Nearly everyone could benefit from a bit more cash, especially when a full-time salary falls short. A well-chosen side hustle can provide the additional income you need.
According to Pootlepress, 43% of UK adults have a side hustle, and 68% of Generation Z do.[1] Omnisend research also found that 50.3% of UK adults have a side hustle to help with the cost of living crisis. [2]
Initially, by dedicating just a few hours a week, you too can tap into the potential of a side hustle.
Eventually, you’ll have to choose between making a modest living from your side business and making it your full-time job. If you follow a few guidelines both before and after you jump in, you can turn your hobby into a full-time job.
What is a Side Hustle?
A “side hustle” is any kind of work that you do to supplement your main income. A side hustle usually necessitates some degree of your involvement or supervision, so it’s not uncommon for you to have to work hard outside of your normal employment hours.
The Financial Impact of Side Hustle
The average income from side hustles in the UK is impressive, standing at £207 a week or £900 a month.[1]
This translates to an average annual revenue of £18,200 for side hustlers.[1]
What’s even more interesting is that 7% of side hustlers make more than £50,000, and 5% bring home over £100,000 annually.[1]
Side Hustle vs. Business
A side hustle is a smaller, often part-time venture pursued alongside a primary job to generate additional income, usually involving lower risk and investment, while allowing for flexibility and personal passion projects.
In contrast, a business is a more structured and formalized endeavor that seeks to generate profit and often requires significant time, resources, and commitment for growth and scalability, involving comprehensive planning and higher financial stakes.
Keeping theory aside, it is a matter of fact that no matter how little or big your side hustle is, once it starts making money, you and the government can treat it like a business.
Since nearly half of all businesses in the United Kingdom (UK) fail within five years, a side hustle can be a great way to gain expertise and lay the groundwork for a successful full-time venture. However, if your side hustle starts to take off, you should think about quitting your day job to focus only on it.
Expectations before Switching your Side Hustle to a Business
When considering making your side hustle your full-time job, keep the following in mind:
- Can I realistically expect to pay all of my company’s bills with the money I make?
- Has growth been rising at a consistent rate for the last twelve months?
- Is it feasible for my firm to handle the seasonality of my consumers’ purchasing?
- Do a handful of extremely large clients account for the vast bulk of my income?
- Am I getting new clients through all the channels I’ve set up? Is there a certain method that has always worked to bring in customers?
- Will I need to recruit help to handle the extra workload when I go full time?
6 Steps to Turn your Side Hustle into a Business
An investment of time and energy into planning and preparation is necessary to transform a pastime into a lucrative enterprise. Consider these six points:
1. Define your goals
Think about the things you want your business to achieve in the long run, such as how many clients you want to have and how much money you want to make. The next step is to set clear, attainable goals with due dates so you can track your company’s progress.
Having both short-term and long-term goals can help your business prosper in the long run. In the next three months, you may decide to make 100 sales calls in the hopes of acquiring 10 return clients. In the next year, you should hire a contractor to assist with some of the additional work and strive to extend your client base to twenty.
By establishing these goals, you will be able to track your progress, fine-tune your key performance indicators for more accurate predictions, and concentrate on problem areas, such as low client retention, with ease.
2. Create a business plan
Once goals are defined, one must first draft a comprehensive plan in order to launch a company. Thankfully, you have already taken a step in the right direction by outlining your company’s goals and key performance indicators earlier.
Your company’s goals, objectives, and strategy for reaching those goals should be detailed in a business plan. It lays out your company’s model, unique selling proposition, marketing plan, goals, key performance indicators, and revenue forecasts. Use any and all market research at your disposal to bolster your plan. This will provide you with proof of your interest and an idea of how successful you expect to be.
Companies can choose between high-level plans that cover all the bases and more detailed plans that dig into every detail. Since it shows your company’s sustainability throughout time, the latter is better for presentations to possible financiers and investors.
3. Plan to scale
You can put a premium on having a prosperous business if you intend to stay for the long term. Here are some things to keep in mind to make sure your business stays successful throughout the change:
- Get a mentor: A great approach to hone your own leadership and business management abilities is to study the successes and failures of others, particularly other prosperous company owners in your field. To locate a local mentor, you might use the Service Corps of Retired Executives (SCORE) as a resource.
