Perhaps your side hustle has always been a passion of yours and you have figured out how to generate extra income. Maybe your side hustle has been out of necessity to cover what seems like never-ending bills. Or maybe your side hustle comes from simply being great at what you do and the work flowed in. Either way, a solid side hustle can feel great! Suddenly you are making extra money, people are finding your services or products valuable, and you are having a more direct impact on your financial future.
However, many entrepreneurs have reservations before they jump into full-time status. Balancing the shift from side hustle to full time can be challenging. Perhaps you are hesitant to leave behind a safe and predictable career? Is your side hustle prepared to take on a more demanding workload? What will the financial impact of this choice be? These concerns are normal and valuable. It can be hard to know if you and your side hustle is ready for what may come next.
To help prepare your transition, we have compiled three important next steps to consider as you reflect on taking your side hustle to a full-time gig and build confidence that you are moving in the right direction.
1. Improve procedures and systems.
Why focus here? In the beginning of a side hustle, you are probably wearing all the hats at any given moment. Organizing those hats and making them easily understood allows you to pass them off during times of rapid growth. This makes growing your company much easier, for everyone, and eventually more successful.
As Chris Guillebeau said in his book Side Hustle: From idea to income in 27 days, “Don’t let yourself get distracted from the two things that matter the most for your side hustle: the benefit for customers, and the income for you.” Procedures and systems are what makes those two things happen. This can be anything from onboarding clients, fulfillment processes, hiring new employees, accounting and payroll. Systems that can be easily learned, easily referenced and easily adapted need to be in place before the company can successfully predict and manage transitioning from side hustle to full time.
2. Run those numbers.
What do we mean by running the numbers? Running a side hustle is a great way to make extra money, but if you’re thinking of transitioning to full time, then you need to be sure that the projections can actually support your needs and the needs of the business. Here is where the old adage of “burn your boats” is considered. It is said that when Cortez landed in the Americas that he burned all his boats, forcing he and his crew into a no return option.
Going full time with your side hustle means thinking through and running numbers for ALL the options. Including the less desirable options. This will help prepare you for all the possible outcomes and create stability as you tackle new problems during transition. Additionally, making sure you have estimated your personal financial health in various situations will help make the shift from side hustle to full-time gig more manageable.
By running revenue and cost analysis on your current side hustle, along with projected customers and projected future revenue, you can bring some clarity as you move through the decision process. On the other hand, if you do decide to take the plunge into full-time hustle and “burn your boats,” it might be the motivation you need to make this work. Either way, trust your gut, look at your low-end projections and your high-end projections and make sure that the potential generation of new business can truly cover your financial needs. Whatever decision you make, give it all you got!
3. Get protected.
Sadly, we live in a litigious society where anyone can sue you for anything. If you are engaging with clients, it is time to make sure that you have created a properly formed business entity. It is important to note that the step of forming a business entity is not reserved for just the full-time hustlers; it is just as important for the side hustlers as well. The level of liability protection and tax savings that can come from a properly formed business will be no different whether you are side hustling or have transitioned to full time.
The chances are that you have a regular job during your side hustle phase, which means the owner of the company you work for has either assumed the liability themselves or structured a business entity to do so. You are protected under their structure as an employee. As you begin to earn money in your side hustle or full-time hustle, those liabilities will either fall upon you personally or upon the business structure you set up. This is why setting up your own entity for liability protection is crucial.
If you haven’t already incorporated your business, then it is time. Make sure that the legal liability now stays within the company instead of putting your personal assets at risk. Depending on your specific business needs, you can determine the right legal entity structure that is a good fit for you. Typically, these entities will fall within an LLC (Limited Liability Company), S-Corporation or C-Corporation. Either way, a properly formed business can protect your growing company, not to mention gain you access to all kinds of tax saving opportunities.
Are you ready to go full time on your side hustle? Improving procedures, running the numbers and considering the type of legal entity you need in place will help in making the right decision for you and hopefully ease some of those concerns involved with transitioning to full time. Whether you are ready to go full time or stick with a side hustle, your decision to protect yourself and maximize your tax savings is crucial to your success. These steps are important and can be simplified. If you need to set up a new business entity or have questions about which one may be best fit, you can visit our trusted vendors at Advanced Tax Group and they can help you navigate your options.
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