Is it just me, or does everyone seem to have a side hustle these days? More than one of my co-workers goes straight from the office to their second job. The other day, my rideshare driver told me he transcribes court proceedings on the side. Even one of my executive friends has an e-commerce store.
As hard as side hustlers work, though, it's not the same as operating an actual business. And unfortunately, the road from side hustle to startup is a lot more perilous than many assume. Challenges from finding the right business charge or credit cards to working out a small-business loan will come up—and you need to be ready. If you decide to take your side hustle beyond solopreneurship, be prepared for the following challenges:
1. Getting Funding
As the co-founder of a payment processing company, I run across small-business owners all the time that struggle with funding. Initially it can be scary to take on additional funding, but there are costs that come up that it's impossible to plan for and it's good to have the support when you need it. It's important to find the right funding source for a freelance or home-based business—pick the wrong investor or small-business loan, and you could be left holding the bag. You could also do irreparable financial damage that will prevent you from obtaining funding for future ventures.
2. Paying Employees
Once you stop being a one-person shop, business becomes a lot more complicated. Forget all about HR and employment law for a moment: Can you even pay your employees? You may have the money, but do you know your federal, state and local tax obligations?
Go ahead: Plug a potential team member's information into a payroll tax calculator. Do you know how much of that person's paycheck to reserve for federal withholding? How much in the way of FICA taxes must you deduct—and match? Remember, too, that you'll need to pay state and local taxes on each employee's paycheck. And don't forget about pre-tax withholdings: If you want to compete as an employer, you'll eventually need to provide 401(k), healthcare and other benefits that will be needed to attract talent.
3. Attracting Clients
If you're a rideshare driver or craft show stalwart, you've benefited from a captive client base. Although you may have done some marketing yourself, the road gets a lot rougher when you can't lean on an established name to bring customers in the door.
Decide whether lead generation or demand generation is your best marketing strategy. If you're a consultant offering a niche service or selling to other companies, generating and nurturing leads is how you'll get business. If you're selling a product, especially if it's in a competitive space, opt for demand generation. Your choice of strategy can help you choose between tactics like digital advertising, broadcast advertising, content marketing and SEO.
Once you stop being a one-person shop, business becomes a lot more complicated.
4. Finding Mentors
You may feel ready to go it alone, but keep in mind that mentors can be a key to success. No matter how knowledgeable you are about product development or sales, there will always be unknowns. Recruiting, for instance, is something few solopreneurs have experience with.
Where should you start looking for mentors? SCORE, a nonprofit and partner of the U.S. Small Business Administration (SBA), connects entrepreneurs with volunteer mentors in 62 industries. Small Business Development Centers, another SBA program, are also great places to look. Don't forget, though, about your own connections. Are you part of a trade association that might be able to help? What about social media?
Side hustles are a great way to earn extra cash, but their struggles are a small slice of what company founders face. Full-time business ownership is an awfully big bet to make before doing your homework.
Photo: Getty Images