In today’s society, many people no longer rely on just one source of income. With access to information and evolving technology, it’s easier than ever to start a side hustle – even if you work a full-time job. For those with an entrepreneurial spirit, a side hustle is a great way to bring in some extra cash and take a step toward financial freedom.
But what do you do if you want to take your side hustle to the next level and start a real business? It may appear daunting, but it isn’t necessarily as hard as it might seem at first. We met with Corey Welch, a sales site leader at small business loan lender RapidAdvance, to talk about his experience starting his own businesses and get some tips on how you can start your own.
Monetize Your Passion
Success doesn’t come over night, especially when starting a small business. So to avoid getting frustrated and burned out, Welch says it’s important to focus your side hustle or business on something you’re passionate about.
“With a side hustle, there is no set time you have to clock in or clock out – that’s all on you,” says Welch. “It’s your passion, determination and drive that makes you clock in. It’s your lack of passion that makes you clock out.”
Once you’ve identified what interests you most, consider the ways you may able to turn your passion into income.
Research and Plan
Welch stressed the importance of conducting a lot of research before jumping head-first into a business. Risk, costs, time and scalability are just a few things you should research.
He learned that lesson the hard way after he didn’t plan properly for his investment properties and broke even on the second property he invested in.
“You can’t expect things to go perfectly; you have to expect things to go horribly wrong,” says Welch. “If you do that, you’ll plan accordingly and be better prepared for it.”
Welch was better prepared the next time.
“I spent more time on the front-end planning before I purchased my third property,” Welch explains. “I did a lot of research on Google, listened to podcasts so I learned more about assessing risk and the expenses needed. So this time around, I was a lot more calculated and I wasn’t figuring things out on the fly.”
This includes taking your time and researching things like small business insurance.
Create a Business Model
According to Welch, aspiring business owners should serial consider creating a business model detailing how they’d make money if they want their company to succeed.
Are you providing a service or a retail product? Identify your target audience. What are the key demographics your business is trying to reach? At the end of the day, a strong business model will set you up for success and help you stand out from your competition.
Here are some things to include in your business model:
- The vision for your company
- An analysis of target audience
- Key business partners
- Business resources
- A map of revenue streams
- Business processes
Develop a Unique Name
In a competitive world, it’s imperative to cut through your competition and gain the attention of your customers. There are many ways to do that, but one of the most important is creating a unique name and brand for your company.
Welch said he struggled to differentiate himself from his competition when he called his property management company Welch Holdings. After failing to generate leads online, he realized his name was too ambiguous and his customers didn’t know what his company did. Welch ultimately changed the name to Sunny Side Up Property Management, inspired by the fact that he likes sunny-side-up eggs.
“You want a unique name. People need to recognize this as your space when you advertise online,” Welch said. “I had so much more interest and spark with way less viewers because it was just an interesting name with property management behind it.”
Here are a few things to consider when creating your company’s name:
- Research your competition
- Avoid using buzzwords or trends
- Don’t rush – let it come to you naturally
- Simple is better
- Look at it from your customers’ perspective
- Make it clear what your business does
File for an Employer Identification Number
Once you think of your eye-popping name, Welch says you should then file for an employer identification number through the Internal Revenue Service. Thankfully, the process is simple. All you have to do is enter your business name and personal information. The service is free through the IRS.
Select a Business Structure
One of the final steps to making your dream a reality is to establish the business entity with the IRS. The most common business forms, as noted by the IRS, are listed below.
A sole proprietorship is an unincorporated business that is owned by one person. Essentially, the business is not a separate entity from the owner – you are the business!
A partnership is a relationship between two or more people who join to carry on a trade or a business. In a partnership, you must file an annual information return or report income, deductions, gains, etc., but you don’t have to pay income tax.
Prospective stakeholders in a corporation exchange money or property for the corporation’s capital stock. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
Limited Liability Company (LLC)
An LLC is a business structure defined by state statute. Keep in mind, each state may use different regulations.
It is important to carefully consider what business structure describes your company because it impacts taxes and day-to-day operations.
Once you have all these things in order, you’ve officially turned your side hustle into a real business, but you may need funding for your business. Make sure you consider all options to help kick-start your company, including a small business loan.
If you’re a successful business owner and have any great tips or tricks from starting your own company, please comment below!
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