Let’s face it, times are tough. The unemployment rate is high and the cost of gas and food prices are on the rise. Out of necessity, many people have started to look for ways to supplement their income. Some have succeeded with side business ideas, like driving for DoorDash or investing in real estate, while they continue to work a full-time job. But that’s a big step, and many don’t realize how much time, effort, and money it takes.
If you’re looking for ways to increase your monthly income, and have considered starting a business, take a look at this comprehensive guide to determine whether or not this move is right for you.
Reasons to Start a Side Business
You’ve already considered the obvious reason to start a side business – to bring home more money. After all, a side business done right can be a great source of extra income, and it’s possible to run one while still working a full-time job. But here are a few other reasons to start a business on the side while maintaining your full-time gig.
1. To Test a Product or Business Idea
It’s a big risk to leave a stable job and venture out into territory unknown, which is exactly why many people decide to test the demand for their new business while still enjoying the benefits of a full-time salary. This works particularly well if the idea is new or you aren’t sure whether or not the product will go over well in your area. By not committing full-time to the business, you can maintain a safety net in case it doesn’t go as well as you hope.
2. To Maintain Health Insurance
Health insurance for the self-employed is not cheap. This is especially true for the would-be entrepreneur who has a family to consider. Many people who can’t afford the high cost of insuring themselves keep their day job solely for this purpose. Then, once their business becomes profitable enough to afford insurance, they leave their job and become a full-time business owner.
3. To Save for Something Big
Many people begin a part-time business in order to save for something they couldn’t otherwise afford like a house, car, swimming pool, or vacation. Their regular salary continues to pay for everyday expenses, and money earned from the side business is put into a special fund exclusively reserved for the desired purchase.
4. To Save More for Retirement
The future of Social Security is questionable and company pensions are practically a thing of the past. Many people have realized that it’s entirely up to them to put aside money for when they no longer can or want to work. Some side business owners have started their companies simply to fund their retirement.
5. To Build Cash Flow
Having an adequate amount of cash flow in a business can make the difference between success and failure. That’s why it’s important to have serious cash reserves when you launch full-time. But many people don’t have the months of operating expenses needed to do this. So they start small with a side business and use profits to beef up cash reserves for a future full-scale launch.
Things to Consider Before Making a Decision
Now that you’ve thought through the myriad of reasons to start a business on the side, the next step is to know what to expect. Some people think a side business will be easy and won’t take much effort. After all, it’s a side business right? Unfortunately, that’s simply not the case. A side business has many of the same challenges and issues a full-time business has. Here are a few considerations to keep in mind.
1. Say Goodbye to Weekends
If you think you’re busy now, wait until you have a company to run. Even side businesses take up loads of time, especially in the beginning stages when you are just setting up your systems and trying to attract customers. You’ll be working after your day job during the week and most likely on weekends too. This will limit the time you have for your family and personal relationships. Think carefully about the time commitment and consider what it will take to start your business.
How many person-to-person calls will you have to make each day? How many hours each week will it take to develop leads or communicate with existing customers? Will you need to constantly deal with suppliers? What about accounting tasks?
Be realistic in your calculations, and then be honest with yourself about whether or not your lifestyle can handle it. Make sure that you not only have the time available, but that you’re willing to sacrifice it with your family’s full support.
2. You’ll Have Two Demanding Jobs
The type of business that requires active owner participation at all hours of the day may not be the best if you’re working a full-time job. For example, if you open a service business and customers want to see you during daytime hours, you’ll be limited to only your lunch break. In addition, it’s typically a bad idea to take phone calls during your full-time job or communicate via email. The best type of side business is one where you can dictate your own hours. After all, you don’t want your side business to endanger your full-time job or vice versa.
3. Get Ready for Stress
Imagine this scenario: You’re at work and a customer from your side business calls your personal cell phone. He has a problem with a product you delivered the night before and needs you to fix it immediately. If you don’t, he’ll refuse to pay for it and you’ll have to eat the expense. But you also have a project that’s due in a few hours at work that can’t be late. What do you do?
Every job has a stress factor. So when you’re juggling both a full-time job and a side business, you’re going to at least double it. But if you’re prepared and understand that it comes with the territory, you’ll be better able to deal with it. If a tough decision needs to be made, weigh your priorities carefully beforehand.
