Starting a side hustle has become increasingly popular among younger generations. Earning extra income from something you love is rewarding, and if you’re successful, you may be able to pursue it full time. But how do you take your hobby to the next level? Turning your side hustle into a small business can be worthwhile if you’re serious about elevating your passion, but the process can be complicated. Here are a few ways to help you get started!
Choose a Business Structure
The first thing you should do when transitioning your side hustle into a small business is choose a business structure. This decision impacts key parts of your business like taxes, operations, and personal liability, so it’s important to weigh your options carefully.
Some of the most common business structures are a sole proprietorship, which is beneficial if you’re the only person involved, and a Limited Liability Corporation (LLC), which allows you to include multiple owners and business partners. You should also research what licenses and government regulations are required to operate legally.
Next, you’ll want to register your business to receive an Employer Identification Number (EIN), which allows you to hire employees. You’ll also want to open a business bank account to separate your personal finances from your business finances. This will help you track your business’s profits and expenses more effectively and will organize your finances for tax season.
Create a Business Plan
One of the best parts about having a side hustle is that you’ve already proven your business idea is successful! To help this success grow even further, you should create a business plan to track how you can scale your side hustle and take it to the next level.
Examine your business’s current needs and make sure you have a strong foundation to handle growth. Do you need to rent a commercial space? Hire employees? Purchase more equipment and tools? Along with assessing your needs, you should also have a clear vision of what you want to achieve. Set short-term and long-term goals for your business and plan how you’ll accomplish them.
For instance, if you want to grow your business large enough so you can quit your full-time job, how much income do you need per month to make this happen? Think about the steps you need to take to achieve these goals and track your progress to determine what’s working and what isn’t. Doing this will keep you accountable to your goals and will better prepare you to adjust your business plan based on the market.
Starting a business can be expensive, but don’t let the costs prevent you from pursuing your passion! If you’re serious about turning your side hustle into a small business, you need to give it the funding it deserves to give it a fair shot at succeeding. Luckily, there are several financing options available to help you get started.
One of the most common financing choices for businesses is a small business loan. There are a few different types backed by the government and offered by banks and online lenders, but keep in mind there are approval requirements like credit checks, minimum time in business, and annual revenue.
If you’re unable to get a small business loan, you can research state or local grants and use crowdfunding platforms like GoFundMe to raise money from friends, family, and the public. If you’re a homeowner, you can also use a home equity loan to finance your business by borrowing money against the equity you’ve built up in your home. This loan option can be a wise choice for business expenses because there are no restrictions on how you can use the money, and it has lower interest rates than a personal loan or credit card.
Whatever financing option you choose, start slow and try not to go overboard with your loan amount. Only borrow the money you need, and try to avoid unnecessary debt as you get started.
Utilize Helpful Tools
Although you might have managed your side hustle without much assistance, operating a business is much more hectic. Owning a business requires a lot of work, and to make this easier, there are several online resources, tools, and software available! Depending on your business goals, you should consider using bookkeeping, email marketing, advertisement, project management, or eCommerce tools to help streamline your workflow.
These tools can help you be more efficient with your time and may allow you to decrease the size of your team. Certain software may require a fee, but there are also several high-quality, free tools you can use to start out. Make sure to take advantage of these resources to learn more about best practices and to better optimize your business!
Starting a small business isn’t easy, but luckily you already have a strong foundation in place from your side hustle. Taking the leap to follow your passion is an exciting and fulfilling journey, and you’re already on the path for success. Just make sure to establish your business legally and have an organized plan and you’re ready to launch!