Making extra money on the side sounds great, right? Thanks to the internet and mobile technology, new ways of making money after work are becoming a norm in our society. Side hustles can serve several different purposes – from creating an emergency fund, retiring early, or making a down payment on your first house.
It seems like there are endless stories about people striking it rich from a random side gig, but there's actually much more to it than meets the eye.
Side hustles, no matter how small, are still a business. Just like you have to hustle to get ahead in your actual job, the same goes for side hustling, and it may be even harder because you are building it from the ground up!
Here are 7 things to seriously consider before starting a side hustle:
1. Do you have a business model?
This can be a fairly intimidating aspect of starting any type of business, especially if you don't have any prior experience. The most important part of building a successful brand is learning how to plan correctly and find your target market.
Here are a few things you'll want to think about when you are planning your side-hustle strategy:
- Does the service you are providing actually provide value?
- How will you advertise and find clients or customers?
- What is the realistic amount of time it will take to get your business up and running?
- Is there a specific legal structure that would work best for your type of business?
- What are the tax implications that you may face later down the road?
While you may be thinking that your business will just be a hobby that you do in your spare time, it's always smart to make sure that you understand every aspect of your business before getting started.
Don't be afraid to hire an attorney to help you create a strong legal structure that will separate the business from your personal assets. If you don't, it's possible that your personal assets could be vulnerable in the unfortunate circumstances of a lawsuit.
You may also want to pay an accountant to give you guidance on the best tax strategy for your side hustle moving forward. If there is anyone you don't want to forget about, it's the IRS.
2. You may need startup capital
In addition to the professional services mentioned above that you may need to cover the cost for up front, there are also other business expenses that you may need to prepare for.
Even a service as simple as pet-sitting requires extra money in gas and potentially pet insurance.
Many side hustles don't require a massive amount of startup capital, but it's always a good idea to sit down and create realistic estimates on what it will cost you to run your business.
3. It can take more time than you think
The time that it takes to run a successful side hustle has to come from somewhere, and it's usually what would be your time to relax on the couch or go to a movie on the weekend.
Depending on the nature of your side hustle, you may need to schedule your time very carefully to make sure you are still able to do things that help you recoup from your actual job.
4. Your primary income comes first
It's easy to get obsessed about the extra income that is coming in from your side hustle, but your primary job still needs to come first.
One of the biggest risks involved with creating secondary income streams is that you are essentially burning the candle at both ends. The last thing you want to do is experience "burnout" at your main job or have your performance slip to a point where you could be fired.
No matter how great your side hustle is, if it doesn't at least match or even exceed your day job income – it needs to take a back seat.
5. Do you have a goal?
With as much time as side hustles actually take to become successful, you'll want to make sure that you have a goal going into it that will help keep you motivated to put in the extra work.
It could be as simple a goal as saving extra money for vacations, or as big a goal as retiring from your job 10 years earlier than you originally planned. Whatever it is, make sure that it's important enough to push you to put in the extra time.
6. You'll probably have to learn to sell
The reality of keeping a business alive is that you'll have to feed it with new sales. If you have no background in sales at all, trying to convince other people to give you their money for a product or service can be fairly intimidating.
While there are certainly sales strategies and tactics you can learn – it's going to take trial and error. Every time you have a successful sale, there may be ten times that you get turned down.
Just like with anything else, practice makes perfect.
7. It could fail
Before you take the leap into part-time entrepreneurship, you need to understand that your venture has a real chance of not making it. There are a number of reasons for this, but at the end of the day it's just the nature of business.
They just don't always make it.
Fortunately, if you provide a great service or product that gives value to your target consumers, you're much more likely to thrive.
Don't let this list discourage you
Even though the above list may make side hustles seem like an intimidating challenge, they are still an incredible tool for getting ahead financially and meeting your biggest goals sooner than you originally planned.
As long as you take your side gig seriously and treat it like a real business, you have a great chance to find success and create a viable second income stream.
-- Bobby Hoyt is a former high school teacher who paid off $40,000 of student loan debt in a year and a half. He now runs the personal finance site MillennialMoneyMan.com full-time, and has been seen on CNBC, Forbes, Business Insider, Reuters, Marketwatch, and many other major publications.