3 min

How to Start A Side Hustle in 7 Steps

Feb 14, 2023
in a nutshell
  • Pick a side gig that meets your interests and helps you grow professionally.
  • After you've picked a side gig, develop a business plan so you have a roadmap to follow.
  • Research the laws around small businesses in your state and apply for any permits you need.
Image of Whether you’re trying to pay off your student loans faster or want to save more money, starting a side gig can help you accomplish your goals.
in a nutshell
  • Pick a side gig that meets your interests and helps you grow professionally.
  • After you've picked a side gig, develop a business plan so you have a roadmap to follow.
  • Research the laws around small businesses in your state and apply for any permits you need.

Whether you plan to launch a dog walking business or want to earn money as a graphic designer, learning how to start a side hustle the right way can set you up for long-term success. 

Step 1: Pick something that interests you

There are lots of different side hustles you can do; top side hustle ideas include:

  • Assembling furniture

  • Cleaning 

  • Freelance writing

  • Grocery delivery

  • Pet sitting

  • Rideshare driving

  • Social media management

  • Tutoring

When thinking about what side hustle is right for you, ask yourself the following questions:

  • What do you want to get out of the side hustle (besides extra money!)? Your personal and professional goals can help you narrow down your list. For instance, let’s say you’re an accountant and you dream of starting a career in social media. You can use your side hustle as a social media account manager to build a portfolio and gain references. 

  • How much time do you have to dedicate to a side hustle? Some side hustles allow you to work when you want, and you can take weeks off at a time. With others, you need a more structured schedule and commitment, so be realistic about the amount of time you can dedicate to your side hustle. 

  • What do you enjoy doing? A side hustle is a great way to make extra cash in your spare time doing what you enjoy. For example, if you love animals, you can earn money by pet sitting or walking dogs. Or if you love knitting, you could make money selling your creations online. Spend some time brainstorming activities you enjoy and possible side hustles. 

Step 2: Determine your target audience

Next, think about the customer you’re serving and their needs. Figuring out exactly who your customer is and what their problems are can help you better position and market your business. To do that, look at similar businesses’ social media pages and websites and see who their typical customers are and what needs they fulfill. 

For example, let’s say you’re a dog walker in a major city. You may find that other dog walkers in the area typically work with working adults in their early and mid-20’s that work long hours. Because they can’t get home mid-day, they hire dog walkers to exercise their pets so their pets are content and relaxed when they come home from work. 

That exercise will help you identify your target audience and how you can differentiate yourself from the competition. 

Step 3: Create a business plan

When you start a small business, creating a business plan is a critical step. A business plan is a document that outlines the business’ objectives, marketing plans and competitors. It’s often used to attract investors or to secure credit from banks. 

With side hustles, your business plan doesn’t have to be so detailed, but it’s still a good idea to create one so you have a roadmap to follow. 

A side hustle business plan should include the following: 

  • An overview of the side hustle and the problems it solves for your customers or clients

  • Information about the business’ goals

  • Details about competitors and the industry

  • Plans for marketing and growing your business

  • A breakdown of your financials, such as necessary startup costs and potential earnings. With a side hustle, your startup costs are likely low, but there may be expenses you haven’t considered, such as insurance, office supplies or better-quality internet. 

Step 4: Take care of the legal stuff

Unfortunately, a key part of figuring out how to start a side hustle is taking care of legalities. If you’re working a side hustle through an app like DoorDash, InstaCart or Uber, most of the work is handled for you through the app. But with other side hustles, there’s more work required on your part. Depending on where you live, you may need to do the following: 

  • Get an employer identification number (EIN): If you plan on hiring employees or operating your business as a corporation or partnership, you’ll need to get an EIN. You can find out if you need one — and apply for one online — at IRS.gov

  • Apply for a business license: Most businesses will need federal and state business licenses to legally operate. The type of licenses you need are dependent on your state and business type. 

  • Apply for permits: Similarly, you’ll likely need federal and state permits to run a side hustle. You may also need permits from your county or city. For example, residents of Orlando, Florida, will need a business tax receipt and a certificate of use permit. And if you intend to work out of your home, you’ll also need a home occupation permit. 

  • Check your insurance coverage: As a business owner, you may need to purchase additional insurance to adequately protect yourself. For example, you may need to buy a specific rideshare auto policy in addition to your personal car insurance, or you may need to get errors and omissions coverage if you’re a writer. 

  • Consider business structures: As your business grows, you may want to consider changing your business’ structure from a sole proprietorship to a limited liability corporation or S-corporation. Switching structures could be beneficial at tax time, and it can also limit your personal legal liability. 

For information on federal and state permits and licenses, visit the Small Business Administration’ website or your state department of revenue. 

Step 5: Open a business bank account

If you plan on sticking with your side hustle for more than a few months, opening a business bank account is an important step. Having a separate bank account makes it easier to track your income and expenses and simplifies the process of filling out your tax return. And if you’re audited, a separate business account gives you additional protection. 

Step 6: Talk to an accountant

When you have a full-time job, taxes are relatively easy. Your employer deducts your federal and state taxes from each paycheck, and at tax time, sends you your W-2 so you can fill out your tax return. 

When you start a side hustle and earn money outside of your day job, it can be more complicated. Your earnings from your side hustle are taxable as income, and you have to pay self-employment taxes on your earnings throughout the year. If you don’t, you could be caught by surprise by a large tax bill and penalties. 

Working with an accountant when you start your business can prevent problems later on. An accountant can help you create a system for tracking your income and expenses, and determine how much you need to set aside for taxes. 

If you don’t have an accountant already, you can find a certified professional accountant (CPA) through the Association of CPAs

Step 7: Promote your side hustle

Now that you have your business set up for success, you can focus on promoting your business and finding clients. Promoting your side hustle doesn’t have to be expensive; there are free and low cost ways to get your business out there. Some ideas include: 

  • Create a website: You can purchase a domain and create a website on Wordpress or GoDaddy for as little as $9.99 per month. You can use free search engine optimization (SEO) tutorials on Udemy to learn how to incorporate keywords and get more views to your site. 

  • Social media: Through Twitter, Facebook, Instagram and TikTok, you can connect with potential customers in your community — for free. 

  • Paid ads: You can use paid social media advertisements or advertise in your local newspaper to get your business in front of more people. 

  • Word of mouth: As you build your customer base, encourage them to share your business with their friends and family. For example, you could offer your customers a discount for future services if they refer a customer. 

  • Networking events: Appearing at local community events, such as farmer’s markets, craft fairs and small business meetings can be excellent ways to build your professional network and find new customers. 

Launching a side hustle

By learning how to start a side hustle, you can launch your business and start earning money. But if you find the process overwhelming or are having trouble figuring out what permits or licenses you need, you can get free or low-cost business counseling through the Small Business Administration and its partners. You can use its searchable database to find business counselors near you so you can start work on your side hustle. 

Acorns is not engaged in rendering any tax, legal, or accounting advice. Please consult with a qualified professional for this type of advice.

Kat Tretina

Kat Tretina is a freelance writer and certified financial and student loan counselor. 

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