“31 Days to Financial Independence” is an ongoing series that appears every Thursday on The Simple Dollar. You might want to start this series from the beginning!
Last time, we examined strategies you might want to use if you’re looking to move on to a better job. Today, we’re going to to take a different approach to income generation and look at some strategies for starting a side gig.
So, what’s a “side gig”? A side gig simply refers to anything you do outside of your main job in order to earn some additional money that’s self-funded (meaning you don’t have to take out debt for it and already have the gear you need or can buy it out of pocket) and won’t require employees, at least not at first. Usually, it’s in reference to a microbusiness, where you’re making something and/or selling something. This can take a lot of forms, from starting a Youtube channel to engaging in freelancing parallel to your career, from repairing smartphones to building wooden Adirondack deck chairs, from making jewelry to sell on Etsy to mowing lawns.
The key to a successful side gig is to find something that you enjoy doing that you can turn into profitability or else find something that other people hate doing that you don’t mind doing so that they’ll pay you for it. For example, in the first category, you might make a Youtube channel about your hobby, or in the second category, you might mow lawns. It also needs to be something that isn’t so time-consuming that you can’t do it in your spare time.
In my own experience, building a side gig was a fundamental part of achieving financial and professional success. The Simple Dollar started as a side gig for me, one that grew into a full time job over a series of years, and it helped both with our financial turnaround but also with our life flexibility.
Let’s get to it!
Exercise #21 – Building a Side Gig
Most of the strategies in this article seek to tease out some of those ideas from your own life and then how to turn that idea into something that actually makes money along with a few basic tips on keeping your money straight.
Identify your personal skills and passions. People pay money for skills. They also pay money for passion. That’s what people like to spend their money on. People want things that are done with skill. People enjoy things that are produced with passion and care. People put up their money for things that they want and enjoy.
Thus, if you want to make money, one great way to start is with things you’re passionate about and things with which you have skill.
To start, make a list of all of the skills you have: things you can do well that elude others, either through natural talent or through training. Maybe you’re good at photography or line drawing. Maybe you’re really good at poker. Perhaps you can play the piano, or you’re a wizard at Adobe Illustrator. Perhaps you’re good at making videos, or maybe you can write reasonably good prose in large volumes quickly (that’s something I can do!). Maybe you’re a borderline golf pro. Figure out the things you’re notably good at.
Then, figure out things that you’re really passionate about. What do you love doing or learning about? Perhaps you’re passionate about science fiction books. Maybe you’re really into binge-watching shows on Netflix. Maybe your passion is board games. Think of things that you truly love, that you’re opinionated about, that you think about all the time.
Those two lists are things that you can draw upon to form a side gig. The best ones, I’ve found, come when you combine a skill that you have – say, video making – with a passion that you have – say, science fiction. That means you’re in a place to create something with skill that you’re passionate about, and you’ll almost always find fans who will buy into what you’re doing when you combine the two.
If you don’t have a skill that matches up well with a passion, you can always focus on learning a skill. Video making is a great skill to learn, for example. Starting a side gig can be a wonderful incentive for learning a skill.
Identify things you don’t mind doing that other people hate doing. If you’re struggling with the previous list, switch your focus to considering things that you don’t mind doing that other people seem to loathe doing. House cleaning. Lawn mowing and other yard work. Laundry. Moving stuff. Walking dogs. Those are all tasks that people don’t enjoy doing and will often pay others to do.
Think about things that others complain about all the time that you really don’t mind doing and you’re probably pretty close to the source of a side gig for yourself. People will always pay to offload a task that they don’t enjoy.
From those lists, identify two or three ideas that might work for you. At this point, you should have a bunch of skills, passions, and tasks you don’t mind tackling written down. Now is the time to start filtering all of those ideas.
The first step here is to start mining those skills, passions, and tasks for potential side gig ideas. Just look at those things and ask yourself what you could do with them to make money, especially when you can combine a skill and a passion.
