Your side hustle can be an effective part-time way to earn extra money. But increasingly, a side hustle can turn into a full-time role. Experts say, not only is it important to examine your business, but you should also review your personal situation, goals, and responsibilities to know if or when the time is right to make a leap.
Studies have shown the main reason for making a side hustle your full-time job is more about being your own boss, not about a high tolerance for risk. Either way, there are risks and rewards.
To help you be as successful as possible, small business lending expert Howie Gotshalk of Civic Federal Credit Union recommends planning to stay in your current full-time position until your side hustle has historical trends, such as consistent revenue growth and a diverse customer base.
“Look at where your bread and butter is coming from,” says Gotshalk. “That can help you know if a leap may be possible or if you need to expand your business, or grow existing accounts before making any decision.”
Ask Yourself These Questions:
Gotshalk says the following questions can be a reality check to help know if a leap may be possible.
- How are you currently living? Are you and your family okay with a possible reduction in living status, if needed?
- What dollar amount do you need to stay afloat each month, for personal and business expenses?
- Do you have something to fill in the gaps should your business slow down?
- What are your cash reserves? One year or six months?
Get Ready Checklist
Jeff Dortch, a Certified Financial Planner and Experience Center representative at Civic Federal Credit Union says being prepared for the realities of owning a small business can help with your decision.
While each situation is different, there are some must-haves for anyone with a side hustle who is thinking about making a permanent change.
Get Saving: To help manage any downturns in your business, have 6-12 months of savings built up before you make any final decisions. If you decide to leave your full-time job, this money will help you cover your business and personal expenses while you close the gap to replace your prior income.
Understand the J Curve: This is a typical occurrence where new business owners experience a decline in monthly income that hits a bottom and creeps back up to the income level from your pre-small business owner job. Planning for this can help you better navigate it, should this happen.
Be Honest About Being a Self-starter: Think about the whole picture of making things happen in your industry. Unlike a corporate job, you will have the sole responsibility of designing daily tasks including serving customers, marketing, and selling – everything. Be honest with yourself about your abilities.
Protect Retirement Savings: Do not plan to dip into your existing retirement savings for your business. If you do, you will be taxed at traditional income levels with an added 10 percent tax. It is difficult to make that money back. Plan to keep your existing retirement savings untouched and meet with a financial planner to establish new strategies for a long-term view of your investments.
Be Willing to Get a Side Hustle to Your Side Hustle: If you are not making two-thirds of your previous full-time salary, you may need to get another side hustle to help make ends meet. Waiting tables or driving for a ride-share company can help generate that last third of income.
Embrace Being Frugal: Have a regimented spending plan and follow it with laser precision. Being your own boss does not have the same safety net as a full-time corporate job. Using software or an app to help plan out spending will pay dividends for you down the road.
Find Birds of a Feather: Connect with others who share an enthusiasm for small businesses. Turn to Meetups, local small business groups or the North Carolina’s community college network of small business centers. Tap into local, North Carolina resources that can teach you and help prepare you for the possible road ahead.
As your side hustle begins to grow, Dortch says to remember these tips:
- Don’t listen to the nay-sayers. Remember your reasons for being a small business owner and why they are important to you. Remind yourself of them.
- Learn the basics about growing and scaling a business. Community college classes can be helpful here.
- Find a business coach to provide perspective and guidance for your business idea and a supportive path forward.
- Consult your accountant and financial planner to help advise you
Having a side hustle can be rewarding on many levels. Through it all, and no matter what you decide, keep your focus on making progress and remaining humble.
Disclaimer: You + Money blog posts are provided for informational purposes only and not intended to replace the advice of a financial, legal or accounting advisor.