scales, you may want to think about hiring dedicated advertising or marketing professionals to help you with this part of your business. There are plenty of ways you can use marketing to your advantage, so be sure to prioritize this as you get ready to launch.
6. Decide When to Quit Your Day Job
Now that you’ve taken some crucial steps in forming your business, it’s time to think about when your day job is no longer needed. It may be a couple of months before you can quit, and much of it will come down to how profitable your new operation is.
Remember that earning enough profit to quit may take longer than you expect. Some say to ballpark how much you’ll need to make before you leave and then triple that number because it’s better to be safe and financially stable before you resign.
This decision will boil down to your specific circumstances, and if you need to consult a financial adviser, then be sure to do so. Your future self will thank you for taking into account your long-term financial stability.
As you prepare to bring your side gig to the forefront, you’ll need to remember these steps. Launching a business should be a fun, enjoyable experience, but it will come with obstacles you’ll need to overcome. Many entrepreneurs will use new technologies to streamline their operations, so be willing to adopt new tech to make starting your new company a breeze.
Own Your Side Hustle and Call It What It Is: A Business
Side hustles are becoming more common in today’s economy. They come with pros and cons, and it’s critical to remember that not every one will work as an established business. However, many new companies can be viable if you follow the right steps before launching.
Becoming an entrepreneur is not for everyone, but if you have enough drive, determination and passion for the products or services you provide, you can make it happen. Start calling your side gig a business and take the required steps to set yourself up for success. If you follow your heart and keep a cool head, you’ll be ready to start earning a profit doing something you love.