- Educate yourself: You can also quickly have access to the invaluable knowledge of other business owners by reading or listening to their content.
- Consider a business partner: Finding a business partner could help you compensate for your weaknesses. If you want to survive the ups and downs of business with your partner, you need to select someone you can trust and work well with.
- Diversify your revenue: Expanding your business into new products, services, and promotional channels can boost your revenue. In doing so, you may increase your company’s financial profile and cater to a more diverse range of clients.
- Plan to hire out: You will not be able to accomplish everything on your own and will not be able to get as much done as you could if you hired someone to assist you. One possibility is to start with freelancers or goods that provide a service and then move on to hiring full-time staff.
4. Establish your business
Your next move should be to build a solid groundwork for your business that you can keep going strong. Create an official business structure, such as an LLC, C-Corporation, or S-Corporation.
- LLC: A limited liability company (LLC) is preferable to a sole proprietorship because it establishes a legal barrier between your personal and company assets.
- S-Corporation: The tax treatment of S corporations is preferential to that of LLCs. These businesses require formal papers such as bylaws to regulate them since their owners or shareholders have control over them. If the business is successful or unsuccessful, the owners’ personal tax returns might show it because of these loopholes.
- C-Corporation: There is a better way to protect the owners of C businesses from lawsuits. Having said that, there is a plethora of paperwork involved in paying taxes for these corporations, and the owners end up paying taxes twice: once on the business and again as individuals.
In addition, you must submit an application for an Employer Identification Number (EIN). You can think of this as your company’s tax ID. When you were the only owner of your business, you may have filed your taxes using your Social Security number. Doing business as a duly organised entity requires an EIN.
5. Seek financing
One way to speed up the growth of your organisation, once started, is to borrow money to expand. Access to capital may be crucial when launching a new product or hiring additional staff.
To acquire capital, one can approach investors, use crowdsourcing, or look into small business loans. Obtaining a business credit card or line of credit is a good idea regardless of whether you anticipate a need for the funds immediately; doing so will provide you with greater flexibility in the future.
Funding for new endeavors can be difficult to come by, and most side hustles are still in the starting phase. Bankrate found that 24% of people who make extra money on the side have been doing it for two years or less, and that 50% of people who do it for fun had only been doing it for a year.
There are requirements that you must meet before any bank or lending organization will provide you a business loan. A few standard prerequisites are as follows:
Time in business: This is compared to the two years taken by conventional banks and the six months taken by online lenders.
Annual revenue: $100,000 for online loans and $200,000 to $250,000 for banks
Personal credit score: Somewhere between 600 and 650 online lenders and 670 banks
6. Check in and improve
Becoming a business owner is an ever-evolving process that might change as your company grows. To maximize the effectiveness of your goal-setting process, it is recommended that you review your goals often to determine their relevancy and make any required revisions. Regularly revising your income predictions and indicators will help you stay on track and achieve your goals.
No matter how many people are involved, there is always room for improvement in customer service and current processes. Loyal customers will stick with your business for the long run if you always try to come up with new and innovative ways to beat the competition. Learn more 5 powerful tips to boost your e-commerce success.
The Final Result
In the exciting journey of developing your side hustle into a full-fledged enterprise, you may lay solid groundwork for your business by planning, creating goals, and continuously learning. Taking care of the necessary paperwork to register the company and pay any taxes that are due are important parts of running a successful business.
But you need to keep going. Make plans to grow your business so it can thrive in the years to come. If you follow these procedures, your organization will be well-prepared to endure, even if launching it takes a lot of time and effort.
FAQS
Do I need a business account for a side hustle?
The easiest way to keep your business’s finances separate is to open a separate checking or savings account. For those just starting off, an individual savings account with their current bank could be an excellent option. When your side gig starts to take off, it’s a good idea to open a second account so you can keep track of your money better.
Should I start an LLC for my side hustle?
A modest side gig doesn’t really need you to form an LLC, although doing so does offer some protection from customer lawsuits.Compared to corporations, limited liability companies (LLCs) are more affordable and require less paperwork to form.
When should I register my side hustle as a business?
It is recommended that you formally apply for the formation of your firm once you have decided to dedicate your full time to it. It is possible to submit your application earlier if you would like to take advantage of the tax benefits and avoid personal liability.
References
