Looking to increase your income? Then, you might want to consider starting a side hustle. Side hustles are so popular that more than half of Americans say they’ve started a side hustle to supplement their income.
What is a side hustle?
A side hustle is work that you do in addition to your full-time job or alongside other part-time jobs. It's an excellent way to earn extra income, build a financial cushion, and gain new experience.
Tips for launching your side hustle
Starting a side hustle should be carefully considered. Earning money from a side hustle is the same as launching a new business and requires thorough planning. Here are seven tips for starting your side hustle:
1. Find the right fit: Skills, certifications and lifestyle
To maximize your earnings, start by identifying the skills and talent that others might find valuable. Perhaps you love dogs and enjoy exercise and can channel that passion into a dog-walking business. Or maybe you have knowledge in a specific subject area and can put that know-how to work as a tutor to students in your area or online.
Consider your skills, certifications, and lifestyle to determine a rewarding side hustle. Strike a balance between your professional skills and personal strengths and goals to help refine your side hustle idea.
2. Do proper research and planning for the side hustle
Even if it’s not a full-time business, you will still need to invest time and even money in your side hustle. Take time to research the market you’ll be entering and your target customers.
- Where does your target market spend their time?
- What platforms and media should you use to reach them and get the word out?
- What messaging will resonate with them? You’ll need to strike the right tone, voice, and visuals to appeal to their needs.
Think about how you’ll position your business, how much you’d like to make, what your expenses will be, and what it will take to strike a profit (income less expenses).
If you require funding to get started, you’ll need a business plan. Financial institutions, partners, and investors will need to see that you are serious about your side hustle. Your plan should include a detailed description of your business, your products and services, your marketing plan, financial analysis, and other information.
3. Review current workplace policies
If you’re currently employed, you must understand the implications of starting a side hustle. Many employers have policies that prohibit side gigs.
Review your employment agreement, non-disclosure agreement (NDA), and non-compete agreement. For more information, see Can I start an LLC side business while employed?
4. Know your tax and legal requirements
Don’t make the mistake that a side hustle is free money. Starting a side hustle from home or anywhere requires that you pay income taxes.
According to the IRS, you must file if you earn more than $400 in net earnings from self-employment, even for side jobs or independent work. These payments are made as quarterly estimated taxes. You may also need to set aside money to pay self-employment tax (Social Security, Medicare) and federal, state, and local income taxes.
Your side hustle may also need to comply with regulations and legal requirements, such as obtaining permits and licenses (even if you work from home). Check your county and municipality laws to understand what’s needed.
For example, if your side hustle involves renting out property on Airbnb, most towns and cities regulate short-term rentals. These businesses must be licensed and permitted, are often restricted to certain zones, and caps may be placed on the number of licenses issued. For more information, see How to start a short-term rental business.
5. Be aware of liability risks
Any business owner should think about liabilities and risks, such as damage to property and others. For example, if your side hustle is a dog-walking business and a pet is injured in your care, you could be held responsible for medical costs. Or, if you rent out your car through a car-sharing service and fail to maintain the vehicle, you may be held responsible for medical expenses if a driver has an accident.
To minimize liability, it's important to get the right business insurance. You should also consider forming a business structure such as an LLC, which keeps your business assets separate from your personal ones. This structure protects your personal assets if anything goes wrong with your business.
For more information, see:
- What is an LLC? Definition and steps on how to form an LLC
- How does an LLC help with personal asset protection?
6. Know your reasons for starting a side hustle
Understanding the reasons behind your desire to start a side hustle can help narrow down your business focus and eliminate impractical ideas. It will also assist you in addressing the day-to-day challenges of managing your business. Ask yourself:
- Do you want to increase your income to pay off debt, boost your savings, or invest money?
- How will that extra cash help you achieve your short-term goals?
- Do you plan to grow your business and become a full-time business owner?
7. Getting started: Testing the waters with your network
Starting a side hustle can be tough, but it's crucial to just get started. Begin by offering your services to friends, family, or your existing network and ask them for honest feedback. These initial relationships and work can help you determine if this is the right path for you and if you have what it takes to make your side hustle a success – without committing to your venture full-time.
Considerations for starting a side hustle from home
If you want to start a side hustle from home, consider your options. Perhaps you could focus on a product or service that can be delivered digitally (web design, blogging, tutoring, etc.). However, a home-based side hustle doesn’t always preclude the need for physical inventory, equipment, products, or services, just be sure you have the space to store, produce, and ship your assets.
Most importantly, remember that your side hustle is still a business.
Many home-based businesses overlook that they need approval from their local zoning department to operate out of their house, even if working primarily online. Check with your state and locality to understand licensing and permit requirements, among other legal restrictions for home businesses.
For more information, see How to start a business from home and How to start a profitable online business
Ready to take your side hustle to the next level?
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