Starting a side hustle is a great way to earn extra income without committing to growing your own business. But it still comes with new responsibilities like tracking your finances and a new element to filing your taxes.
A recent survey showed 44% of Americans had a side hustle to get some additional cash. If this is you, could you scale your side hustle into more than just extra money? And if so, what's it going to take?
Before you commit to growing a side hustle into full on self employment, these are eight questions you should ask yourself.
Your financial reporting holds the answers to many questions self-employed individuals ask themselves. Before you decide to expand your side hustle, it's worth reviewing the numbers behind your business to learn its ins and outs.
When selling goods, you need to know your gross profit margin, average order value, and fixed operating costs. Gross profit margin is the percentage of a sale that the business keeps after covering direct costs.
Multiply your average order value by your gross profit margin and you get the average amount of money you pocket on a sale. Divide your fixed costs by this average and you get how many orders you need to cover your costs.
From here, you can start experimenting by asking yourself questions about if your costs change or what a feasible marketing budget could be.
If you're a freelancer, your costs can be a lot more predictable. But it's still worth looking into how much you make per project and how many hours these projects take. Estimating your hourly rate helps you understand how scalable your side hustle is without overcommitting to too much work to reach your earnings goal.
Sizing up your operations means an increased workload. You need to get critical about whether your current setup is going to be sufficient to tackle the extra volume.
For freelancers, going from a handful of projects to a full portfolio means more communication and work to stay on top of. You might benefit from upgrading your tech stack. Look into work management, communication, and other software for efficiencies.
If you're selling goods, what will it take to deal with extra orders? Do you need to invest in new tools for expanded demand? How will you stay on top of your bookkeeping?
Put together a list of "˜must haves' and "˜nice to haves' to get an estimate of how much to budget for. It could be worth holding off your expansion plans until these solutions are in place.
To scale your side hustle, you either need to get more customers or upsell to the customers you have.
There are many strategies to get more customers. Offering referral codes or discounts to referred customers is a great way to acquire high quality clients with similar values. Otherwise, you could opt for cold calls, advertising, or local promotion.
Upselling to clients usually means introducing new goods or services. Think of a product that goes well with what you're already offering. A ceramics company could start selling saucers that pair with their mugs, or a web developer could offer SEO audits.
Many self-employed individuals worry about not having enough work to pay the bills. But what happens when you have too much work?
When you make your side hustle your full-time gig, it's easy to fall into the pitfall of saying yes to too many things. You're trying to establish yourself, build relationships, and create new revenue opportunities.
Defining a reasonable workload ahead of time helps you understand when you're reaching your limit. This means it's time to start asking what it will take to start meeting your demand, potentially even hiring an employee.
Remember, looking after your mental health is important. It's what keeps you working at your best and delivering the highest quality work and product to your customers.
Deciding to take your side hustle to the next level can happen at any stage of the journey. While there's no criteria for how long it will take for you to reach your first milestone, it's helpful to have a timeline in mind.
Having a timeline has two big benefits. Your timeline will keep you accountable on your goals, but also gives you perspective if you ever feel overwhelmed.
Say you set a goal of a certain amount of recurring revenue in eight months. This can save you from getting flustered by month two if you haven't hit your goal yet. But it also helps you choose what initiatives you want to take on to reach that goal, whatever it may be.
The hedonic treadmill theory reveals how humans tend to revert to their baseline level of happiness, regardless of life's highs and lows. This phenomenon is especially evident among self-employed individuals, who constantly crave more success even after significant achievements. However, setting long-term goals is the key to breaking free from this cycle. Ambitious objectives act as a safeguard against the perpetual pursuit of "more."
Moreover, long-term goals provide substantial benefits in terms of prioritization and decision-making. They serve as a guiding compass, offering a clear direction for your actions. With well-defined goals, it becomes easier to justify taking time off, knowing that progress has been made towards your objectives. Similarly, any idle time can be used productively by engaging in tasks that contribute to the achievement of long-term goals.
When moving to being self employed, you get to determine what success is. Use that to your advantage.
Taking the plunge into the full-time self-employed lifestyle comes with its unique challenges. Even though you're equipped to take them head on, having some support helps.
Check out Facebook groups, LinkedIn connections, and local small business organizations for people you can connect with. They've faced similar challenges in their past. Don't hesitate to reach out if you want a helping hand or even just an understanding ear to listen to your experiences.
For some, their side hustle is their passion project. Scaling that up means it's not just a passion project anymore. Will you be okay if that relationship changes?
Having your side hustle become your full time gig has you spending much more time doing and thinking about the work. There will be associated stresses like are you doing enough of it and potential imposter syndrome.
Remember that as a self-employed person, you have a say in how you want to balance your life. Scale up in a way that works for you. There's no hard and fast rules for how you structure your self employed lifestyle so experiment to find what works for you and don't forget to enjoy the ride!
After putting so much effort into learning how to start a side hustle and getting yourself established, don't let common mistakes stop you on your journey. With these eight questions, you'll be equipped to tackle the biggest challenges entrepreneurs face when scaling their side hustle to a full-time commitment. Taking the time to grow sustainably protects your time and helps keep your head above water as you continue on your new adventure.
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