Many thriving businesses started as side hustles, but it can be hard to know how to transition from a successful sideline to the real deal. We spoke to several business owners about the challenges they faced and how they overcame them.
Side hustles have become big news in the past few years. Research suggests that over a third of people in the UK run a side hustle and 55% of these were set up during the pandemic.
Our own research into entrepreneurship during Covid here at The Pitch tells a similar story. Out of 2,000 UK adults surveyed, 11% said they wanted to start a business because of the crisis.
So what’s driving the desire to set up in business alongside a full-time job?
The first common reason is the extra income. Whether you’re selling homemade crafts on Etsy, importing goods to sell in the UK or creating new food products for your local market, side hustles can be a brilliant way to boost your earnings.
The second reason is that side hustles are an effective, low-risk way to test out a business idea. With a side hustle, you can see if your idea has legs without putting your mortgage payments on the line.
For many, side hustles start out as passion projects. But what happens if you decide you want to ditch your day job and turn your side hustle into your full-time career? Here’s how to make the leap.
We ran a 30-minute webinar on taking a side hustle full-time. Catch up with the webinar below.
Take an iterative approach
It doesn’t have to be all or nothing to start with. You can take a series of smaller steps, so start by working out the stages that will help you ramp up your side hustle bit by bit.
An obvious way is to try and reduce your hours in your day job so it becomes a part-time role. Alternatively, look for freelance or contract roles that allow you to work flexibly. This is the approach that Afrocenchix founder Rachael Corson took to start with.
“We were working on Afrocenchix with no salary and realised we needed a cash injection. I was tutoring, contracting and generally side hustling to pay the bills,” explained Rachael.
Create a personal and business cash flow
Crowdcube co-founder Darren Westlake started the business as a side hustle. It’s now a successful crowdfunding platform, but Darren remembers the financial difficulties he had to overcome to make it work.
“The biggest challenge was trying to raise money,” he said. “It’s scary either way. If you don’t quit your job, it might be the wrong decision and someone could come and do your idea and be a massive success. If you quit your job and go full time, you’ve got no income to pay the mortgage.”
This is where a robust cash flow forecast comes in to help smooth the transition away from a paid salary. Your forecast is basically a plan to show how much money you expect to receive in and pay out over a certain period of time.
It’s helpful because it allows you to see what costs you incur at different points of the year. It also takes into account any trading you’ve already done in the current financial year.
Forecasting means you can map out a plan and understand your “runway”, or the amount of time your business can operate before it runs out of cash.
It’s important to plan well and do your research. What will the first six months in full-time business look like? What extra expenses will you need to factor in?
- Where will you work? Will you need larger premises, such as office space, a professional kitchen or a studio, for example?
- Who else will be involved? Do you plan to take on more staff or pay freelancers for certain tasks?
- How will you increase sales? It’s likely that this will involve a bigger marketing and sales budget
- Will you need extra stock or equipment? Increasing productivity usually involves an initial outlay
How to fund the next step
It’s likely that you’ll need to invest more money in your idea to scale it up to the next level. Research by insurance broker Caunce O’Hara shows that 19% of people running side hustles make between £1,000 to £1,500 a month and 17% make £1,500 to £2,000.
If you’re earning that kind of money on top of a full-time salary, consider saving your side hustle earnings to cover your costs when you first make the leap away from employment.
To properly ramp up operations, however, you might need to look beyond savings and consider other avenues. Business loans and grants are a good option at this stage and there’s a lot of decent government advice, support and funding available for SMEs.
The next step is finding investment. While this can be time consuming and scary, it’s often the step that provides the turning point for true growth.
Afrocenchix’s Rachael said it took a good couple of years to get to the point where they could convince funders that the business was a worthwhile investment. But it’s now a well-funded and thriving business.
Her advice? “Venture capital isn’t for everyone. Even angel investment isn’t necessarily the best route. Set out your vision and roadmap before you start speaking to investors,” she said.
“If your aims are global, you’ll likely need investment. If you can achieve your mission by reinvesting profits, then that’s the best route to take. Fundraising is draining and time-consuming – only do it if you have to.”
Managing cash flow effectively is crucial if you want to grow your side hustle into a successful full-time operation. The Pitch partner Sage has everything you need to make that step with their side hustle toolkit. Get advice from successful side hustlers, plus free business plan and cash flow forecast templates. Download the toolkit here.