The idea of the side hustle is very popular these days. It seems to be evenly split on social media between entrepreneurs and scammers. Whatever the modern reasons for so many people having a secondary income, the logic remains eternally solid.
Starting your own small scale business is a great way to grow personally and financially. It is rewarding and challenging in equal measure. But how do you know where to start? Here at BearMoney we’ve put together a guide to planning your own side business.
It might seem daunting but with a little bit of effort and a solid plan you could potentially turn a hobby or idea into a workable part-time business.
The following steps will help you understand what you really need to consider before taking the plunge. Risking your time and money is not something that you should do lightly. But don’t worry, we’ve got your back.
Have a look at our tips and start planning your brilliant business idea today!
1.Understanding The Market
Understanding the market that you’re going to be operating your side hustle in is critical. Without a knowledge of how business is carried out in this market you will likely fail. Additionally, as your business is a side project, a lack of understanding will eat up more and more of your time. It is important therefore, to understand the ins and outs of the work you plan to do. You don’t have to be a subject matter expert to run a successful side hustle though. Just taking a bit of time to look and listen to what is going on will help set you up for success.
There are many services that can provide you with market research data but honestly, Google is your best friend. You can find out a lot about industries and your local economy just through simple searches. For example, you can try to see how many competitors there are within a radius of your location just by using Google Maps.
The Size of the market is a very important attribute. Are you going to have a lot of potential customers or very few? Are they going to be spread out or close to your area of operation. Is there and international demand for your product/service? Knowing just how many people would buy your product/service is a bit difficult to figure out, but it is absolutely crucial.
Every customer in the broader market is a potential customer that you can acquire and keep. The pool of potential income is important in both the long and short term so pay close attention to it.
A little market research early with save you a lot of struggle in the long run.
Having a solid knowledge of the characteristics that your customers possess is a fast track to success. All of your business decisions that you take for your side hustle should have your customers in mind. Knowing their age, gender, race, spending potential and multiple other things allow you to target your limited time and resources.
While some of this information can be easily found online it might be worth setting up some social media accounts and using a small advertising budget to see who is interested in your product/service. With as little a $10 you can learn a hell of a lot of useful information about the demographics that have an interest in your side hustle. On rare occasions it can even provide you with a specific target audience that will drive 90%+ of your sales/interactions.
There’s no point carrying products or advertising to a group that don’t want to buy your product or service. Why advertise bicycle repairs to car enthusiasts? Tuning into your ideal customers over time is critical to ensuring the long-term survivability of your business.
You’re going to end up competing against larger operations with both more time and greater resources than your humble side hustle. If your market is locked down by core companies or swimming with thousands of small operations, it might be time for a rethink. Although being a small fish in a big pond can have its advantages.
In order to take customers away from competitors you’re going to have to offer something important at a better price. Many people will spend and extra 20% to buy local or to go to a professional that gives them more attention than the big players. Most mechanics will know all about this because big dealerships rip people off. If you see your potential customers getting ripped off you can offer better value, if you see then getting treated poorly you can offer better service. You have tools to fight the competition.
Even still, finding an area with a small enough competition to make a part-time business viable is the smartest strategy. Every hour extra you will spend making yourself stand out is lost money. If your city is full of similar small time businesses, you’re not going to have much luck.
Longevity of the Market
Do you remember ‘Fidget Spinners’? I’d bet you remember them, alongside the people who lost large amounts of money trying to sell them after they stopped being trendy. Making quick turnarounds on products can be a great earner and is the traditional definition of a side hustle. However, if you’re looking to operate for a long time, you need to think strategically.
Fads and trends are profitable for people who can get products to market quickly. This usually requires money and extensive experience. Thankfully, a lot of market research and media reporting covers declines in certain markets. Try to find industry publications to see what the state of your new market is. Also, common sense can be really useful too. Selling Vinyl might work, selling CDs not so much.
Don’t start a business that caters to a shrinking client base, find something that will still be popular once you’ve got your business momentum going.
2.Assessing Your Skill Set
Many of us come up with great business ideas daily. An even larger number of us come up with ideas we only think are great. The smallest percentage are people are those with the idea, the will, and the skill to make it happen.