For example, if you wrote down that you’re skilled at Adobe Illustrator and that you’re passionate about board games, perhaps you could find someone with an interesting prototype for a game and turn it into something beautiful that you could publish together. If you’re passionate about chess and interested in learning videography, perhaps you could start a Youtube channel where you teach basic chess or else analyze matches in a way that a layperson could understand. If you’re passionate about board games and skilled at writing quickly, maybe you could start a blog about board game reviews. Add those things to your list.
You might have freelancing opportunities related to each of your skills as well. You might have the opportunity to directly sell your creative works or offer consulting.
Maybe you don’t mind doing laundry and others hate it; you could start a “laundry service at your door” business. If you like mowing, maybe you could start a lawn care business. Almost everything that other people dislike doing that you don’t mind is a great basis or a business.
Hopefully, you’ll come up with a list of several ideas for businesses during this process. If you did, spend some time whittling that list down to the two or three that intrigue you the most. You should strive to end with your three best ideas for a side gig.
Develop a real business plan for each idea. Take each of those three ideas and flesh them out into a business plan. This seems like a painful formal process to many, but there’s a very good reason for making a business plan: it helps you see the potential problems in your idea before you start running with it, which means you can think of ways to get around those problems so that you’re more likely to have success right off the bat.
I highly suggest following the recommendations for writing a business plan from the Small Business Administration. You can skip over the parts about funding – a side gig should be self-funded, as noted above – but take the other parts seriously. Unless you’re doing this just for kicks, you’re going to want to have a side gig that will succeed and walking through the steps of writing a business plan for each of your ideas will pretty quickly help you figure out the problems and benefits for each of your ideas.
I did this with The Simple Dollar (back then, I used a business plan book from the library rather than these great SBA resources that exist today) and with many other small businesses I’ve dabbled in. The process of writing such a plan has almost always helped me see obstacles and helped me figure out how to deal with them before they become disasters that I’ve invested many hours in. I’ve walked away from many ideas after writing a business plan, and for good reason – they would have turned into black holes of time and money, slurping away all of those resources and giving me little in return.
Once you’ve written up a business plan using these ideas, pass them around to some trusted family members or friends or mentors. Send each one to a few people and get their feedback. Send them to people you trust and whose advice you trust and take their comments seriously. They might be really negative on an idea that you think is great, but rather than just brushing it off as “jealousy” or something, stop and listen to what they’re saying. Often, the good people in your life are critical of something you’re doing for a reason – they may be seeing something you’re not seeing due to your own blind spots.
Often, this can turn into a feedback cycle, where people give you comments, you improve the business plan, and then you send it to people for a second reading or to new people for a fresh reading. The goal is to develop a plan as well as you can so that you have a strong plan going forward when you start.
Choose the one that makes the most sense. Once you’ve written up a few plans, passed them around to people for comments, and made some changes to each one, read each one of them again and make a decision on which one to follow up on.
Most of the time, you’ll already know in your gut which one you should choose, but if you’re still uncertain, my general suggestion is to choose the one that you think you could sustain over the longest period of time. If you’re thinking that a particular idea sounds profitable but that you can see it becoming misery in a few months or a year, skip that one. You don’t want to invest the time and effort into building something up only to find yourself hating it down the road.
Wall off blocks of time to devote to your business. Once you’ve got a business plan in place, wall off some blocks of time during your typical week to devote solely to this business. This is your time to work on your side gig – make it as uninterruptible as your main job.
Unless the tasks for this side gig require long blocks of time – meaning that the weekend is the best time for it – it’s usually better to devote a block of time most days to the business. Plan for it every day unless there is a mitigating reason not to, like a particular meeting you have on Tuesdays or something like that. Put this in your calendar. Make it a real thing.
Blocking off a segment of time each day for your side gig means that you’ll move forward on the things that need to be done and you’ll begin to take it more seriously. It will become a routine for you, and when it becomes a routine, you’re going to find that you’re much more likely to do the hard work it takes to make it succeed.
