Investing in a Side Business From Your Salary: 6 Things to Consider

Every business has some level of risk associated with it. The market rewards risk; if it didn’t, then everyone would start his or her own business and the subsequent rewards would be diluted. Sometimes we need to mitigate risk, however, by continuing to work a “day job” while we grind away at our side gig or side business.

This can be tricky, because that side business could easily be our main source of income in the future. But it can also drain a large chunk of our savings and/or salary in the present, and possibly never turn a profit (like most businesses). So here’s what first-time business owners should consider regarding how to fund their side gig.

1. Do not dip into your retirement savings.

Yes, I began with a “don’t.” But this is crucial. Yes, it may pan out. But let’s deal with probability, not possibility. CAN this be the best decision of your life? Sure. WILL it be the best financial decision of your life? Statistically speaking, probably not, given how many businesses ever actually turn a profit, especially in their early years. So hands off retirement savings, or any other irreplaceable savings.

2. Manage your initial debt.

Most likely this will be personally secured debt, so don’t take on more than you can comfortably pay back on your current salary. You decide what that is, but without knowing the details of your business, I would recommend it be recoverable in one year under your current net income, as a rule.

3. Consider using a fraction of your salary.

Simply calculate how much you can spare out of each paycheck and use that. If you need a larger initial investment, e.g., for product development or a prototype, start saving a few months before your pre-launch activity. This budget discipline is also useful in vetting your idea, organizing your business, and not spending that money on yourself.

4. Don’t jeopardize your current salary with your startup work.

That’s much easier said than done, because working on your startup is probably a lot more fun than your job, but it’s important. Your startup has a better chance of surviving if it has funds coming in.

5. Spend “close” to your customer.

In other words, while it’s tempting to spend on “Phase 2” or the next cycle, it’s generally safer to concentrate on spending your dollars where they will have the most impact on your customers and prospects. This helps you spend less initially and focuses you on customer success and your marketing and sales pipelines.

6. Niche your side-hustle.

If your small business lacks the funds to build an elaborate marketing and sales pipeline, consider a “niche.” Focus on a particular customer and a particular service or product, and pivot that niche if your data and experience lead you elsewhere. But beware of dilution; typically, multi-service/product marketing and sales pipelines are expensive to get right on a side gig’s budget.

These considerations are just the tip of the iceberg with regard to financing your side gig, but I hope they are useful. If you need assistance, don’t hesitate to reach out and let us know. Maximize the return on your startup investment; give us a call to discuss how.

Side-Hustle 101: 3 Things to Consider when Contemplating Part-Time Entrepreneurship

A recent study predicted that in less than two years, 40 percent of American workers will be independent contractors, turning the “gig” economy into just “the economy.” Side-hustles have become a reality for many, either by choice or by need. They can allow us to pursue our entrepreneurial passions while working a 9-5 job that pays the bills. But they can also have a downside. Before making that leap, here are three things to consider when contemplating a new side-hustle.

A recent study predicted that in less than two years, 40 percent of American workers will be independent contractors, turning the “gig” economy into just “the economy.” Side-hustles have become a reality for many, either by choice or by need. They can allow us to pursue our entrepreneurial passions while working a 9-5 job that pays the bills. But they can also have a downside. Before making that leap, here are three things to consider when contemplating a new side-hustle.

1. Never let it jeopardize your main job.

Let’s consider this the “golden rule” of the gig economy. Until you’re ready for your side-hustle to provide your primary source of income, you must protect your “main hustle.”

Do you need more flexibility in your day job in order to pursue your side-hustle? Consider negotiating for it when you start a job, or at another opportune time; for example, ask for flex-time or one work-at-home day a week in lieu of a raise.

Is holding a second job permitted by your employer? If you’re not sure about the rules, find out what they are, and don’t break them – ignorance is no defense. And ask if your company has strict non-competes as well.

2. Maintain a very strict resource budget.

Time, money and focus are your primary resources when it comes to being an entrepreneur, so don’t let your side-hustle siphon them off, leaving little for anything else. Managing resources is easier when you have a clear business plan for your side-hustle. Not only should this include how much you will invest and how much you will see in return, but how much time you will devote each week, and how you will distribute your focus. Clarity always helps execution.

3. Find one or more mentors.

Many have already tread the path you’re on, so reach out to those who have already been where you are. Find someone who is executing a plan similar to yours and learn as much from them as possible. Then return the favor with someone else who is just starting out. Mentors and accountability partners help you keep in touch with other entrepreneurs, and stay on track yourself.

Like any business, there’s risk in starting a side-hustle. Implementing the three ideas above can help mitigate that risk, as well measuring, observing and being diligent – three behaviors to help make empirical decisions that will lead to better optimized outcomes and result in your dream career.

We can help you get there. You may feel like you’re on your own, but we believe that business is best done when done socially. We’re building a startup community in which you can connect with other entrepreneurs and help each other achieve more success. Join us!