It is important that you critically assess your skills before you start your side hustle. It makes no sense starting up a computer repair business if you don’t know how to repair computers…
If your business is going to require you to carry out technical work it’s important that you have the training, certification, and skills to complete it properly. This might require extra investment on your part but for any small business it is important that your customers know you will do as good a job or better than your competitors.
If you are lacking in skills or a ‘piece of paper’ like a diploma, it is probably worth your time investing in those first, before you start taking on serious amounts of sales or clients. Many people will pay extra when they feel that you are sufficiently trained and certified in their mind. If you need to upskill make that a part of your starting plan. You can do it in tandem with other parts of your business but don’t wait until you’re established to go back to school.
Side Hustles are built on soft skills. The ability to convince customers to pick you over other options is going to be the number one factor in your long-term success. The big guys can afford to lose a certain percentage of customers, you likely cannot. So practicing your social skills and business communication will help you get a better success rate over time.
Friends and family can help with these skills, even being a customer yourself. If you have a chance to analyze a situation where a conflict arose either in your personal or professional life, take it. Try to figure out how you could have made the other person happier while still being honest. If you’re treated poorly in a store, imagine what response you would have liked to have heard.
It sounds stupidly simple but being positive and honest is the key to your side hustle succeeding. The longer you do succeed the more you will hone these skills and build a loyal, profitable client base.
Once you’ve assessed your skills honestly and critically it’s time to start bridging the gap. If you are lacking in skills that most of your competitors have you are going to start at a significant disadvantage. This is without considering that many of your competitors are already established and have a solid customer base. So, whatever skills you’re lacking you need to gain them early in your journey.
This is where a hard choice must be made. Once you sit down and figure out how much effort it will take, you’ll have to decide if its worth it. If you need to put in thousands of dollars of training to become viable is it really worth it? This is decision we all have to make. This isn’t meant to discourage you but it definitely helps to have a clear understanding of just how much effort you need to put in to survive.
Don’t feel like you have to achieve at a pace that is unrealistic, it is better to shift out the timescale than to abandon the project. Be honest with yourself and you can probably come up with a workable plan to get ahead of the curve.
3.Do You Have Time For The Hustle?
Your Free-time Investment
All side hustles are constrained by time and money. There is a finite amount of both that can be put into any business idea. Right at the start you need to set a minimum, maximum, and ideal amount of time you’re going to invest into your new venture.
If you are planning on up-cycling for example, but you can only put in two hours a week, then your projects are going to potentially takes 6 months to finish. Similarly, if you’re preparing to put in 30+ hours a week then this is no longer a side hustle, it’s a full-time job.
You time is the most valuable thing you have in this life and you need to treat it with respect. Side hustles can easily run away from us and cause more stress than they are worth in the long run. Again, you can give yourself a little leeway but always make sure that your spend as little time as possible at ‘maximum effort’.
Note: By ‘Maximum Effort’ we means a level of work that will have you feeling run down after a week or two. If you’ve ever worked to a deadline and then got the flu you know exactly what we’re talking about.
Time To Profit
Every side hustle has the goal of turning a profit. Very few do once you factor in all the associated costs. It is critical that you attempt to estimate how long it will take for you business to return a profit to you.
For most of us that only invest >20 hours a week into our side businesses this will be long time. This is fine. If you really are doing something you’re passionate about, 12 months is not a huge lead time to profit.
This is especially true if you have chosen a market with longevity that you enjoy working in or your costs are very low. Some ideas are slow burners, some are not. Try to look at successful case studies that might signpost you towards realistic expectations.
4.Passivity Of Income
Passive income is the dream of every side hustle. It is profit that comes to you with little or no effort. An example of this would be investments that just generate dividends to you without you having to do much work.
In the world of small business this is usually something like drop-shipping (taking orders electronically that are filled by somebody else) or advertising income.
Overall there are three types of side hustle income that your market could generate. It is up to you which kind you want to target but be aware that there will be large variances in difficulty between different side hustles.
Categories of income
- Passive :This is income such as advertising income that you don’t have to ‘actively’ chase. This means that you can be earning money from your product without have to produce it. For example, if you have a website and make advertising revenue, this makes you money while you’re not even awake!
