6 Steps to Turn Your Side Hustle Into a Full-Time Business
By Meredith Wood
When you decide to turn your side hustle into a full-time business, you’re taking a big step into exciting, new (and often scary) territory.
While being a full-time entrepreneur can be thrilling and life-changing, nearly 50% of all startups fail within five years. But you welcome the challenge. You don’t just plan on surviving, you plan on thriving!
How can you make sure your transition leads to a successful, long-lasting business? By setting up a strong financial foundation from the start. Here’s a handy checklist to ensure you have all your bases covered.
1. Choose your business name and brand
Choosing a business name doesn’t necessarily have to be the first thing you do, but it’s one of the most important steps in making your business legitimate. It will also help you set up your website and social media accounts, and develop your branding.
A few things to consider before settling on a business name:
- Don’t put off starting just because you can’t come up with the “perfect” name. If you can’t decide, ask friends and family to vote on a few of your favorite options.
- Use free business name search tools online to make sure your business name is not already taken.
- Search to see if the social media handles you want are available.
Once you’ve made your choice, know that creating a logo and setting up a website can take a bit of work. However, there are free and low-cost services you can use, such as WordPress.org for building a website or Canva for creating a logo. You can also go to SBA.gov for free webinars and other resources.
2. Set up your business legally and financially
Depending on the type of business you run, there may be legal steps you need to follow. Here are the most common legal and financial tasks businesses need to complete:
- Choose your business structure: When you run a one-person business, you’re already a sole proprietor. However, if you want more financial protection, you may want to take the extra steps to form a limited liability company (LLC). If you plan on growing your business significantly, then electing to be an S corporation could be a good choice.
- Obtain business licenses and permits: Check your local and state government websites to see what’s required. Depending on your business type, you may need a special permit.
- Open a business bank account: Don’t mix personal and business funds, even if you’re personally funding your business. By separating the two, you’ll help ensure your business survives and that you don’t go broke funding this new venture.
A friendly word of advice? Unless you’re a sole proprietor, don’t do taxes yourself — it’s not worth the risk. Instead, get an accountant who can assist you. Additionally, consider enlisting the help of a reliable attorney who can help you with contracts and statements of work (SOWs).
3. Do market research to understand your competitors
In order to succeed, you have to bring value to your customers. You probably have a clear idea of what your business will do for them, but you need to know how to set yourself apart from the competition. One way to get clarity is to define what your business does in just one sentence.
You can also set yourself up as a serious competitor by performing market research to understand how many customers are in your target market, who your competitors are, and your advantages. This will also help you figure out how much market share you could potentially win.
4. Write up a business plan
The Small Business Administration (SBA) says that a business plan will serve as your “essential roadmap for business success.”
Because you’ve already figured out how your business is different from the competition, some of this work is already done. But here’s what your complete business plan should include:
- Executive summary: A snapshot of your company
- Company description: What you do and how you stand out
- Market analysis: Research on your industry and main competition
- Organization/management: How your business is structured and run
- Strategy: Marketing and sales strategies, and your product or service line
- Financials: Funding needs and projections (if you’re looking for capital)
A well-written business plan is absolutely required if you want to pitch to potential investors. Plus, it will help you develop a clear strategy and roadmap for the early stages of your operation.
5. Create a budget and find the capital you need
One of the main reasons small businesses fail is because of cash flow issues. In other words, they have more money going out than coming in. Part of the problem is that early-stage entrepreneurs tend to underestimate how much money they need in order to get started.
That’s why Viridiana Ponce, business consultant and founder of VP Consulting, says that a non-negotiable with her clients is “creating a detailed startup budget.” To create a realistic budget, Ponce recommends asking yourself, “What resources do I need to launch my business?” She suggests considering the following categories:
- Fixed assets: Build-out expenses, technology, equipment
- Operating Expenses: Training, inventory, legal, accounting
- Capital: Working capital, and a buffer for miscellaneous/unexpected expenses
There are many ways to get the funding you need for your startup, even if you have bad credit. They can include grants, SBA loans, crowdfunding and business lines of credit. Business credit cards can be another option, but they often come with the highest interest rates.
When you begin looking for capital, keep an open mind. Explore all your options and see what makes the most sense for your current financial situation and future goals, with fees and interest rates taken into consideration.
6. Network and find small-business mentorship
No successful business is an island. Once you address the legal and financial details of expanding, it’s time to get out there and find customers, partners and mentors.
Networking with other entrepreneurs can also be valuable. Why? Because you can find insights, get guidance and support from people who have been in your shoes.
No matter where you live, you can find local groups and assistance for entrepreneurs. For example, the SBA offers free business counseling at its various locations across the United States, and SCORE offers free mentorship.
Get help with your business to-do list
If you’re ready to expand your side hustle into a full-time business, make sure you check each item off this list before you take that leap of faith. Yes, this process can be scary, but you can still get out there and stay adaptable as you face the challenges ahead.
Need more support as you launch a full-time small business? Reach out to an NFCC-certified credit counselor for help separating your business and personal finances, improving your credit and more.
About the Author:
Meredith Wood is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.
