Each year, scores of would-be entrepreneurs put their noses to the grindstone and embark on perhaps their most challenging role: small business owner.
Many of these folks are those with a “side hustle,” or a gig or hobby that you’re passionate about but isn’t your main source of income or full-time job. This can include everything from photography and flower arranging to event planning, blogging and home organizing.
“Sometimes a side hustle can turn into a meaningful revenue line, whether something that provides a little extra cash every month or even serves as a cushion when you’re between jobs,” says Christina Wallace, Vice President at Bionic, a startup igniting growth revolutions inside Fortune 500 companies, and co-host of The Limit Does Not Exist, a podcast on the FORBES network focused on the intersection of STEM and creativity. “And maybe, just maybe, the side hustle could turn into your main hustle at some point, if that’s something you are aiming for.”
Make no mistake: the numbers are sobering. Only two-thirds of small-business owners will still be in business two years out, according to the Small Business Association. Five years out, the survival rate drops to 50%.
The good news: if you’re strategic about putting more of your focus into your side hustle, and understand the pros and cons, and the risks in doing so, you might be on your way to being your own boss.
It Takes Commitment
Laura D’Abate, owner of Pip N Bits, a custom bakery, works 15 hour days and supplements her income with a part-time job several days a week. That means coming home at 6:30, after picking up last-minute supplies, and baking to 10:30 or 11. (Read more about her journey from photo editor to baker here.)
Wallace says both the ability to understand the amount of time required and the ability to commit to it is crucial to making a side hustle successful. That might mean waking at 3am before the kids are up, or retiring to your workspace when the rest of the family is watching “The Voice.”
“Can you commit to it for at least a defined period of time?” asks Wallace. “Whether it’s a weekly podcast like we have or a certain amount of freelance writing, if you can forecast and budget your time for the side hustle, then you can turn it into a business.”
Ask The Right Questions
Time aside, you also need to map out what it will take to get your business off the ground. This means examining everything from whether you need a website and how robust it should be to how much revenue you wish to bring in to make this side hustle-turned-small business a viable option for you and your family.
“Other things to consider, maybe not right at the beginning, but as you are ramping up: do I want to create an LLC to keep my revenue and business-related expenses separate?” says Wallace. “Do I want to think about a bookkeeper and a lawyer and a business bank account, alongside the website, social media accounts, and customer management system?”
Lisa Rowan, a writer at The PennyHoarder, a personal finance site, suggests answering the following set of questions:
- Is this something I could see myself doing long-term?
- Am I talented at (fill in hobby or side hustle here)?
- Can I make a profit from my hobby?
- Is there an audience for this product or service in my area? Online?
- How long will it take to see revenue generated from the hobby?
- How do my finances look? Do I have an emergency fund and enough cash to get the business off the ground? If not, am I willing to make sacrifices or raise funds (or both) to do so?
Be Realistic About Revenue
It may be relatively easy to earn $125 making three-dozen specially decorated sugar cookies for the fifth birthday party your neighbor is throwing, but scaling that to a full-fledged income stream is undoubtedly difficult.
“It’s not hard to go from $0 to $100,” says Wallace, “but going from $100 to $10,000 or more is a big shift.”
What’s more, as you get off the ground, much of the profit you bring in will likely be put back into your business for supplies, marketing and day-to-day expenses. D’Abate, for example, started Pip N Bits with no outside investment, and, while in her first year of business, plugged virtually all her profits back into her brand.
Know That It Will Now Be Work, Not Just A Hobby or Side Hustle
If you enjoy spending a few hours each week cruising Pinterest and scouring the Web for items for custom-made gift baskets for friends and family, and think this would be a great business idea, it very well might be.
Will you enjoy doing it full time? That’s not so clear-cut.
Indeed, when Rowan graduated college, she decided to take a blog she had started about vintage clothing and transform it into a business.
But, she says, “when I decided to take it full-time and open a shop in Washington, D.C., I unfortunately found that the stress of operating a business overshadowed the fun I once found in the process of selecting items for the store and interacting with customers.”
Wallace says this is common, and that oftentimes, a side hustle that allows for creative outlet or critical thinking quickly becomes a slog when the amount of time and accountability is ramped up.
“I think mostly people have a cool hobby that they know has value and that people would pay them for but they underestimate how much time has to go into converting it to a real business upfront,” says Wallace. “There can definitely be some downside to turning it into a business. It ups the ante on the commitment and you actually have someone to be accountable to, whether your partner or a client or your audience.”
In the end, experts note that running a business is very different than just doing what you love, and to keep this in mind when exploring your options.
“It requires organizational skills and a sales strategy,” says Carrie Karpen, CEO, Likeable Media, and host of “All the Social Ladies” podcast. “It requires a lot more than an idea. These are the roadblocks that keep women from pushing forward. My best advice is to seek help from other women who’ve done this successfully.”.