- Semi-Passive: This is income such as sponsorships where you have to commit to produce or modify your products and services to meet the needs of a sponsor. An example of this would be putting logos of your sponsor on your product. This is ‘semi-passive’ as you are not really actively creating your primary product/service.
- Active: This is income such as the selling of goods where you have to source, store, or produce the goods yourself. Generally you will produce goods and try to sell them to customers having to go through both a sale and production process. The majority of side hustles are active. An example of this would be selling homemade baked goods.
5.Cost Benefit Analysis
Although most side hustles come from a mindset of growth and passion it is important to remember that they are businesses at the end of the day. No matter how happy your projects make you, you will need to take a hard-headed approach from time to time.
We know that a lot of side hustles start out as hobbies and a large amount of love goes into them. Even still, there is an important difference between doing something for fun and doing it for money. Money adds stress and subtracts love from your hobby. It’s practically impossible to maintain to love of a hobbyist once you’ve to pay taxes.
A side business that loses you money is actually just one of these hobbies. You need to carry out as detailed as cost-benefit analysis (CBA) as possible.
The amount of money you’re going to need to spend to set up your side hustle is going to vary from hundreds to thousands of dollars. It will definitely cost some amount of money as well a time.
In other articles we’ve talked about valuing your time adequately and this is highly relevant here. You need to calculate the hours, products, and services that you’ll need to buy before you even make your first dollar.
The upfront costs of you business will decide on how soon, and how fast you can turn you dream into a successful side hustle. It is always a good idea to go with the most affordable option when you’re starting off.
A lot of suppliers will have small business options that can help you give a professional service for a decent price. However, it is important to notice that although there are many great free business tools, you are going to have to pay for a least some ‘pro’ or ‘premium’ versions.
The ongoing costs of running you business can quickly eat up any profits you are starting to make. A lot of people make the mistake of committing too much spending too quickly. An example of this would be trading up from a sales cart to a rented store space when you’re not overwhelmed with sales.
It always pays to be cautious when figuring out running costs. There are many hidden expenses in hustling and you’re going to encounter a lot of them early on. Even something as simple as a parking ticket can wipe out a weeks profit early on.
As a rule you should keep running costs as low as possible and look at every cost increase as a 200% necessity. This means that it is absolutely necessary to grow and that it will return at least twice what you spent on in in net profit.
Return on Investment
Every business is going to cause you stress, and it is going to cost you money ( at least in the short term). The two things that make this worthwhile are the satisfaction of a successful side hustle, and money. Whatever profit goal you set, it is going to need to be worth the blood, sweat, and tears that are getting invested in the venture.
A good enough return on investment is key to keeping your operation going in the long term. So once you’ve figured out all of the above, sit down and figure out how much money is going to make it worth it. This doesn’t mean you need to aim for $100,000 a year, but it does mean that you should A) make more than minimum wage and B) enjoy what you do. This is the secret to a successful secondary income.
The Magic Formula for a Side Hustle
The ideal side business idea has the following characteristics;
Low Skill, Large Market, No Competition, High Return, Passive Income Stream
This small business does not exist. For a successful side hustle you will be lucky to get 3 out of five characteristics. Normally you will get two. It is important to know this going in and be happy that you although you will struggle in some areas, your chosen market has pathways to success.
If you can, try to sit down and take a look at your personality. Figure out which of these characteristics you are happy fighting against and which one you want on your side. Maybe you are a hard worker that doesn’t like complex processes so a lower skilled business is for you. Maybe you love competing so you want as cutthroat an industry as possible. Whatever type of person you are you can apply this formula to assess your possible markets.
Even with the perfect formulation, you’re very unlikely to make a huge amount of money doing this. It will be hard and stressful. A large part of your free time will be eaten up and you will question if it’s all worth it. This is the nature of the part-time business.
Do It Anyway
You heard us. Do it anyway. Yes it will be difficult, and yes you may fail (most businesses do). That doesn’t really matter if you take a thoughtful and balanced approach though.
Failure is a lesson, and there is value in trying something new. Think hard, try hard, and have a positive attitude. If you can bring all the pieces together, you side hustle just might change your life.
Do you have an stories about your side hustles? Share them below to inspire and educate your fellow BearMoney readers.