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Guest Post by Joe Peters
Pursuing your passion, earning extra income, learning new skills, and gaining financial independence are some of the reasons people take up side hustles.
Regardless of the factors that drove your decision to establish a gig on the side, you may have built a decent customer base and generated substantial revenue from your side hustle.
So now it seems like a good idea to leap into full-time entrepreneurship.
Moving from a steady job to striking out on your own can be overwhelming and empowering.
Before you jump ship, you need to know what you’re getting into and take the necessary steps to ensure that your transition from side-hustle to full-fledged business goes smoothly and increases your chances of success.
1. Plan For Financial Stability
For the first few months or even years of running a full-time business, your income will be unpredictable and unstable. So, you need to ensure that you have enough capital on hand to weather the storms and have enough cash flow to further grow your business.
The ideal is to reach a point of predictable revenue, as that gives you stability and recurring income, but that doesn’t happen overnight.
Try to gather adequate funds to take care of six month’s worth of living and operating costs, so you don’t suffer extraordinary hardship while working to make your business profitable.
Calculate how much money you will need to manage basic expenses and income fluctuations, so your business doesn’t fold up at the first sign of adversity.
Unless you have sufficient personal funds saved up, you may need to take out a business loan or rely on other sources of external financing. You can consider borrowing from friends and family, getting a business credit card, crowdfunding, or seeking funding from investors or venture capitalists.
Make sure you carry out market research to know if your side hustle is lucrative enough to service any debts you incur and remain profitable.
According to the 2019 Hiscox Side Hustle to Small Business Study, 72% of the business owners surveyed admitted to setting up their business with someone else.
You don’t have to go it alone. Consider yourself lucky if you can partner with someone who compliments your vision. It is easier to endure the first years when there are two or three founders, but you have to get along with them professionally and you should share the same passion.
If that’s not possible, you can set up an informal advisory board of well-wishers and friends to contribute insights, suggestions, and offer support when needed to help you achieve growth.
Anyone who has relevant business experience can share their two cents and give you a different perspective on things.
2. Determine Your Business Model
Depending on the nature of your side-hustle, the clients you attract, your desire to separate and protect your personal assets, and how much you want to save on taxes, you will have to decide if you wish to incorporate your business or continue operating as a sole proprietorship.
There are various kinds of business structures to choose from―Limited Liability Company, S-Corporation, C-Corporation, and Partnership.
Do your due diligence and research them to understand the implications for your business and their requirements. In these situations, the decision you make now will greatly impact your life later. You have to think a bit ahead and consider all possible outcomes.
You want a model that will support your business in the long run, not fetter it.
If you’re unclear about what is best for you, consult an accountant or business professional to help you figure out and handle the finer details of setting up a legitimate business.
3. Get The Required Legal Issues Sorted Out
A side hustle may not require you to have paperwork, licenses, or requirements in place before getting it off the ground, but a legit business will.
You will need to pick a business name and then register it to get state and federal tax identification numbers. Some jurisdictions require you to secure a business license before you can operate within it.
For instance, if you’re working from home, you may need to get a “home use permit.” Make sure you research your local business laws so you can learn the regulations that apply to your business and fulfill them.
Whether you plan on hiring workers or not, it is important that you apply for an Employer Identification Number (EIN), as you’ll be needing it to open a business bank account, which will make the process of filing taxes less complicated for you.
You may have to hire a lawyer to draw up the paperwork for your business model and an accountant to manage your finances and taxes. Starting costs can build up but it is important you set good foundations to avoid problems later on.
4. Create A Detailed Business And Marketing Plan
Developing a real business and marketing strategy is a crucial component of success when making the switch from side hustle to a legitimate business.
Perhaps you had to keep your side hustle a secret and you couldn’t fully promote it yet, but now that becomes an inevitable part of your venture.
Before you start working out a strategy, analyze your customer profile first—it will give you direction, especially for writing copy on your website and social media posts.
Determine your purpose and map a path towards accomplishing it. Some of the things to keep in mind when building a plan for your business are:
- Are you going to rent an office or co-working space?
- What are your business goals for the first year?
- What marketing can you do with available resources that will have the highest ROI?
- How will you generate leads and drive conversions?
- What social media channels will you use to boost your marketing efforts?
- How many employees will you hire?
- How will you stand out from the competition?
- What metrics will you use to measure results and growth?
While you can’t predict how your entrepreneurial journey will pan out, hardcore dedication and thorough planning will go a long way to help your business be successful and profitable.
5. Invest In Tools You Need To Be Successful
It is essential to lay down foundations to limit hiccups, promote efficiency and ease of operations so your business can kick-off after the transition is complete.
Be organized. Have tools and processes in place to manage everything from client relationships to fulfilling orders, managing payments, invoicing, accounting, workflows, and schedules for you and any employees you may hire.
When your client base starts growing, establish security measures and data backup strategies to minimize the risk of losing valuable data.
You will probably be doing most of the work online and use cloud based software, but nevertheless, always have backups for your most essential data.
Losing data happens all the time, and recovery is challenging. It can easily disrupt your business operations, cost you thousands of dollars worth of revenue and even lead to your business shutting down.
Assess the needs of your business ahead of time and procure the necessary equipment, software, and resources to help you scale and manage the expected inflow of customers and revenue.
Success doesn’t happen overnight. It’s up to you to take steps to ensure that quitting your main job to focus on transforming your side-hustle into a full-fledged business pays off.
Once everything is in place, don’t procrastinate. Dive in and get to work. No one can promise that it won’t be challenging, but as long as you make the right moves and take calculated risks, you can end up with a thriving business that makes your life a lot better.
Joe Peters is a Baltimore-based freelance writer and an ultimate techie. When he is not working his magic as a marketing consultant, this incurable tech junkie devours the news on the latest gadgets and binge-watches his favorite TV shows. Follow him on @bmorepeters