Is it time to turn your side hustle into a full-time business?
Many business owners want to know how to tell when it's time to take their side hustle to a full-time business. They also want to know how to get started when it's time. Does this sound like you?
Running a side hustle is a great strategy. You can test the markets, determine if your hobby is a viable business, and still earn a living without risking your primary source of income.
If you have dreams of quitting your day job and working for yourself, we have one thing to say.
If you’re on the fence, this article will teach you a few things:
- The six things you need to consider before turning your side hustle into a business.
- The legal and financial considerations that may make or break your decision.
- What to consider before quitting your full-time job (do you even need to quit your job?)
What to do consider before turning a side hustle into a full-time business
Thinking about turning your side hustle into a business? Then there are a few questions you should ask yourself.
Do you have a plan?
When we say have a plan, we don’t just mean a business plan, but also a life plan. You can’t work on your business 24/7. Like when it was your side hustle, you’ll still have family, friends, and other life obligations. You can’t just put these things in a box and forget about them. Also, you shouldn’t assume you can just figure it out when the time comes.
So what questions should you ask yourself?
- How much money will I need to make?
- What’s the required time investment?
- How much will I invest in startup costs?
- What would six months of expenses cost?
Honest answers to these questions help you structure a healthy balance between business and life.
Ok, so now you have the right questions. Let’s create a plan and start with the financial part.
How are your finances?
There’s a reason why financial stability is the priority on this list when deciding to turn your side hustle into a full-time business. The #1 reasons business fail is a lack of money. You need to find money through other avenues if you don’t have the cash flow. Raising capital may cost you equity, but there’s a straightforward fact.
| The more cash in the bank when starting your business or going full-time, the longer your business can survive before turning a profit.
Your #1 goal in business is to turn a profit. One caveat; As business owners, we all know that blindly chasing profits is a surefire path to disaster. Especially as a startup, you need to build a robust business.
This means investing early profits into customer service, research and development, personal development, and other facets of your business.
Do you have a customer base?
Most business ideas don’t require a full-time commitment, which is why 45% of Americans had side hustles at some point in 2022. Thanks to tools like the internet, more people can become business owners without disturbing their full-time employment.
What does this mean?
It means that your business idea should have some proof of concept before you make the jump. And a paying customer base is the #1 way to tell if your business idea is viable.
So, ask yourself this question.
Does going full-time make sense based on the growth of your current customer base?
Sometimes, having customers isn’t enough. You also need a competitive advantage to help your business survive tough times.
What’s your competitive advantage?
If you’re building a business, you’re likely already aware of your competition. In the early stages, you should be a sponge for any insights on what they’re doing that you’re not. Also, what are you doing better than them, or they’re not doing?
Stack enough competitive advantages together, and you have a business that survives and thrives. Before making the jump to full-time, you should test your offering in a controlled environment where you can solicit honest advice.
Do you have a support system?
Look, asking yourself some of these questions can be uncomfortable. Everyone has the right to start a business, but there’s no denying that starting one at the wrong time can set you up for disaster.
For some people, the wrong time is when they lack the proper support system around them. A support system can be a spouse, friend, business partner, friend, or mentor. Having someone who understands the large risk you’re taking can help you in many ways. More so, someone who can help take a load off your shoulders at home or in your business is priceless.
Do you have these people around you?
If you don’t, or you think you need more, know that these relationships can make or break your business. Align yourself with people that want to help you succeed and can invest tangible and intangible resources into your vision.
Being in your corner doesn’t always mean offering investment. It can mean offering the time to listen, giving an honest opinion, or just walking your dogs because you’ll be home late.
Do you know your numbers?
Did you think we’re done bringing up finances? Absolutely not…
If you don’t know your numbers, you are flying blind. Your key metrics are a guide, steering you in the right direction. How can you know what holes in your business need your time when you don’t know where they are?
Numbers expand way beyond revenue, expenses, and profits. Dive deeper into KPIs like your sales conversion rate, cost per customer acquired, and customer retention rate.
When you’re a full-time business owner, you can’t afford to waste time on activities that aren’t moving your business forward at lightning speed. Heck, when you’re part-time, juggling a job, you can’t afford to do that either.
The legal side of a full-time business
You may be ready for full-time business ownership if you feel confident in your answers to the six questions we posed above. Before making the official leap, you’ll have to sort things out legally.
One thing to consider is your business structure.
Did you know that if your side hustle earns money, the IRS considers you a business? Yep, that’s classified as a “sole proprietor”?
Also, if your side hustle earns more than $600 in a calendar year, you must report it on your taxes.
For most side hustles, a sole proprietorship makes the most sense. However, if you’re worried about liability risk or want to add more professionalism to your business, consider other structures like an LLC.
An LLC protects your assets from liability should your business run into trouble. More, it helps you separate your personal and business finances, making tax filing easier. Lastly, it gives your business credibility, making it more trustworthy.
Full-time or side-gig, ComplYant can help
Turning a side hustle into a business is not a small leap. It’s an endeavor, and you have every right to feel nervous about your decision. Hopefully, you feel confident in taking the leap and betting on yourself.
If you still need more time to think and plan things through, that’s ok too. Still, implement some tips we shared in this article to improve your side hustle and maybe speed up how long it takes to go full-time.
Whether you've got a side hustle or are running your business full-time, ComplYant can help you manage your business taxes. We offer simple tools to help anyone from sole proprietors, LLC owners, and corporations simplify their taxes.