How to Start a Side Hustle (2024)

What Is a Side Hustle?

A side hustle, or a side business, can be a way of boosting income beyond what is earned from another job and an opportunity to gain experience outside of other roles. Many people start side hustles doing something that they are passionate about or skilled at.

Some benefits of starting a side hustle can include earning money on top of a regular pay check, building the foundation to eventually work for oneself doing something enjoyable, or diversifying one’s career opportunities and professional skill set.

How to Start a Side Hustle in 7 Steps

Depending on the nature of the side hustle, not all the steps below will apply; however, these are some common steps involved in starting up a small business. Regardless, it’s important to fully research and understand the financial, legal, and tax regulations in the jurisdiction or jurisdictions that the business will be operating in before getting started.

1. Evaluate the Possibilities

In launching a side hustle, many people start by evaluating their skill set, interests, or lifestyle. Often, finding an overlap between a product or service that is in demand and a hobby or personal strength can be a lucrative place to start.

2. Research the Market

You'll need to look at the competition and narrow down a target customer, both of which are important initial market research steps to take in order to confirm that there will be demand for a product or service and to understand how to price any given offering.

3. Write a Business Plan

If the side hustle will require investment, funding, or a partnership, a business plan is a must. Potential partners, investors, and financial institutions will want to see a comprehensive overview of the business, including the overall vision, your products and services, your marketing strategy, your financial plans, and any other important details.

4. Estimate Startup Costs and Determine How to Secure Funding

If there will be expenses associated with starting your side hustle, it is essential to create as comprehensive a list of them, then determine how they will be funded. Depending on the nature of the side hustle, startup costs can be quite low, but it is still important to estimate and plan for them.

5. Choose a Location, Structure, and Name, Then Register If Needed

Determining where the business will be operating and how it will be structured has implications for taxation, funding, paperwork filing, and personal liability, so it’s important to consider this carefully. Federal and/or state registration of the business and tax IDs may be required as well.

6. Secure Any Licenses, Permits, Memberships, or Certifications

Depending on the activities of the business and the jurisdiction in which it is operating, federal and/or state licenses and permits may be required to maintain legal compliance. It may also be helpful to secure or renew memberships or professional certifications related to the business if these are required for operation. All of these will generally have associated fees that should be included as part of the startup cost calculation.

7. Set Up a Business Bank Account and Apply for Insurance

Keeping business and personal financial transactions separate is important for both accounting purposes and tax purposes, so it can be good to open a separate business bank account. It may also be prudent to apply for business insurance depending on the risks associated with the intended business activity.

Advantages and Disadvantages of a Side Hustle

Starting a side hustle can offer some benefits, but a second job can also have drawbacks. Here are some advantages and disadvantages to consider.

Advantages of a side hustle can include:

• A flexible work schedule
• Freedom to pursue a passion or interest
• Additional income
• Diversifying a skill set
• Exploring entrepreneurship in an experimental way

Disadvantages of a side hustle can include:

• Disrupted work-life balance
• No longer enjoying a hobby after monetizing it
• Financial and legal risk
• Business failure
• Tax complications

Other Considerations

Some other factors to consider before starting a side hustle include:

• The tax implications of earning additional income: For example, accepting over $600 from sales of goods or services via an online marketplace or payment app could result in receiving a Form 1099-K; profits from sales must be reported on a tax return. The IRS has a list of questions that can help delineate whether certain activities fall under the category of a hobby or a business.
• How goods or services will be marketed and sold: It can be wise to create a marketing and sales plan in advance of starting a side business to ensure that products and services reach their target customer.
• The ongoing costs associated with selling goods or services: Look into whether there are fees, expenses, overhead costs, or any other financial obligations associated with things like licensing, shipping, warehousing, domain registration, online selling, or membership dues.
• Cash flow planning: Earning an income from a business may not only be about collecting money; it may also entail paying suppliers, vendors, or employees and other bills. It’s essential to ensure that the timing of incoming cash is aligned with the payment schedule for various expenses.

Tips for Starting a Side Hustle

Those looking to start a business on the side might consider the following helpful tips for launching and running it:

• Maintain a healthy work-life balance. The time and effort required to run a business is easy to underestimate and can be difficult to manage. Those starting out might find it useful to delineate working hours for their side business to ensure that it does not take up more of their schedule than is sustainable in the long term.
• Consider skills as well as interests. Many people start a side hustle because they intend to make money doing something they love. However, sometimes it can be better to separate hobbies from professional pursuits, as having to derive income from a hobby can diminish the enjoyment of it. Instead, it might be better to start a side hustle that incorporates a professional skill set or strength.
• Start small and scale up. Beginning with an experimental mindset at a small scale can be a good way to explore something without committing to it full-time.
• Don’t underestimate the power of word-of-mouth and free marketing tools. Before making a formal investment in marketing, consider telling your friends, family, and network and spreading the word through free marketing tools like social media. This can be a good way to get the word out without spending money.
• Consider financing options carefully. Before making any major financial decisions, it’s essential to understand the risks, terms, and conditions associated with taking on debt, working with lenders or investors, and pursuing any other funding or financing avenues.
• Understand the risks and common reasons for failure. The more awareness you have of the potential pitfalls and risks, the easier it is to avoid them. Doing research can pay off in a major way in this area.

9 Side Hustle Ideas

There are many avenues that people can pursue as a side hustle, but here are some of the most common:

1. Digital marketing services: From social media management to website design or development, those with a digital marketing skill set can offer their services on a contract or freelance basis.
2. Bookkeeping: Anyone who has a penchant for numbers and/or certifications or professional designations in accounting could consider offering their services to businesses on an hourly basis.
3. Teaching or tutoring: Turning a pre-existing skill or subject area expertise into a teaching or tutoring business can be a good way to earn income without requiring a major investment.
4. Babysitting or pet sitting: People who love children or animals might like to make a bit of money on the side by offering their services to those who need childcare or someone to look after their pet.
5. Dropshipping: Starting a dropshipping business by reselling goods from a wholesaler, particularly through an ecommerce website, can be a lucrative way to turn a profit.
6. Creative products or services: Artists and crafters might consider selling their pieces online through creative hubs like Etsy or Shopify. Additionally, creating something that offers a recurring return without additional effort, such as an ebook, stock photography, or a template, can be a way to earn passive income.
7. Writing, editing, or transcribing: Those with a communications background might consider offering their services to businesses, authors, publishers, or other organizations who need content.
8. Coaching, classes, or courses: Whether offered in-person or online, starting a class on something like fitness, cooking, baking, crafting, design, investing, or professional topics might be an appealing way to earn additional income. There are also many online platforms where people can offer their expertise to clients via coaching services or courses.
9. Landscaping or home services: Services like car washing, gardening, snow removal, lawn care, hanging Christmas lights, or home repair can easily be offered on weekends or before or after work hours.
   

The Bottom Line

Starting a side hustle is a great way to explore entrepreneurship without a huge commitment. However, it’s important to consider the benefits and drawbacks of a particular side hustle before diving in so as to ensure that it will be a good fit and meet expectations. It is also a good idea to fully research the business idea before starting, thereby ensuring a good understanding of financial, legal, and tax regulations as well as building a good foundation for the growth, sales, and marketing of the business.