Whether you’re a freelance writer, an Uber driver or you just take on the occasional side project, having a side-hustle is a common way to dip your toe into entrepreneurship. But how do you know when it’s time to commit full-time to your side-hustle?
Look at the dollars and cents
A career switch of any kind can have large consequences to your life. And a move from dabbling in your own business to full-time entrepreneurship can require a deep dive into your finances.
Having money saved up to run your business before it starts to actually make money is a good idea. Often called a company’s cash runway, it refers to the amount of money or time you need to sustain yourself and your family before your company takes off or starts to make a profit.
Entrepreneur and author Damon Brown advises having six to nine months of runway before quitting your day job. Although the length can vary based on what your side-hustle entails. He suggests asking yourself questions like:
- What costs, from health insurance to meals, are currently covered by your day job?
- Are you funding a lot of startup costs?
- Could there be sudden expenses?
- How much are you predicting to make from sales?
By definition, a side-hustle is something you only devote part of your time to. Brown suggests you’ll know it’s time to give it your full attention “when you have calculated that you would be much more productive or impactful in the side-hustle without doing your day job.”
Are you willing to adjust your lifestyle?
Becoming a full-time entrepreneur will force your work and life to overlap and intersect in more ways than ever. If you find that you aren’t able to to sustain your current lifestyle while building your business, begin to explore whether you can bring your life-costs down while you build your business up.
It could be as small as scaling down your vacation time, or taking a break from concerts and sporting events. It could even be as large as downsizing your home or putting a major purchase on hold. Either way, decide how much of a change you’re willing to make to your lifestyle in order to get your business going. It’s a math equation but also a test of how much you can commit to expanding your venture.
While you might be willing to make sacrifices in the short term, any job that forces you out of a lifestyle you currently have (or want in the future) for longer than you’re comfortable with is unsustainable in the long run.
You know you can afford to do it, but can you afford not to?
As important as it is to crunch the numbers, the reason for starting a business on the side is never just about the money. A side-hustle can be a way to explore a new idea, dabble in an industry you’ve always loved, or a way to start chasing a lifelong dream.
Professional development coach Tyler Waye says after adding up whether you can afford to jump into your own business full-time, you should figure out if you can afford not to move forward with it. “When you’re looking at 40 years of work and you’re doing something that you just really don’t like, can you afford to stay in the job longer and longer?” Waye acknowledges, “That’s the more personal, meaningful side of the equation.”
It doesn’t have to be all or nothing
When you are evaluating what to do with your current side hustle, turning it into a full-time job isn’t the only option.
Waye says the beauty of having a side-hustle is that it allows you to dabble in a particular industry or job, and it gives you a chance to learn about it and figure out if it’s something you want to wholly invest yourself in. But he suggests that jumping into full-time entrepreneurship is not the only answer. “One of the questions that people should ask before they make the jump is: What if I were just to combine what I’m currently doing, my traditional work, with this new passion that I have. Can you combine those and fix the frustration that you’ve got?”
For example, if a copywriter at an ad agency began selling some of their drawings and paintings on the side, could a move into their agency’s graphic or creative department fulfill their need to express themselves creatively, without making the jump to going into business for themselves?
Or perhaps keeping your business a permanent side-hustle is fulfilling enough. Brown co-founded the app Cuddlr in 2014, and it brought in 100,000 users in its first week—a huge success for Brown and his co-creators. From its inception to selling it a year later, the app remained a side-hustle for Brown. “You should quit your day job later than you think you should,” Brown advises. He adds that if you manage your time properly, you can be a successful side-hustler without giving up the security of a day job.
A leap into entrepreneurship doesn’t have to be a lifetime commitment. Gauge whether your current career is something you can find a new job in quickly if your side-hustle struggles. And is there is part-time or consulting work you could take on if your business is slow to build?
Once you’ve looked at your books and your life, and you’ve decided it’s worth taking the next step with your side-hustle—then actually make the leap!
What Waye often hears from people at a crossroads in their career is that they’re one step away from moving forward, that they want to accomplish one more goal, or be just a little more prepared for taking the next step. He adds, “it doesn’t matter what that one step is, and it doesn’t matter how much they’ve accomplished before they want to jump. They always feel like—if I could just check off that one more box then I’d know.” Waye says this is a false dilemma.
Life coach and startup advisor Susie Moore echoes this advice, suggesting that people can get in their own way. “Often it’s way less risky than you think. You can always get another full-time job. But you might not have the same entrepreneurship opportunity again.” And she adds the biggest mistake potential entrepreneurs make is not getting started, “There is magic in beginning, and action cures fear.”
The information and tips we’re sharing in this article are meant to be a starting point for your year-end tax prep, so you can be informed and feel confident when working with your accountant. Be sure to check with a tax expert in your country or region for any specific advice you need, as each business (and tax district) is different. As our lawyers would say: “This article is for informational purposes only. It should not be considered legal or financial advice.”