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n the last few years, Houston-based small business coach Stacey Butler has seen a large uptick in the number of clients asking her how to turn their side hustles into full-time jobs. This increase is likely due to economic necessity and proactive desire – and many of these startups and small businesses have thrived since the beginning of the pandemic. For the unprepared, Stacey says, the transition from a passion project to sole income can be overwhelming.
She said, “You realize you are suddenly the person wearing all the hats. You are now the CEO, you are the marketing person, you happen to be your own CPA, and you might even be your social media person!”
With 45% of Americans engaging in a side hustle that net them an average of about $6,000 a year, we wanted to help side hustlers looking to make the jump to full-time. This guide covers the steps you’ll need to take to turn your side hustle into a full-time business.
Setting the stage
1. Develop your "why"
Your side hustle may start as a way to generate extra cash on the side, and that's fine. Turning it into a full-time business, though, may require a little more thought. Why do you want to build your business into something more? Is it because you love the work? Is it to provide a better life for yourself or your family? The "why" behind your business is just as important as the "what" and the "how."
Like many entrepreneurs, you may hit a wall or work yourself too hard, resulting in burnout. Knowing why you do what you do can help you manage burnout and keep you on task when times get tough.
2. Generate a business plan and set goals
Creating a business plan is the first step in preparing to go full-time with your side gig. A business plan outlines your business goals and how you plan to achieve them. It also walks through other aspects of your business like marketing, sales projections, and your current finances. A business plan lays out a clear picture of where you're at currently and where you want to go. Like any good plan, it can also help keep you on track, accountable, and organized.
Additionally, take time to set goals for your business. Consider objectives related to revenue or sales or other milestones you want to reach. Write clear and actionable goals to track your progress.
Keep your goals simple, too. Start with 3-5 goals, including short-term and long-term goals. Write down your goals and keep them visible as a constant reminder. Review your goals regularly and adjust them as needed.
3. Understand your market and customer base
There's a difference between earning money on the side and bringing in your sole income from a full-fledged business. To create a company that connects with customers, you need to understand the market. You can learn about your market by doing market research and by studying your competitors: What are they doing right? What would you do differently?
Customers are the lifeblood of any successful business. Understand how you’ll connect with your current and potential customers. Maybe you’ll use affiliate marketing, social media, and ads—even community-building, if your customer base is large enough. Find out what problems your target audience experiences and figure out how to solve them.
4. Choose your business structure
There are five main business structures to choose from when you are setting up your business. Of the hundreds of businesses Stacey has coached, the three most common she sees are sole proprietorships, LLCs, and S Corporations.
When deciding which business structure to choose, Stacey notes that it often comes down to if somebody were to have an issue and file a lawsuit against you. “You want to make sure they can only make a claim against the business assets, and that they can’t come after your personal assets.” In instances where you could get sued, Stacey recommends an LLC.
“Depending on the state and county where you live, there are so many nuances! I always tell small businesses to contact a local bookkeeper and/or a CPA – or even attorneys. Many of them will give you a free consultation, so there are not a lot of out of pocket dollars that need to be spent. Also, the Small Business Administration has resources to help.”
5. Register your business and obtain required permits
When it comes to permits and licenses, Stacey says, “Most of my clients have researched permits and know everything… or they have limited information on this subject.” She says requirements are specific based on trade.
“My husband started his own remodeling and construction firm, so for him there are different requirements for certifications and permits that he has to follow. My advice is just go to your state website, and put in whatever business you are. It will tell you the different certifications or permits or other things that you need to have.”
Proper registration, permitting and licensing:
- Ensures Legal Compliance: Ensures you are operating legally and in compliance with local, state, and federal laws and regulations.
- Protects Your Business: Protects your business from potential lawsuits, fines, and penalties. It also helps to safeguard your business and personal assets.
- Builds Trust: Help build trust with your customers, vendors, and other stakeholders. It shows that you are a legitimate business and are committed to following the rules.
6. Start small
It's extremely rare to find a business owner who has achieved overnight success. In most cases, developing an idea into a successful business can take a while. There's nothing wrong with starting small, especially if you're learning new skills.
For example, if you're a freelancer, you can start small on sites like Upwork and Fiverr. You may not earn much money through these sites, but they can help you build a portfolio of work. Get in, put in your time to develop your business, then get out and on to higher-paying clients. The same goes for marketing your business.
