If you are considering starting a side hustle and you imagine quitting your job one day to take your business full-time, or maybe you just need to make a little extra money in your spare time. When launching a successful side hustle, there are several foundational things you should have in place.

What exactly is a side hustle and how can it benefit you?

A side hustle is an additional job or income stream generated alongside a primary job. Side hustles are beneficial because they allow people to make more money while utilizing and practicing other money making skills and also working according to their own schedules.

With a successful side hustle, there is no limit to how much you can make. And with some extra money in your pocket, you can save, utilize the best way to get out of debt or take that trip you wanted.

As exciting as starting a side hustle may seem, you must have a solid plan to fully reap the benefits. In addition, you have to start with the hustle idea that is best for you.

10 steps for starting a side hustle

Finding the perfect side hustle that helps you make a little extra cash is only half the battle. You must also find out what business will work well for you and your lifestyle. Here are all the details on how to begin your side gig:

1. Determine how much time you can set aside to grow your side hustle

A crucial part of getting started with a side hustle is to think about how much time you have to spare. Are you free most evenings, or are you already super busy and you struggle to find a few hours a week to yourself? In order to find out how much time you have and consequently what side hustle to choose, use a planner or calendar. Add the tasks that you do each day and the specific times that you do them. You likely already do something like this, so it should be easy to take a look at your schedule.

If you have a couple of hours a day that you could work on your side hustle, you can pick something that requires more time from you on a consistent basis. But if you don’t have much extra time, you might create something that is mostly passive income after it’s set up.

Find out (realistically) what times you have available and how much time you can spare. Remember that your side gig should not interfere with your regular job, time with family and friends, or other responsibilities. Then, create your side hustle time management plan.

2. Pick something that interests you

Think about what interests you. Something that you enjoy doing. Since your full-time job probably takes most of your energy, finding a side gig that you’ll be excited about long-term is essential. Choose something that is easy for you or that you enjoy.

Let your hobbies guide you.

If you aren’t sure where to begin, look to your hobbies for ideas. Maybe you love to write, bake cakes, garden, or organize and clean. See if any of the things that you enjoy doing could be part of a niche business idea that makes you an income. Write down as many hobbies or interests as you can think of. Then highlight the hobbies that make money or that have income potential, and go from there.

3. Decide the amount of money you want to earn

It’s easy to say that you want to make extra money each month, but how much is a little extra? Consider some examples of financial goals and the amount of money you need to achieve them.

For example, how much additional income will you need to pay off debt? Perhaps you want to buy a new car; what is the cost involved? Knowing how much money you want to bring in can help you determine which side hustle to start with.

Some side hustles like taking online surveys or dog walking will bring in a couple of hundred dollars a month.

However, suppose you’re looking to replace your current salary or surpass it. In that case, you’ll want to start with a side hustle you can eventually transition into full-time.

How to know what amount you need to make

First, ask yourself why you decided to launch a side hustle gig in the first place. Is it for a one-time payment for something? Is it an ongoing need to make more money?

After that, choosing a side hustle will be easier because you’ll know what will make the amount of income you need and what won’t. You’ll also be able to determine if a side hustle will be short or long-term, which may affect what you choose.

4. Create a business plan for your side hustle

If you’re in the process of starting a side hustle and do not have a business plan, you need to create one now. A business plan is essentially your roadmap for your side hustle to achieve your goals for a small business. You can’t have success in life without a plan!

Your business plan doesn’t need to be 100 pages long. Instead, it needs to focus on key things to help you build a successful business and show how you’ll start a profitable side hustle.

Your initial business plan will possibly change – a lot! These changes are expected because as you put your ideas on paper and your business comes to life, you may realize other factors. As a result, you’ll better determine what you want and don’t want in your business or come up with entirely new ideas.

Below are some topics you should include and some questions to get you thinking as you create your business plan:

• Create an executive summary

Your executive summary outlines your business and the problem you are solving with the product or service you’re offering. The executive summary section, usually a one-pager, will be easier to complete once you’ve built out the main sections of your business plan highlighted below.

• Identify your target audience and avatar

When starting a side hustle, you need to know who you’ll sell to. Here, you’ll define your target audience, which includes identifying key demographics such as location, age, and income of your ideal clientele. You’ll also want to consider why your target audience would be interested in your business.

You should also know your ideal client and how you will find these clients. Since social media is a big part of everyone’s lives, LinkedIn, Facebook groups, and Instagram can be helpful in how to get clients online.

• Decide on what products and services you’ll offer

Every business offers a product, such as jewelry or a pre-owned designer handbag, or a service like editing or photography. When deciding which side hustle business you should offer, think back to your executive summary. Whatever you offer should align with the problem your business will be solving.

Once clear on this, it’s a good idea to sketch out thoughts on how you will price your products or services. You’ll also want to consider how you’ll be selling them.

• Figure out your operating model

A clear operating model helps you understand and lay out how you intend to deliver value with your products and services. It will also help determine the type of experience you plan to provide your ideal customer.

Start by asking yourself, are my products packaged in a way that aligns with the experience I want my customers to have? Is my website in line with my brand?

Once your operating model is fine-tuned and running, and you are branding for success, it will allow you to scale your side hustle because you’ll have well-established processes in place on how to run your business.

• Research your competition

Ahh, competition. Everyone hates it, but everyone needs it! No business plan is complete without some insight into your competition.

Where is your competition located? What are the strengths and weaknesses of their offering? And how can you differentiate yourself from your competition and improve your offer?

