TMCnet Feature
April 28, 2022

How to Turn Your Side Hustle Into a Business

These days, it seems like everyone has a side hustle. Whether your regular job doesn't quite pay the bills or you're looking to earn extra cash to pay for luxury items, a side hustle offers financial flexibility.

However, what if your side business becomes more popular and starts earning more money than your main job? What if you like your side hustle better than your 9 to 5? In those instances, it might be a good idea to invest more time, energy, and money to make it your primary source of income.

Fortunately, turning a side hustle into an actual business is pretty straightforward. Here are the six steps to get there.

Step One: Create a Business Plan

Before putting too much time and money into your side hustle, you have to figure out the ins and outs of your new venture. A business plan helps you consolidate your ideas and flesh out the details of your company. This way, you can be sure you're making the right move and that you'll be successful. But, what's in a business plan specifically? Let's break it down:

  • Market Research - This section outlines the demand for your products and the competition you'll face. Market research is essential because it tells you the obstacles you'll encounter along the way, and it'll highlight the potential success you can expect. You should also pay attention to whether demand for your products increases, decreases, or remains constant.
  • Business Operations - You have to outline how your business will run. Even if you're not planning on securing a loan or pitching to investors, this section helps you understand your company's structure. Look at the assets you have right now, including any suppliers, infrastructure, or inventory. From there, you can focus on what you need, such as a storefront, website, employees, etc.
  • Products and Services - Since you're already selling your items as a side hustle, you should have a pretty good idea of what your company has to offer. Still, you want to outline how your products solve the needs and problems of your target demographic. Also, discuss how your business stands out from the competition.
  • Marketing and Promotion - Finally, you need to figure out how you will market yourself within your industry. Will you focus on word-of-mouth or invest in PPC ads and social media? Marketing is an essential component of any business strategy, so you have to know what to expect before pulling the trigger.

Overall, a comprehensive business plan helps you build a strong foundation upon which to build. Also, if you need funding from investors or a bank lender, they'll need to see this plan. Otherwise, they're much less likely to give you money since they don't know what to expect.

Step Two: Establish Your Business Legally

If you haven't created a legal business entity for your side hustle yet, now is the time to do so. There are four primary options, and each one has pros and cons. Forming an entity ensures that you can operate legally in your state, and it enables you to secure business financing, including credit cards and bank loans. Here's a rundown of each entity type and how it works:

  • Sole Proprietorship - This option only works if you don't plan on hiring anyone or partnering with anyone to form your business. As a sole proprietorship, your business is tied to you, meaning that you're on the hook for debts and obligations. While it's possible to get a company bank account, there's often no distinction between business and personal finances.
  • Partnership - This entity type allows two or more people to enter into a partnership agreement. This agreement outlines each partner's specific roles and duties, along with their financial obligations. As far as liability goes, what matters is the type of partnership you form. As a rule, you can limit your personal liability so that you're not tied to your business debts.
  • Limited Liability Company (LLC) - LLCs are often the best option for small companies and startups. Forming an LLC can be an easy process, and you can form one by yourself or with other partners, and everyone has limited liability. As with a partnership, you need to draft an operating agreement. This document outlines how your company will run and who's in charge of what. Another advantage of LLCs is that they allow pass-through income so that you don't pay taxes twice on your earnings.
  • Corporation - Typically, you should only incorporate your business if you want it to be separate from any individuals. Corporations are harder to form, but they're much more stable and can stand independently without any specific partners or investors. There are two types of corporations: S-Corp, which allows pass-through income, and C-Corp, which doesn't.

Step Three: Prepare Your Finances

No matter what kind of business you're running, you need a comprehensive accounting strategy to know where your money is going. Because you're already operating as a side hustle, you should have a good idea of your profit margins, but if not, now's the time to dial everything in. Here are some factors to consider when preparing your company's finances:

  • Assets - Assets are more than just your starting capital. You should also consider any tools, inventory, or equipment you use to run your company. On the one hand, you should outline the assets you have already. On the other hand, you need to figure out how you will pay for new assets to take your business to the next level.
  • Loans or Investments - Chances are you don't have enough money to launch your business, meaning you have to appeal to investors or lenders. How much do you have to borrow? If you're working with investors, how much will they earn? How exactly will you use that money?
  • Cash Flow - Your cash flow refers to money coming in and going out of your business. The other element is figuring out how much you need to earn to be profitable. For example, how many products do you have to sell? You need to have this dialed in before you launch since it's much harder to adjust it after the fact.

Step Four: Familiarize Yourself With Marketing Tools

As we mentioned, marketing is an essential part of any successful business. Once you outline your marketing strategy in your business plan, now's the time to figure out how to implement your goals. Some essential marketing tools to look at include:

  • Social Media - You can set up profiles and promote your business on these sites before you launch. Once you get your business up and running, you should look into scheduling software to ensure that you can maintain consistency with your posts.
  • Pay-Per-Click Ads - You can run these ads on social media sites or search engines, and you can set a daily or weekly budget. Be sure to conduct A/B testing to determine which ads have the most impact.
  • Inbound Marketing - In this case, you're producing high-quality, informative content that brings people to your website or social profiles. Inbound marketing requires a bit more effort upfront, but it provides tons of assets that will keep on paying off.

Step Five: Start Outsourcing Tasks

Running a side hustle means you know how to squeeze as much productivity out of the day. However, once you start your business, there's no way you can handle all the tasks yourself. Instead, it's better to hire employees to take some of your operational logistics.

When hiring new staff, be sure to utilize payroll programs and accounting software. Trying to keep track of checks, hours, and overtime yourself can quickly get overwhelming. Also, consider the employment laws in your state to ensure that you stay compliant.

Another advantage of hiring employees is that you can get better at training people on how to perform specific duties. This way, as you grow and expand, it's easier to bring on new people.

Step Six: Build Your Team

As you bring more people into your business, it's time to create a core team of high-value workers and supervisors. This team ensures that you can build a stronger company from which to thrive. In this case, you have to look at your employees as assets and their paychecks as an investment. All too often, business owners focus on wages as a cost, meaning they don't value the work of their staff.

When hiring, be sure to find people who are just as passionate about your business as you are. This way, they're more willing to put extra time and effort into the brand to help it grow. Just be sure to reward these "day one" employees for their work. Remember, just as you're investing time and energy into your business, so are they.

Turning your side hustle into a full-fledged business is often easier than starting a new company from scratch. Since you already have some customers and inventory, expanding your operations is much easier. Now that you have the knowledge to take the next step, success is within reach!

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