With so many social media platforms available, it may seem like a good idea to try and promote your business everywhere. It's challenging to market yourself effectively on every platform, even after going full-time. Do yourself a favor and pick one or two social media channels to grow and worry about the rest later.
7. Separate personal and business expenses
While it may seem basic, Stacey says it is essential for a business owner getting to scale to keep their personal and business expenses separate. Defining these terms is one of the first things she does with new clients.
Personal expenses are the costs incurred for an individual's personal use, such as housing, groceries, clothing, and entertainment. Business expenses are the costs incurred in running a business, such as office rent, salaries, equipment, and supplies.
While there are many benefits to separating your personal and business expenses, Stacey says the clarity will make taxes easier, protect you in case of legal liability, and help you understand the financial health of your business. These data points can be crucial in making informed decisions about investments and future growth. “I always tell clients that when it comes to the finance piece, and the banking, keep it simple! You don’t need to have something crazy set up but you do need to protect yourself.”
Novo is your best option out there for a business checking account. You get fee-free financial management for your business by centralizing everything you need into one app. You can also set aside money into Novo Reserves for quarterly taxes or any other business expenses.
Running your business
8. Manage cash flow
Managing cash flow and creating cash flow statements are essential for the success of any business, regardless of its size or industry. Here are some best practices when it comes to managing your business's cash flow:
- Develop a cash flow forecast: A cash flow forecast is a plan that outlines how much cash your business will have on hand in the future. Creating a forecast helps you identify potential cash shortages and take steps to prevent them. It also helps you make informed decisions about investments, expenses, and borrowing.
- Keep your cash flow positive: A positive cash flow means that your business is generating more cash than it's spending. To keep your cash flow positive, you need to manage your expenses, collect payments from customers on time, and negotiate favorable payment terms with suppliers.
- Keep a cash reserve: A cash reserve is a safety net that can help your business weather unexpected expenses or revenue shortfalls. It's recommended to keep at least three to six months of operating expenses in reserve. (With Novo Reserves, you can automatically set aside a portion of your deposits into cash reserves – save for a rainy day, set aside money for taxes, and more.)
- Manage inventory: Excess inventory ties up cash that could be used for other business expenses. Managing inventory levels can help you avoid overstocking and reduce the amount of cash tied up in inventory.
- Consider financing options: On average, small business owners spend $40,000 in their first full year. Financing options, such as lines of credit or loans, can help you manage cash flow fluctuations. However, it's important to choose financing options that align with your business's cash flow needs and capacity to repay. Consider bootstrapping your business if possible – Novo makes it easy for you to invest in your business by sending anywhere from 10% to 100% of your paycheck to your Novo business account.
9. Know your numbers and keep detailed records
There are many numbers to consider when going full-time with a business are revenue and business metrics. First, you want to verify that your business generates enough revenue to cover your expenses and beyond. Hopefully, you'll increase your business income quickly once you transition to full-time, but it's no guarantee. Build up a solid emergency fund to cover yourself if anything goes wrong.
Business owners also need a good handle on their business metrics like sales, expenses, profits, cash flow, and more. Knowing and understanding your business numbers will help you prepare for future decisions.
Make sure that you’re keeping detailed financial records. The more your business grows, the more details you'll need to worry about day-to-day. That's why you need to develop a system now to stay on top of everything. Try out different tools, software, apps, and organization methods to find what works best for you. If something gets missed, ultimately, it's on you. Implement organizational systems that will keep you on track when you go full-time. If you have a Novo account, you can integrate with popular accounting, payment processing, and payroll apps to get your full financial picture in one place.
Lastly, it's important for any business to keep up to date on tax obligations. These can include self employment taxes, which are based on your income and include Social Security and Medicare taxes, and estimated taxes. If you are a full-time business owner, you’ll have to make estimated tax payments throughout the year, based on your projected income.
10. Consider accepting digital payments
Cash only businesses are few and far between as more and more consumers depend on credit and debit cards. If your business doesn’t already have a payment processor, now may be the time to get one.
A payment processor, like Stripe or Square, facilitates electronic payment transactions between a customer and a business. The processors move funds between bank accounts and credit card accounts, and they provide security and fraud protection for both businesses and consumers. Processors accept various forms of electronic payments, such as credit and debit cards, e-checks, and mobile payments.
“Even if you use PayPal or Zelle, if you are doing a lot of transactions, you need a payment processor,” says Stacey. “If it’s too complicated then your potential client may not want to do business with you.”
