- By Pamela Slim
I remember the moment vividly. It was 1993 and my dad called me from his office, which was two blocks away from where I worked as the manager of training at Wells Fargo Nikko Investment Advisors in downtown San Francisco.
“Can you come over right now?” he asked.
I instantly left my high-rise and walked across the street to see him at his large utility company. My dad, who was then 56, poked his head out from behind his cubicle.
“They laid everyone off today,” he said. “Everyone except me.”
20 Minutes Notice to Leave a Job
Dad’s co-workers, who had worked for the company for decades — a few of them for generations — were let go with only 20 minutes notice, enough time to pack their belongings in a cardboard box and be escorted out the door.
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My view on the stability of corporate life was forever shaped that day. While I was thankful my dad’s job was saved, I knew that no job anywhere would ever be truly safe.
During the decade I spent as a consultant developing and delivering programs and management training for corporations, I met many hard-working employees with no contingency plan in case they were laid off.
I always encouraged them to change their mindset and adopt my mantra: “We are all self-employed.” Even if they intended to stay in the corporate world, I explained, they’d be safer if they viewed their employer as a client.
In today’s work world, you never know when your job may change dramatically or vanish. That’s why I believe you should always try to have at least one side hustle.
What Is a Side Hustle?
So what’s a side hustle? It’s a tiny, independent venture you do during your free time when you’re not at your full-time job. Think of it as a part-time job with powerful potential.
People with an eye toward eventual full-time entrepreneurship use a side hustle as a way to slowly grow revenue until they’re able to earn the equivalent of a full-time salary.
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Others simply like to have something fun and different to do, which just happens to bring in extra income. Examples of side businesses could be a lawyer who bakes cakes in his spare time (like the founder of the Cake Love bakeries, Warren Brown) or an accountant who moonlights as a professional garage organizer.
A Form of Career insurance
Even if you’re happy in your career, I think it’s smart to start a side hustle for three reasons:
- You want to have a backup plan in case you get laid off.
- It's a way to experiment with new ideas and fields, keeping your brain fresh and active.
- It can provide a financial cushion, bringing in extra revenue for whatever goal you deem important, from paying down debt to saving for a vacation or bolstering your retirement account.
How to Prepare for a Side Hustle
From a sales perspective, all you need to kickstart your side hustle is a clear description of your product or service, a place where people can buy what you’re selling (like a website) and a way to get paid (like PayPal or Square).
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You’ll want to be sure not to run afoul of state and local laws for small businesses where you live. Most local government small business associations can help you avoid such problems.
The free nonprofit resource, SCORE, will also assist you. Check out the SCORE website and contact the group's closest chapter to find a mentor. (Next Avenue has some excellent SCORE articles for entrepreneurs, too.)
Steps to Launch a Side Hustle
These are among the most important things you’ll need to do to set up a side hustle:
Choose a legal structure for your business. Most people with side hustles operate them as sole proprietors or LLCs (limited liability corporations), but there may be a reason to choose a different structure, such as an S or C Corp. A SCORE mentor can help you figure out which legal structure is best for you and explain how to create it.
Get any necessary business licenses and permits. The Small Business Administration’s website can walk you through the process.
Set up a business bank account. Even if you have a tiny side business, it is best to keep that money separate from your personal bank account.
Check to see if you need business insurance. Some professions require liability insurance. If you need coverage, you can probably get it for a reasonable monthly fee. Read the Small Business Administration website’s primer on business insurance for details.
Check with a CPA to learn the tax requirements. You’ll want to know which expenses are deductible as well as when and how to file your business taxes.
3 Potential Side Hustle Dangers
Although I’m a big fan of side hustles, I think you need to watch out for these possible problems:
1. Violation of employment policies If you’re a full-time employee, check with your employer before starting a side hustle to be sure you’re not prohibited from outside work. You don’t want to do anything that could jeopardize your job.
2. Overcommitment Be careful not to take on so much side work that you become stressed and overwhelmed.
3. Planning too much, doing too little A side hustle is a way to have fun trying something new. If you find yourself creating a 30-page business plan, you’re missing the point.
So, start small. Then, once you see real promise developing, you can invest more effort planning and expanding.
Wading into entrepreneurial waters with a side hustle can be exciting, invigorating and lucrative. Better still: If you wind up with the misfortune of being handed a cardboard box and 20 minutes to pack, you’ll breathe easier knowing that you have a backup plan ready to go.