Wondering if it’s time to turn your side gig into your full-time job? Here are four actions to consider.
At some point, almost everyone wonders whether they could turn a hobby they love — from photography to knitting to furniture-making — into a full-time career. Take this example: Kate loved to bake. She received so many compliments that she began thinking about selling her goods.
She started small, selling cookies and pies at the local farmers market. Over time, she was so successful that she expanded into local shops, and now, 12 years later, she has her own commercial bakery space and distributes her cookies, pies, and cakes to retail stores in several states.
Kate’s not the only person to discover that her side gig could bring in enough income to support her full-time, says Ed Coleman, district director for the Washington, D.C., chapter of SCORE, a national nonprofit organization that pairs business owners and aspiring entrepreneurs (like Kate) with mentors. The number of small businesses in the U.S. has been on the rise for years; according to the U.S. Census Bureau, over 5 million new businesses opened in 2022 alone.
Coleman says there can be many benefits to starting your own business, such as flexible hours, the chance to make your own decisions, and room for potential financial growth as you pursue an activity you love. But he warns there are other aspects to consider — such as deciding whether you need a business partner or if you can afford to hire employees.
Here, Coleman shares four important steps that any aspiring entrepreneur should consider taking.
1. Create or revisit your business plan
Coleman says the first step is to create a focused business plan. That could mean revamping an existing plan or creating a new one that helps map out the direction for your business and the steps you’ll need to take. Coleman says your plan doesn’t have to start as a complicated document, but it needs to answer some basic questions:
- Who will your customers be? What problem are you solving for them, or what need are you fulfilling?
- How will you differentiate yourself from competitors?
- What will your revenue streams and cost structure look like? How will you price your products or services, and what is the cost to you compared to that income?
- Where will you sell your goods and services? Online, local retail shops, craft fairs?
- Will you need help? At what point do you plan to hire employees or contractors, and how much does your business need to earn to ensure you can cover payroll?
Note that if you start small, you may be able to take a test-and-learn approach. For example, if you’re selling baked goods, try setting up a table at a farmers market or other local event to sell your treats. Use it as a chance to gather feedback: What do people like, and how much are they willing to pay?
“Become a student of the marketplace you’re going into,” Coleman says. “Align your marketing and your sales process to the customer base and take it out and test it.”
When you’re ready to create a more in-depth plan, consider approaching it as if you were creating a business plan meant to attract outside investors and venture capitalists. This level of detail can help ensure you have thought through the steps and milestones that will be crucial for your success.
2. Set a solid foundation
All businesses, no matter the size, need structure. There are multiple options, including sole proprietorships, LLCs, partnerships, and corporations. Each comes with its own liability considerations, accounting, and tax rules. It can be helpful to talk to an accountant or lawyer with business experience to understand your options.
It’s important to keep your personal and business assets separate to help avoid any legal or financial complications. You also want to make sure your business is protected. Depending on the types of goods and services you’re offering, you may need liability insurance, for example. An insurance agent can discuss your options and help you make sure your insurance offers sufficient protection.
3. Plan for financial success
Having the right structure in place may also make it easier to track your business’s finances, both long-term and day-to-day. It can be prudent to clearly separate your personal income and your business income. The IRS recommends opening a separate business account to avoid any commingling of funds — and to help avoid confusion at tax time.
A separate business account may also make it easier to manage payroll and cover business expenses. An accountant can help you determine which expenses are business and which are personal, as well as help you determine your company’s budget — you’ll likely want to earn enough to pay yourself and any employees, as well as cover expenses like buying supplies or paying for advertising. A separate business account could also help protect your personal assets in the event your venture does not succeed.
Your accountant can help you make sure your business is putting enough of its income aside to pay for any federal, state, and local taxes, as well as determine whether you’ll need to collect sales tax.
4. Bring in experienced advisors
If turning your hobby into a full-time career starts to seem overwhelming, don’t despair. Millions of people have successfully launched their own businesses. One key to success: Don’t go it alone.
Along with a mentor, a financial advisor can offer input on the financial impacts to consider. They can also suggest who else to add to your team of advisors as you grow.