Payment processors bill small businesses for their services based on a pricing structure that typically includes two types of fees: a percentage fee and a per transaction fee, both billed on a monthly basis.
The percentage fee is typically around 1.5% to 3.5%. The transaction fee typically ranges from $0.15 to $0.30 per transaction, depending on the payment processor.
11. Hire employees
When you start your own business, every task falls on you – whether you're good at it or not. As you grow your small business, work to outsource jobs. These can be areas of weakness for you or just time-consuming tasks that take you away from more meaningful work. Focus your time on the tasks that move the needle the most, and hire others to help with the rest.
Stacey has a mantra when it comes to hiring employees, “eliminate, automate and delegate!” She says that, as you transition to full-time, you must ask yourself what you are trying to accomplish in a specific timeframe.
Using her mantra, this is what she asks her clients before they hire new employees:
- Eliminate: “Is this hire really something you need to do right now? Is it going to move the needle for your business, or is this addition just nice to have? Not saying don’t do it, but asking if we can table it, and look at after we get some of the things that are going to move your needle.”
- Automate: “Can we use technology tools that can help you automate so you don’t have to hire? For scheduling, can we use calendar software? For sending invoices and paying vendors can we use accounting software? Are these automated changes duplicatable so they are not having to reinvent the wheel every single time?
- Delegate: “Do you have a passion for this task? Will offloading this allow you to scale your business because you can actually work on the business instead of the back office?”
12. Invest in growth strategies
Growing a business is challenging, but finding ways to scale it early on can give you a vital head start. Effective ways to scale a business include automating tasks, forming partnerships, hiring employees or freelancers, investing funds back into your business, applying for business grants, and creating additional income streams. Don't try to scale too fast, but don't get stuck in the same place. Find the right balance for your business.
Improving your entrepreneurial skills
13. Surround yourself with the right people
The relationships you form can often make or break your small business. Align yourself with the right people who help your business and be honest with you. Iron sharpens iron, and that holds true in business, too. Find people, whether employees, mentors, peers, or friends, who motivate, encourage, and help you grow as a person and business owner. Also, pave a two-way street. Offer the same help and support to people around you, too.
Make sure to network. Networking is imperative for any business owner, especially as you gear up to launch a full-time gig. Search for peers and mentors who used to be where you are now or are at the same spot on the entrepreneur journey. Don’t be afraid to ask questions or seek advice. Attend networking events and conferences to meet new people and uncover new ideas that can help your business grow.
14. Utilize your skills and strengths
You only have so much time and energy in a day. Concentrate on spending your time on the most critical tasks of running a business. Recognize your strengths and skills and use them to your advantage. Remember, there's not enough time to do everything. You'll get the most bang for your buck by focusing on what you do best.
15. Keep learning
As with anything in life, the more time you invest into learning and growing as a business owner, the more equipped you'll be to scale your business. Ways to grow your knowledge include reading books, listening to podcasts, attending industry conferences, and following other successful entrepreneurs. Understand how you learn best and use that knowledge to become a better entrepreneur.
Best side hustle ideas that can become a full-time business
You can turn almost anything into a business with the right plan, hard work, and a customer base willing to pay for your products or services. Here are some of the most popular side hustles and freelance work that can become a full-time income.
- Freelance writer, transcriber, or proofreader
- Virtual assistant
- Bookkeeper or accountant
- Computer programmer
- Social media consultant
- Retail/eCommerce seller (on Amazon, eBay, or Craigslist)
- Graphic designer
- Website designer
- Event planner
- Personal trainer
- Real estate agent
- Influencer or content creator (for example, on YouTube or Instagram)
The barrier to entry varies by profession and may require additional training, certifications, or online courses. Keep that in mind when considering a side hustle or full-time business.
It's a big jump going from a passion project on the side for extra money to launching a full-time business venture. Consider the pros and cons of going full-time with your side hustle before you take the leap.
Prepare financially before you transition to safeguard against ending up in a dire situation. Owning your own business is a risk, but keeping your finances in order can help to mitigate some of that risk. In the end, if your side hustle is something that you are passionate about and it brings in money, moving from part-time to full-time could be the best decision for you.
When in doubt, Stacey says reach out. “A lot of people think they have to build their own pyramid when they scale, and that is not the case. Reach out to local consultants, or mentors, or your local SBA to help you solidify a plan. This is key, especially if you aren’t from a business background.”
Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.
Novo is a fintech, not a bank. Deposit account services provided by Middlesex Federal Savings, F. A.; Member FDIC.
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