4. Don’t Be in a Rush
When you’re operating a business part-time, realize it probably won’t grow as fast as a full-time business would. Many side business owners get discouraged because it takes so long for their businesses to grow. Generally, a business’ growth is directly proportional to the amount of time put into it. So when you can only put in a few hours a day plus weekends, it will take longer to get up to speed.
The flip-side is that you’re still earning a full-time income while you’re preparing your business to bloom. And if your side business begins to surge with potential, you can always quit your day job in order to take it to the next level.
5. Know the Rules at Your Full-Time Job
Companies have different rules about employees working other jobs. Study your employer’s rules regarding what they expect from you if you open a side business. If you intend to offer a competing product or service, you may risk losing your job, particularly if you signed a non-compete clause when you first started. You could even be subject to a lawsuit if you market a product or idea you came up with while working your full-time job.
If you’re forced to disclose the fact, it might make your employer suspicious of your on-site activities and cause them to watch you more closely. On the other hand, it may make them see you in a new light and open opportunities for you with the company. Either way, you’ll have to carefully consider whether or not your employer has the right to know what you’re doing, and what, if anything, is at risk if you don’t tell.
Lastly, be careful about how many hours you spend on your side business while at your full-time job. If your company finds out you’re spending numerous hours on your own side gig, you could become liable for getting fired. Stay organized, and try to get most of your side work done at home on your own hours.
Analyze Your Business Idea
Once you’ve carefully thought about the pros and cons, it’s time to consider your business idea. Because this is a side business, your idea will have to be solid since you’ll have limited time and energy to invest. Consider these four items when developing your concept.
1. Does It Solve a Problem?
If you look at many successful businesses, you’ll see that they have one thing in common: they’ve identified a problem and provided a solution. Especially in this economy, people want to purchase things that will eliminate a problem in their lives. It’s how Liquid Paper, cloud storage, and plastic diapers all came into being.
You may want your side business to do the same. You don’t have to create something new, but if you’re offering an existing product or service, make sure you can provide at least the same level of service and professionalism while only working part-time.
2. Are You in Love With the Idea?
Entrepreneurs who have the most success are often in love with their business idea. Remember, you’ll be selling it, marketing it, and likely talking about it to everyone you meet. You’ll spend most of your free time developing the business, which means you may spend more time with it than you do with your own family. If you don’t truly love it, you won’t have the fuel and endurance you’ll need to succeed.
3. Is the Market Broad Enough?
Make sure your intended market is broad enough to sustain the business. Many new business owners mistakenly offer a product or service that only a select few want, without specifically targeting that market. Especially with a side business, it helps to have a broad audience. But even if your market is niche, make sure it’s large enough to sustain your business. Remember, your marketing efforts may be limited and you’ll need to reach more people with less effort.
4. Have You Tested It?
Before you put up the proverbial shingle, you’ll have to test your product, concept, or service. You don’t want to sell something that doesn’t work, or perform a service you’re not prepared for, do you?
For instance, if you intend to provide a service, do a couple of run-throughs first and make sure you understand potential roadblocks or problems that may crop up. If you intend to sell a product, use it enough times yourself so you’re confident it’s a quality product that will make people’s lives easier.
Tips to Start Your Side Business While Working Full-Time
If you’ve read all of the above and your idea still passes muster, then it’s time to get to the nitty-gritty considerations of your business launch and everyday operations.
1. Set a Schedule and Goals
Consider your business plan to develop a picture of goals and timelines. For instance, if you want to turn a side business into a full-time venture later on, come up with a rough idea of when you’d like to begin this transition. Create a schedule by mapping out yearly, monthly, and weekly goals, and keep track of them along the way. Making and meeting goals will help you stay on your timeline, which will help ensure your business’ success. On the other hand, if you don’t intend to leave your full-time job, determine how much time you’re willing to put into it on a daily and weekly basis, and then create a plan to help you stick with it.
There’s a good chance you’ll underestimate how much time your activities will take and overlook additional tasks. Be organized and document your time, so that at the end of the day you’ll know exactly what you got accomplished and how long it took. If you find that the goals you set yourself are too aggressive, be flexible and adjust them to be more practical. For more tips, see these small business time management tips to increase productivity.