What if you don’t have anything to do at the moment? Spend that time promoting the business so that you’ll have more to do later on. Get engaged on social media or in your community in an effort to promote what you’re doing. Alternately, spend that time sharpening the skills you have that the business is based on by taking classes or working on interesting personal projects that use those skills. Don’t waste that blocked off time; do something that adds value or potential value to your side gig.
Launch sooner rather than later. If there’s one thing I’ve learned about side gigs, it’s that “the perfect is the enemy of the good,” to borrow that old maxim. It’s completely true, too – if you spend your time preparing to launch something and you keep tweaking it and editing your business plan and making promotional stuff and talking about it and thinking about it but never actually doing it because it doesn’t seem “perfect” yet, you’ll never do it.
Just do it. Let go. You have something good there, so launch it. Dig in. Get started.
Yes, there will be problems. There would be problems if you waited until things were “perfect” to launch it, too. Nothing will turn out exactly like you dream it to be.
You know what? That’s okay. The purpose of a side gig is to spend some of your spare time doing something that makes money and if you’re not launching, you have zero chance of making money. You can only succeed if you throw it out there.
Don’t sit around fretting and worrying and planning and trying to perfect things. It will never be perfect. Instead, just dive in and get started.
Start off as a sole proprietor, but keep all money separate from the very start. Much small business advice suggests starting off with a legal business structure, but I think that’s really only a good idea if you’re investing a lot of money in equipment solely for the business itself and not directly for personal use. Given that this is a side gig, one that may or may not take off, and one that you’re starting by using things you have on your own or with very little investment – as suggested at the start – I’d suggest just sticking with a sole proprietorship at first.
So, what’s a sole proprietorship? It means that any income you earn from this business is considered personal income. It’s by far the easiest way to handle a side gig in terms of taxes, but it doesn’t offer you any real personal protection, either. If the business starts to grow or if you’re starting to acquire significant things in the name of the business, you may eventually want to structure it legally like a business.
Because of that, I strongly suggest keeping all money separate from the very start. Keep a separate checking account solely for the business and get in the habit of paying for all expenses for the business out of that account, putting all income for the business into that account, and if there’s money in there, paying yourself by taking the money out of the business account and moving it to your personal checking account.
Eventually, if you move to a more robust business structure, having this already in place will make everything much easier. This will also make things easier when it comes time for taxes, even now, because you’ll have all expenses related to this side gig separate from all of your personal stuff.
When might you transition to a different structure? That gets into a completely different ball of worms…
If things start to click, dig deep into entrepreneurship reading. This article isn’t a be-all-end-all of entrepreneurship, obviously. It’s a “getting started” guide that can push you to the point where you’re launching a little side gig that can make you a few dollars.
Sometimes, that’s all that will happen. (And, yes, sometimes even that won’t happen.) But sometimes, you’ll find that things really click. People like what you’re doing. You accumulate more popularity, more viewers, more readers, more clients than you ever expected. It starts to eat more of your time. You start making significant money. You wonder what the next steps are. You wonder about things like business structures and legal protection and possibly hiring employees. You wonder whether this could become your full-time thing.
When those things start happening, then you need to turn to some deeper guides on entrepreneurship and building a business. One great place to start is The $100 Startup by Chris Guillebeau, which covers some of the ground in this article but carries it further, describing many of the steps one would take if a side gig grows up. The Lean Startup by Eric Ries is a great book about what steps to take if you have a side gig that seems successful and you want to grow it while avoiding failures that can come from growth. Ready, Fire, Aim by Michael Masterson focuses well on what you need to do to take that core idea and turn it into something that will grow rapidly. The Tax & Legal Playbook by Mark Kohler is a great book for when you start to earn significant income from your side gig and you want to understand some basic tax strategies and whether different business structures are right for you. And those options just scratch the surface.
Those books will help you greatly if you find that you have a successful side gig on your hands, one that might grow faster than you think you can handle. That’s a good problem to have.
Next time, we’ll step back and look at “the gap” you’re creating with all of your efforts.
The post 31 Days to Financial Independence (Day 21): Starting a Side Business appeared first on The Simple Dollar.