Finding the answers will give you more clarity and help your business succeed.

• Calculate start-up costs and financing

We’ll cover this in more detail below, but in short, this is a critical part of your business plan and something you won’t want to overlook when thinking of how to start a side hustle.

Here, you’ll outline your initial start-up costs, registration fees, branding costs, website development costs, etc. Then, consider your potential sources of funding and whether or not you’ll need investors. It can help to consider your financial goals and how the business fits them.

• Figure out your cash flow and budget

Also called your working capital, your cash flow is how much you need to keep your side hustle running day-to-day. These costs need to be laid out as part of your operating expenses. They will give you a baseline of how much you’ll need at a minimum each month to keep your business going.

And, of course, you’ll need a plan for staying on track with your cash flow. That’s where your business budget comes into play.

Having a solid business budget and using budgeting best practices is essential to the success of your business. It allows you to manage your business finances properly and stay on top of your expenses.

5. Determine what type of business entity to set up

Before you start providing services or earning money when starting a side hustle, you must ensure it is set up correctly, legally and tax-wise. To do this, you’ll refer to the structure of your business.

There are different types of business structures to choose from that are recognized by the IRS. They include Sole Proprietorship, Partnership, Limited Liability Company (LLC), or Corporation. Be sure to talk to your accountant about the tax implications of each of these entities.

The different business entities include:

• Sole Proprietorship

In a sole-proprietorship business structure, you run the business alone and are personally responsible for all of the related liabilities.

• Partnership

As the name implies, in a partnership, you run the business with a partner or multiple partners. So, the business is managed based on the agreement you set up. You and your business partner(s) are responsible for all the related liabilities.

• Limited Liability Company (LLC)

A Limited Liability Company gives you limited liability (similar to a corporation), which means you have no personal liability for business debts and claims.

You’ll also have flexibility in your management structure and ownership, similar to a partnership. LLC owners are called members.

6. Leverage free resources when starting your side hustle

Be on the lookout for ways to gather information and learn new skills for your business. You may be able to find free courses, Facebook groups, etc., where you can learn more about the skills you need for your side hustle without paying any money.

7. Decide what you will call your side hustle

The next step in operation is to decide on a business name. This would make your business look serious and will also garner you the trust of customers and people at large.

FYI – Your business name is a big deal! It will reflect your brand identity and be the world’s first introduction to your new venture. But before you decide on a business name, here are a few things to consider:

Will your business name appeal to your demographic?

How unique is it?

Is the web domain available?

Is your business name under someone else’s trademark?

Once you’ve answered these questions, you can register your business with your respective state.

Incorporate your business

Set up a corporation or an LLC (Limited Liability Company) to ensure your company is considered a separate business entity. For businesses that are sole proprietorships and partnerships, the business is the same as the owner.

So to have separate business credit, your business needs to be a corporation or LLC.

Obtain a Federal Employer Identification Number

An EIN, or an Employer Identification Number, is the number you’ll use for tax filings and business registration. You’ll also need to provide this number to vendors you work with.

8. Open a business checking and savings account

You’ll need to open a business checking account and possibly open a business savings account in your registered business name. These accounts are where you’ll make your day-to-day business transactions.

Establish your business credit profile.

Getting a business credit card, which you use for business transactions, can help establish business credit. Another way is through buying products and services from vendors and repaying them within a specified period, also known as net payment terms.

These vendors then make reports to the credit bureaus with your on-time payments. The three major credit bureaus for business are Experian, Equifax, and Dun & Bradstreet.

9. Create a plan to obtain funding for your side hustle if you need to

When starting a side hustle, one of the biggest roadblocks is being able to fund it. Even if your business idea is excellent, you still need money. I touched on this above, but here I’ll outline the different types of funding you should consider:

Self-funding

Self-funding your business from savings should be your first resort. Funding your business is beneficial, so you don’t start with debt.

If you have no savings (or not enough) to put toward your business immediately, use free and inexpensive resources to get set up. Start saving a little bit at a time for your business.

Use a free blog platform, create a social media following, and create a small sample set of products instead of a full-blown product line. Also, consider using free online scheduling and planning tools.

Self-funding means you may need to start small and follow a slower growth progression than if you had a ton of money, but it comes with less risk.

Family and Friends

Your friends and family can be great resources when it comes to funding. Why? Because you know and trust them, you can work out low or zero-interest payments with them.

Angel investors

Angel investors are typically high-net-worth investors who invest in your business. An angel investor is most likely looking for equity ownership in your business.

Although angels can be great investors, they mostly invest in companies vs. side hustles.

Bank loans

There are pros and cons of personal loans, but it may be an option. A business loan is also something to consider. The good news about getting a loan from a bank is that you don’t have to give up a share of your business in exchange for a loan. However, you’ll need good credit, AND you’ll be taking on debt that you’ll have to pay back with interest over a specified period.

Crowdfunding

Crowdfunding collects money from various people (usually online) to contribute to your product or service creation in exchange for a reward.

The reward might be the first available offering of your product or some extra equity (shares/ownership in your business). Examples of crowdfunding include kickstarter.com and fundable.com.

With crowdfunding, you don’t always have to give up equity. You also won’t have to go into debt to fund your business.

However, it’s important to know that you will be paying the crowdfunding platform fees when you raise money via crowdfunding.

Hire some help

At some point, consider bringing someone onto your team to help out. A virtual assistant can be helpful if you have the money for it.

While this won’t be needed for a while, it’s something to be aware of later when you can afford it and your time becomes more limited.