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10 Tips to Turning Your Side Hustle into a Business

October 30, 2020
Written by Nextdoor Editorial Team
October 30, 2020 | Written by Nextdoor Editorial Team

This article was updated on June 15, 2021

Has working from home given you a lot more time for creative projects and side hustles? Maybe you've been knitting up a storm and selling your hand-knit masks to friends and family or perhaps you've mastered the art of sourdough, and now your loaves are in high demand. 

Whatever your project of choice, if you've dreamed about turning your side hustle into a full-time business, what's stopping you from taking the leap into entrepreneurship?

Using side hustles to make money is an excellent way to bring in some extra cash. In this short guide, we'll cover our top 10 tips for successfully turning a side hustle into a thriving small business. 

#1 Establish a Legal Business and Open a Business Bank Account

How are you currently managing the profit you make from your side hustle? Are you bringing in extra cash on a regular basis or is the money giving you a little boost to your income from your day job?

If you're accepting a hodgepodge of Venmo, PayPal, and cash payments, you may not have a clear sense of how much you've made-not to mention how much you owe in taxes.

Before you go any further with your side hustle idea, take steps to separate your business finances from your personal finances.

  • Choose whether to operate as a sole proprietorship, Limited Liability Corporation, or a partnership (if you have a business partner).
  • Register with your state to receive an Employer Identification Number (EIN).
  • Open a separate business bank account with your current bank, or use a free online business banking solution like Azlo.

Once you start depositing payments and paying for expenses from your business bank account, you'll have a clearer picture of your actual profits and your actual tax liability.

#2 Research Your Market

According to Harvard Business Review, the biggest predictor of a business's success is how well its leadership understands its long-term market. If you're sewing face masks at home, are you sure you'll have a market in two years, or in five?

Make sure you answer the following questions:

  • Who is your target market? Can your potential customers afford your product or services?
  • Who is your competition? How does your business compare to others? What's unique about your offerings?
  • Does your business have the potential to keep growing after the end of the COVID-19 pandemic?

Once you're confident that your business can grow and thrive over the long term, it's time to start envisioning how. 

#3 Take Steps to Scale

Many people still have a full-time job and do their side hustle as a way to increase their earning potential. No matter your side hustle, it's important to know what steps you'll need to take to grow. Maybe you've turned your baking hobby into a business and have outgrown your apartment kitchen. Or maybe you need to hire assistance for your growing screen printing hustle. As a business owner, make sure you have a clear vision of what you need to do to scale your business, even if you have a full-time job. If you want to meet your financial goals as a freelance graphic designer, baker, online tutor, or whatever it may be, you need to have a clear pathway on how you are going to attract customers, promote your business, and make an income.

What steps will you need to take to scale? Common requirements include:

  • Commercial space to produce and store items or see a higher volume of customers
  • Upgraded machinery and equipment
  • Hired staff and crew

As you scale up your side hustle job, it's important to start small-if you hire a large crew and rent out a new space before you've built up your customer base, you may not have the finances to cover your recurring expenses.

That's why it's commonly recommended to create a thorough business plan once you've made the decision to start your own business.

#4 Create a Business Plan

Even if you’re still working another job while continuing to grow your side hustle, you may be wondering if you’ll be able to turn it into something you can do full time.

This answer all depends on when you'll have enough profits to sustain yourself. Your business plan clues you to that very important when. So what should a business plan include?

  • A business name
  • Description of the target market
  • Competitor analysis
  • Cost analysis, including:
    • Material costs
    • Registration and startup costs
    • Staffing
    • Marketing
    • Space rental
  • Pricing plan for products and services
  • Estimated volume and profit for each month of operation
  • Break-even point based on your anticipated costs and profits

Laying a strong foundation will help you set realistic expectations and attract potential investors with your side business.

#5 Seek Financing

Starting a business can be expensive. Luckily, there are options for small businesses looking to get their start. A strong business plan can help you secure startup capital from the following funding streams:

Once you have enough funding to begin growing your business, it's time to dive in!

#6 Embrace eCommerce Tools

Whether you're offering in-person services or selling products online, eCommerce marketing is essential to your success. As customers spend more time at home, you need to connect with them where they are.

To this end, take the following steps:

  1. Create a website and eCommerce store so that customers can purchase products, services, and gift certificates.
  2. If relevant, you can use eCommerce tools to market your products on different platforms including Etsy, Amazon, and eBay. Be sure to use tools to keep track of your inventory and tax liability.
  3. Establish a newsletter to connect with your customers and inform them of sales and promotions.
  4. Create business pages on social media platforms and regularly engage with customers.
  5. Use analytics tools to track the success of your efforts and understand how customers most often discover your business.

