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5 Steps to Turn Your Side Hustle into a Business

A smooth and successful transition to a viable small business starts with some basics. (opens in new tab) (opens in new tab) (opens in new tab) Newsletter sign up Newsletter (Image credit: Getty Images) By Stephen B. Dunbar III, JD, CLU published 5 October 2022 Whether out of passion or frustration, the pandemic has seen more people than ever get serious about their side hustle. In fact, according to recent figures from the U.S. Census Bureau, there was a 53% increase in new business filings in 2021 (opens in new tab) compared to 2019. However, whether it's interior design or decorative cakemaking, wedding photography or dog walking, how do you go about turning your side hustle into a real, viable business? Here are five steps to take in order to make the transition as smooth and successful as possible.

1 Set up the proper legal form of ownership

Remaining a sole proprietorship (opens in new tab) might mean less admin in the short term, but it also creates a lot more risk in the long term! That's because any credit, legal or liability risk falls on the individual owner. However, by giving yourself the shield of legal ownership, you'll ensure the buck stops with your business rather than with you.

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40 Ways to Earn Extra Cash in 2022 Being an official legal entity also gives you more credibility with lenders when it comes to borrowing money or raising capital. You can consult with Score (opens in new tab), the nation's largest network of volunteer, expert business mentors or with a local attorney to select the right form of ownership for you and your business.

2 Write a business plan

When you're running a business responsible for most, if not all, of your income, having a clear strategy is vital, which is where writing a business plan comes in. Doing so will help you identify your vision for the company, decide what differentiates you from competitors and figure out how much you need to earn to produce enough cash to not just survive, but thrive from your side hustle. If you're not sure how to go about writing a business plan, don't worry! There are loads of great resources and advice out there, including from the U.S. Small Business Administration (opens in new tab).

3 Plan to hire

As a side hustler, you're the accountant, the receptionist, the salesperson, the marketer and more. But becoming a business means deciding when you can afford to bring in extra support to cope with (hopefully!) rising demands on your time. Say your goal is to make a six-figure income every year. If the average full-time working year is 1,900 hours, that means you're aiming for every hour you work to be worth around $50 to $55 ($100,000 divided by 1,900 hours).

Is the Side-Hustle a New Dance Seniors Are Learning? Anytime you perform a function with a typical hourly rate below that – for example, administrative tasks like processing the mail or answering the phones, which tend to pay around $10 to $15 per hour – you're reducing your ability to earn your desired $50 to $55. In which case, hiring someone to do it instead makes sense, both financially and to help you avoid burning out trying to do everything.

4 Let go to grow

As you seek to grow, it's important you have the bandwidth to focus on the elements of the business you're uniquely good at while letting go of the rest. If you're a cakemaker, for example, you're far more valuable meeting customers and creating products than you are sending invoices or responding to emails. A good rule of thumb is if someone can perform a task at least 70% or 80% as well as you, delegate it. That might be via a part- or full-time hire or through one of the country's many small-business incubators. These provide expert support on everything from accounting and legal services to HR and capital investment. Along with benefiting from additional expertise, letting go of some operational tasks will mean your time is spent working on the business rather than in it.

5 Equip yourself for big contracts

Most side hustles start with stuff like selling to friends of friends, posting your products on Pinterest or making one-off sales at farmers' markets. But as your business expands, you may wish to go after bigger contracts with larger customers. This means you'll need to establish certain infrastructure to ensure they're comfortable working with you. Set up proper cybersecurity and data protection, for example, and arm yourself with property-casualty insurance, too. That way, if something goes wrong or gets damaged while you're working for them, everyone knows you have the necessary protection in place.

5 Things to Consider When Weighing a Job Change Along with the steps above, there's perhaps one other key consideration for anyone planning to move from part-time side hustler to full-time entrepreneur: Go into it with your eyes open. Running a business is hard, multifaceted work. And usually it comes with the added pressure of needing to make enough money to support you and your family. Yet, at the same time, picture this: Every day you go to work, you're doing something you're good at. Something you feel passionate about. Something that's truly yours. If you're ready to accept the ups and downs and put in the time and energy required to make it a success, turning your side hustle into a business may well be the most rewarding decision you ever make. This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab). Explore More Building Wealth Stephen B. Dunbar III, JD, CLUDirector of Diversity & Inclusion, Executive VP, Equitable Advisors Stephen Dunbar, Executive VP of Equitable, has built a thriving financial services practice where he empowers others to make informed decisions and take charge of their future. He and his team advise on over $3B in AUM and $1.5B in protection coverage. As a National Director of DEI for Equitable, Stephen acts as a change agent for the organization, creating a culture of diversity and inclusion. He earned a bachelor's in Finance from Rutgers and a J.D. from Stanford. Latest Homebuilders Appear Headed for More Pain Storm clouds are brewing for homebuilders as the Fed's aggressive rate hiking quickly cools demand for new housing. By Will Ashworth • Published 10 November 22 15 States That Tax Military Retirement Pay (and Other States That Don't) retirement Taxes on military retirement pay vary from state-to-state. How generous is your state when it comes to helping retired veterans at tax time? By Sandra Block • Published 10 November 22 You might also like Finding Peace of Mind With Your Retirement Income Even in tough times, you can secure retirement income that lets you maintain your lifestyle, lasts a lifetime, adjusts for life events and leaves a legacy for the kids. By Jerry Golden, Investment Adviser Representative • Published 10 November 22 What to Do When an Unhappy Customer Threatens to Ruin Your Rep Some customers go too far when they feel they haven't been treated well, demanding unreasonable make-goods and even resorting to extortion. An attorney offers some advice. By H. Dennis Beaver, Esq. • Published 10 November 22 Rising Interest Rates Change the Math on Pensions for Some Would-Be Retirees Now is a good time to think about when and if to take a lump sum on your pension and what to do with it. Let's explore the pros and cons. By Michael Aloi, CFP® • Published 9 November 22 Counterattack: Tips for Thwarting a Will Contest From contentious relatives to scam artists, wills are not immune to the threat of a contest. If you have an inkling such a fight could be in your estate's future, here are some ways to limit the risk. By Linda Kotis, Esq. • Published 9 November 22 5 Steps to a Stronger Financial Plan It's impossible to be right all the time, but a strong plan and constantly assessing where you are can help you pivot when bad things inevitably happen. By Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser • Published 8 November 22 Safe Harbor 401(k)s Can Help Small-Business Owners Keep Happy Employees Immediate vesting and contributions by the employer regardless of the employee's participation pump up workers. Employers get lower costs and tax benefits. By Mike Piershale, ChFC • Published 8 November 22 5 Survival Tips for the Bear Market It's been a painful year for investors, but focusing on the long term and implementing constructive actions can help weather the turbulence. By Daniel Kern, CFA®, CFP® • Last updated 8 November 22 Can You Protect Your Retirement From Natural Disasters? Hurricanes, wildfires and floods have wreaked havoc in the U.S. this year. Having a disaster plan in place could help protect you financially in the moment and the aftermath. By Ken Moraif, CFP® • Published 7 November 22 View More ▸ kiplinger About Us (opens in new tab) Terms and Conditions (opens in new tab) Privacy Policy (opens in new tab) Cookie Policy (opens in new tab) Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site.
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