Turning a side hustle into a lucrative full-time proposition can be a dream come true. Transitioning away from taking orders from a boss to making your own business puts more money in your pocket and gives you a priceless feeling of success. Entrepreneurial-minded people who pull it off also enjoy live-work freedom and a greater sense of professional satisfaction. If you’re concerned the venture might not pan out, consider the following side hustles that turned into household name brands.
- Craigslist: Craig Newmark started the platform by sending out 12 emails to friends in 1995. As word of mouth spread, he transitioned to a server and later launched the full-fledged platform in 1999, allowing him to quit his day job in 1999.
- Under Armour: Displeased with the way cotton stuck to University of Maryland football player Kevin Plank’s sweaty physique, he investigated materials that would allow moisture to pass through. After graduating, he ran Under Armour as a side project out of his grandmother’s garage. Under Armour is worth upwards of $3.6 billion today.
- Yankee Candle: This national brand was started by 16-year-old Mike Kittredge in 1969, who made candles out of crayons. It grew to a side hustle in his parents’ garage, only to move into a manufacturing mill four years later. Yankee Candle reportedly sold for $500 million in 1998.
Not every side hustle evolves into a million- or billion-dollar company. But it may be far better to take your shot at doing something you’re personally invested in than grinding out a boring 9-to-5. If you are interested in turning that side hustle into a full-time gig, these are steps successful entrepreneurs take.
Steps to Take Your Side Hustle to the Next Level
The average small business owner earns a salary that hovers around $100,000. Many forego a salary during the startup phase, relying on a jobby-job to pay the bills. But by following these steps and accounting for the unique elements of your product or service, you could turn into a highly profitable enterprise.
1: Hold a Brainstorming Session
Determining whether your side gig can grow into a company requires thoughtful consideration. Your joy and passion for the product or service can sometimes result in biased decision-making. In other words, not everyone or enough people may share your enthusiasm. That’s why it’s critical to bring in friends, confidants, and business professionals to elicit their impartial opinions. In many areas, the Small Business Administration, Chamber of Commerce, or other organizations may have business coaches and mentors who can serve as a sounding board. The point is that you can gain valuable feedback on how the product or service could be received by the general public or anticipated customers.
2: Craft A Detailed Business Plan
Writing a business plan is a fundamental step in growing a side hustle or starting a small business. It definitively states your short- and long-term goals and logical pathways on how to achieve success. These are critical elements of a comprehensive business plan.
- Executive Summary: Sometimes referred to as the “elevator pitch,” the executive summary communicates basic facts such as the business name, details regarding the products or services, market position, and growth potential. Cash-strapped visionaries often use an executive summary to attract investors.
- Company Description: This section provides more in-depth information about the organization. It may outline ownership stakes, the history of the people and product, and the type of business structure you plan to file with the state. Small businesses emerging from side gigs typically start out as a limited liability company (LLC), although some structure the venture as a sole proprietorship or limited partnership.
- Market Research: Investors and lenders will want to see hard data showing why the operation has a chance at success. Include an analysis that highlights the product or service in the context of a particular market. The numbers should indicate an existing need and why you can do it better and for less money than competitors. According to Grata AI, one of the experts in this area, advanced market intelligence tools can help you with this. These tools provide comprehensive data and insights, helping you understand your market position and identify growth opportunities.
You’ll also need to include a detailed financial plan. This section usually includes operational expenses such as materials, IT, labor, equipment leases, rental space, and other essential costs. At the end of the day, a detailed business plan provides a reasonable assessment of the first year or two and when the company can expect to turn a profit.
3: Secure an EIN from the IRS
You’ll likely need an Employer Identification Number for hiring and banking purposes. The Internal Revenue Service has a user-friendly platform available that includes step-by-step instructions. The process starts by determining your eligibility to secure an EIN. The business owner or person responsible for the entity must have a Taxpayer Identification Number. A Social Security Number will usually suffice. If you clear that hurdle, complete the online application and submit it electronically. One word of advice for first-time IRS platform users — there’s a 15-minute time limit per session.
4: Choose a Business Name that Resonates
Aspiring business leaders who want to expand their market share are in for something of an awakening when they choose a business name. Many of the memorable monikers are taken in a given state, even though they aren’t in play. Companies file with the Secretary of State offices or government agencies under one name and sometimes do business as another. This is known as DBA — “Doing Business As.”
That’s why you may need to hold another brainstorming session to compile a list of potential business names. It’s generally prudent to select options that are relatable or at least hint at the product or service for banding purposes. Once you have a list, check it against your state’s business entity list. Most have some type of no-cost company name search engine. If you discover one of your names isn’t being used, reserve it immediately.
5: Select a Suitable Business Structure
As a side hustle, running the gig through your personal bank account and integrating the revenue into an individual tax return made sense. After all, it was just a source of extra money. Moving forward, you’ll need to make savvy decisions about the corporate structure. These are ways startups typically address business structure strategies and why.
- Sole Proprietorship: This option isn’t very different from running the side hustle through your bank account and tax return. States don’t usually require you to make an official corporate filing. Many task startups with identifying the operation with things such as business licenses. A sole proprietorship doesn’t involve a great deal of change, but it also doesn’t offer civil liability protection or tax benefits.
- Partnerships: Although not every state requires you to file a partnership, the IRS expects a return. Your state may also need some form of business identification, such as a license or permit. Standard types include general partnerships, limited partnerships, and limited liability partnerships, among others. This structure is suitable when two or more people want to jointly take a side hustle to the next level or form a startup. Partnerships may not offer adequate protection against civil lawsuits or protect your assets in the event of bankruptcy.
- Limited Liability Company: Many upstart businesses use LLC types because they offer personal protection against company-related litigation, as long as you keep your personal and business assets separated. This corporate structure allows you to keep flowing revenue through your personal tax return, open business bank accounts using the EIN, and apply for loans, grants, and other opportunities. Although each state has a different business entity filing process, the LLC types are roughly the same.
- Corporations: If you plan to invest significant capital and onboard shareholders, a corporation may be the best option. Reserved for complex companies that envision paying stock dividends and hiring a substantial number of employees, this type of entity is not common among startups and people turning a side hustle into their primary source of income.
If your organization grows like Yankee Candle, Craigslist, or Under Armour, you can circle back and change the structure when it makes sense.
6: Create a Large Enough War Chest to Quit Your 9-to-5
It’s important to keep in mind there is no one-size-fits-all equation to determine how much cash reserves an enterprise should have on hand. Most new ventures take time to become profitable. As a general rule, business advocacy organizations advise startups to maintain a reserve that can cover expenses for 3-6 months. Side hustles that are already enjoying a revenue stream may be less volatile. However, it’s better to have it and not need it than to drag yourself back to that tedious day job.
7: Brand and Market Your Full-Time Business
Effective branding does not necessarily require a great deal of money. There are strong, cost-free platforms that provide the tools and technology to create logos and other branding materials. Using a logo, tagline, or other concept on your website, products, vehicles, advertisements, and other places where people will see it helps connect the product or service with the organization.
You can also get to work employing so-called “guerrilla marketing” techniques such as publishing social media posts, Facebook ads, and putting physical flyers in physical store windows and cafés. These and other old-school marketing strategies still work for a variety of small businesses.
The sky’s the limit for motivated entrepreneurs with a passion for growing a side gig into a lucrative company. With any luck, you could be the next success story and motivate others to reach for a small business opportunity.