2. Get Licenses and Registrations
Get the proper licenses, registrations, and insurances in place before operating your side business. Certainly, a small business license will be one such consideration.
If you’re offering a service, do you need to be licensed and registered for it? Research the product or service you’re going to offer to determine exactly what you’ll need to do according to state law. If you’re going to help people with their taxes, for example, you’ll not only need to be licensed, registered, and bonded in some states, but you’ll also need to carry errors and omissions insurance.
If you’re offering a product, you may need to carry insurance against faulty operation or accidents caused by your product. Be aware that as a sole proprietor, your personal assets are at stake if you get sued. Make sure you know the insurances you need and understand the risk you take on if you decide not to get them.
3. Set Boundaries
It’s very important to set boundaries with your clients in order to maintain your schedule. For instance, if you only want to work one day a weekend so that you can spend the other with your family, be prepared to lose some business when you don’t cater to the more demanding clients. With a set goal in mind, it will be easier to stick to your guns and not compromise your other priorities. Remember, if you know where you’re going before you start, you’ll have a much easier time getting there.
4. Set a Budget and Take Advantage of Your Full-Time Salary
There are few businesses you can start without some sort of investment, and a side business is no exception. As a part of the planning process, make a list of start-up costs and calculate small business expenses on a monthly basis. Determine exactly how much it will cost to run the business and how you’re going to pay for it.
Most people use their salaries to fund new ventures. If you’re planning to do this, make sure your salary can cover both your personal and side business expenses. Paying down personal debt can not only decrease your monthly expenditures, but improve your credit score and open credit lines to be available for business expenses if necessary.
Pro tip: Make sure you set up your budget using a platform like Personal Capital. Plus, if you’re struggling to pay down high-interest debt, don’t be afraid to use a personal loan from SoFi to help reduce your interest rate.
5. Play Up Your “Weakness”
One of the biggest challenges to running a side business is that you can’t always be available to your clients. In our fast-paced world, people expect instant service. But if you market your business correctly, that “weakness” can easily be turned into a positive.
For example, you can promote yourself as someone who is available when others usually aren’t – after regular business hours and on weekends. Get your clients used to your schedule by listing your hours on your business cards, stationary, website, and voice mail. If they know in advance not to expect a return call until after five, they won’t be irritated when it happens.
6. Catch the Big Fish
In any business, it’s beneficial to start with a big client already willing to give you business. How can you do this? Right before you launch, talk to friends and family about your new venture and ask them for their business. Also ask them to recommend you to their friends. Join professional organizations and put your networking skills to work.
One source of business many moonlighters don’t think of is their employer. As long as the side business is non-competing and offers your employer a useful service, approach them. They already know who you are and hopefully believe you have a great work ethic – both reasons to do business with someone.
If you want your business to succeed and are not naturally an aggressive salesperson, you’ll need to step outside your comfort zone. You will face rejection, but the more people you approach, the more new customers you’ll get. Remember, the most successful entrepreneurs in the world are often the ones who’ve experienced the most failure.
7. Consider Your Co-Workers
Many businesses reach a point where some work needs to be outsourced. This is particularly true of a side business since the owner is already working within time constraints. Fortunately, side business owners often have access to a ready-made pool of talent in their co-workers.
For instance, if you need a website, why not contract with the tech guy from your day job? Need an accountant? Someone in the accounting department may need income on the side. However, make sure they understand to keep the work separate from their day job, just like you do, and that they’re working for you on a contractual basis. Your agreement should be professional and incorporate a timeline. You should also receive a work order or receipt just as you would from any other contractor.
In this economy, it’s more conceivable to develop multiple streams of income than it is to earn more money from a single job. Given the number of people losing their jobs, this may be a safer tactic as well and a side business can be a good way to do this. Whether you want to keep it simple as just a source of extra income, or develop it into a full-time business, the choice yours.
Be sure to consider your concept thoroughly, to test it out among friends and family members, and to secure their business as well. Be organized, commit to your plan, and hold yourself accountable. Remember, you’re your own boss in this endeavor, and need to discipline and commend yourself accordingly. And last of all, if you don’t succeed the first time around, try, try again!
Do you have a side business? If not, are you considering starting one? What are your thoughts on the process?