#7 Connect With Your Community on Nextdoor

Many small business owners get into entrepreneurship because they love connecting with people-not with data sets. Luckily, there are virtual ways to make personal connections like with Nextdoor. It's easy and free to create a Business Page on Nextdoor, where locals that live nearby can discover your business.

On Nextdoor, you can:

  • Customize - Personalize your Business Page by adding photos, providing information about your unique story, products, and services, along with a link to your website.
  • Engage - Use free Business Posts to interact with potential customers and other small business owners alike and crowdsource customer feedback for new ideas and ask questions
  • Promote - Local Deals allow you to create sales specifically for your nearby community on Nextdoor. With neighborhood targeting, you can customize your budget to advertise in specific neighborhoods up to a ten-mile radius.
  • Connect - Become a Neighborhood Sponsor to reach neighbors in your target ZIP codes and establish yourself as the go-to expert in your field.

The more you connect with your neighbors online, the more word-of-mouth about your new business will spread.

#8 Anticipate Risks

As a small business owner, you take on legal liability, even for a side gig.

When you're filled with excitement about your new side hustle, lawsuits are the last thing on your mind.

But accidents and mistakes happen. For example:

  • If you sell a faulty product, your customers could sue you
  • If someone slips and falls in your place of business, you could be liable
  • You may be legally required to cover employees with workers' compensation insurance

To make sure your business is protected from these kinds of risks, research local and state laws about mandatory business insurance. In addition to any required coverage, consider a Business Owner's Policy, which usually contains several helpful kinds of insurance coverage.

#9 Be Prepared to Pivot

As someone with a current side hustle, you already understand the art of the pivot.

In addition, the COVID-19 pandemic has proven that flexible, adaptable small businesses are the most likely to succeed. In recent months, we've seen restaurants start selling groceries, yoga studios start teaching online, and distilleries start making hand sanitizer.

While no one can predict the future, it's helpful to be ready with a Plan B, and even a Plan C.

Your small business doesn't need to do it all right out of the gate. But it is prudent to have a few ideas for how you could use your skills and experience to offer a different product or service, should the need arise.

#10 Find Joy

Owning a small business certainly comes with pressure. While it’s great to make an extra income, you also want to love what you do. As you begin to grow your side hustle into your full-time job, you'll find yourself taking on multiple new roles:

  • Publicist
  • Manager
  • Amateur accountant
  • Customer service specialist

If it takes some time to get your new venture off the ground, you might find yourself dealing with a little bit of impatience and stress, too.

When obstacles inevitably arise, the most important thing you can do is reconnect with the passion that inspired your side hustle in the first place. Starting a pressure washing business? Get out and talk with your customers face to face or do the spraying yourself periodically.  

If it's been a few weeks or months since you personally delivered a package, answered a customer service inquiry, or otherwise got your hands dirty, consider getting back in there and connecting with the activity you love. Soon enough, you'll remember why this career transition is worth it. Then, you'll have the energy and patience you need to keep pushing full steam ahead.

Keep on Hustling

If you already have a side hustle, you likely have the talent and drive to turn your side gig into your full-time job. While the road to success may seem long, there are tried-and-true strategies for establishing a successful small business. And when you contribute to your community, you may find it easy to get buy-ins from neighbors who want to support businesses like yours.

Just remember, on the road to success:

  • Survey the market and create a business plan
  • Establish a legal business and protect it from liability
  • Secure the startup capital to get started
  • Market your business

Whether you start side hustling as your main job or you have one for your free time, earning extra money through a project you're interested in is always a great idea. Plus, when you own your own business you have more freedom overall. When in doubt, return to what inspired you in the first place. With time, that first spark of interest can turn into a bright, thriving future as an entrepreneur.
Create a Local Deal



Entrepreneur. 5 Keys to Turning Your Side Hustle Into a Successful Business.

Harvard Business Review. Turn Your Covid-19 Solution into a Viable Business.

Grub Street. From Quarantine Baking to a Full-blown Bread Business.

Claim your free Business Page to get started on Nextdoor. For resources on how to use Nextdoor to stay connected with your local customers, pertinent news affecting businesses, and more, follow us at @nextdoorbusiness on Facebook.

Claim your free Business Page to get started on Nextdoor. For resources on how to use Nextdoor to stay connected with your local customers, pertinent news affecting business, and more, follow us at @nextdoorbusiness on Facebook

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