As traditional career paths evolve and digital workspaces grow, the once-distant passion project or hobby is increasingly more viable as an everyday job—side hustles have become a staple of the gig economy. There is no longer a question about whether or not you can manage a successful side hustle but rather whether or not you can transition your side hustle into a successful business. How you implement the tools at your disposal can make or break the dream. Creating a plan and building up your savings, using business credit cards or obtaining a small business loan can help ensure that you have the working capital to maintain while you transition.
If you find that you are questioning whether it is the right time to leave your job, take some time to reflect and ask yourself “Why am I staying?"
For many, leaving the financial security of a 9 to 5 is downright scary—and fear can be a powerful obstacle to progress. (Perhaps a better question is “Why am I not doing it?") Paint the picture. Map out pros and cons. Identify what you want, decide what it takes to achieve those goals and come up with a financial plan to get there.
Sometimes taking the initial leap is the hardest. Having your business affairs in order and a steady cash flow can help you determine when to focus on your side hustle full-time.
1. Set up a legal entity.
First things first, separate your personal and professional finances by creating a separate legal entity. This formal step can help establish credibility and stability. It is also necessary to begin opening business accounts.
Setting your side hustle up as a legal entity allows you to remove individual accountability and begin gaining business credit. Your side hustle may also be more attractive to investors and partners as a separate entity because the designation creates more access to working capital through avenuess only available to businesses: business credit cards, small business loans, stocks, etc. Gaining access to these useful tools can give you a leg up, and it all starts with creating this important legal distinction between you and your business.
A business line of credit, business credit cards or small business loans can help you bridge the gap while developing your side hustle into a sustainable company.
2. Have a plan.
Setting manageable goals is important. You can't do everything at once and, in most cases, you can't afford to.
You can strategize by prioritizing needs—only take on what is necessary to start and then begin preparing for the future. Organizing your tasks around a timeline can help you map out just how long the process of transitioning your side hustle into a profitable business will take. Get clear and be specific, keep track of your goals and cash flow and determine how much money you'll need saved up before you can make the transition. Then you can focus on hitting that mark.
3. Make sure you are financially stable.
Take the time to quantify the risk of quitting your day job. Becoming a full-time entrepreneur has a cost. It's natural (and wise) to want predictability—that's why most people stick with the security of a traditional 9 to 5.
In order to make up for the stability provided by your day job, you have to quantify the benefit. Transitioning your side hustle into a business often means you hope to make more doing something you enjoy. Planning ahead can help you make sure you're able to continue doing the work that you love.
When you are just starting a business, you may not always hit your numbers for the month. I've spoken with many entrepreneurs who had the right pieces in place but cited cash flow as the biggest obstacle to scaling their business. Establishing a relationship with a financial institution early on can be useful as you grow. A business line of credit, business credit cards or small business loans can help you bridge the gap while developing your side hustle into a sustainable company.
Creating a strategic plan for leaving your day job must include a solid financial plan. It can be hard to sustain your personal and professional life without one. If you have a thorough understanding of your finances and projected revenue, you're already halfway there.
Leaving the stability of your day job is all about timing. Having a smart financial plan in place before you make the leap can provide the support you need to make a successful transition. Once you have these elements in place, go ahead! Take the risk and bet on yourself. If you fall, the prep work you've done during the process can help you bounce back and try again.
Read more articles on business plan.
Photo: Getty Images