Summertime and the living is easy — especially when business is booming from your side hustle! If you’ve been running a successful summer side hustle for a few years now, you might want to consider spinning it off into a full-time gig.
What does it take to turn a side hustle into a thriving small business? It’s a much less intensive process than many entrepreneurs may realize, and follows certain step-by-step guidelines. Take a look at the best ways to prepare your side hustle to become its own year-round small business.
1. Draft a traditional or lean business plan.
You might have already created a lean business plan for your side hustle. If that’s the case, it’s time to add more details about the business. If you don’t already have a business plan, it’s also the time to draft one.
Most entrepreneurs choose to draft a traditional business plan or a lean startup plan. The format decided upon often depends on the needs of their business.
Consider a summer side hustle that has been around for several years. It has a proven track record of steady cash flow and offerings that continually appeal to consumers. As this side hustle pivots into becoming a full-time small business, a traditional business plan will provide an objective look into the company’s future.
A traditional business plan outlines the following areas:
- Executive summary. The ability to explain who you are, what the business does, its industry, location, how it makes money, and why consumers want these goods and services.
- Business description, concept, and strategy. What do your products and/or services do, and what makes them unique?
- Industry analysis. A thorough analysis of your brand’s competitors.
- Market analysis. A thorough analysis of your brand’s target audience.
- Organization and management. The core responsibilities of your team members (if you have any employed).
- Financial projections. Tables that provide information about cash flow, projected profit and loss, and a break-even analysis.
- Financing request. A section specifically created for businesses seeking funding from investors.
- Other additional information as it pertains to the company, like letters of incorporation and trademark registration documents.
A lean startup plan is a little less intensive, but covers these key areas:
- Value proposition. A clear statement summing up the value your business brings to its market.
- Key partnerships, resources, and activities. Information about any partners your business may have and resources that allow the business to create value.
- Customer segments, channels, and relationships. The ability to define your target audience.
- Revenue streams. How the business is able to make money.
2. Incorporate the business.
Incorporating a business, even one that starts off as a side hustle, provides the company with tons of valuable benefits. It allows you to build credibility much faster than businesses that do not incorporate, which shows customers that your company is legitimate.
Entrepreneurs may choose from a variety of entities to incorporate their side hustle turned small business. Some of these may include sole proprietorships, partnerships, corporations, and limited liability companies. LLCs, or limited liability companies, often tend to be quite popular with entrepreneurs. The entity is flexible in terms of management and also provides liability protection. This acts as a safeguard between personal and professional assets. In the event of an unforeseen circumstance, like a lawsuit, liability protection ensures that your personal property like cars and houses will not be impacted.
3. Register for trademarks.
Earlier I mentioned that trademark registration documents are generally kept in the appendix of a business plan. Chances are pretty high that your side hustle may have a unique name, phrase, symbol, design, or logo associated with it. This unique mark differentiates your business from competitors. However, if you do not register a trademark the unprotected mark may end up in the wrong hands and be plagiarized by copycats.
Kick off your plans to register your mark by conducting a trademark search. You may do this through the United States Patent and Trademark Office trademark database. This database provides more information as to whether or not another entrepreneur has claimed a mark similar to or the same as your own and if there are any pending marks. If it turns out your trademark is not available, you may need to go back to the drawing board in creating a new one.
However, if the trademark is available it’s highly advised to file a trademark application as quickly as possible. This allows you to register the mark for your business and have the peace of mind in knowing the trademark associated with your brand is exclusively yours.
4. File for any necessary business licenses and permits.
Every side hustle turned business is different with varying needs. Once certain side hustles become full-time businesses, they may require business licenses and permits to operate and remain in compliance. Check in with your local Secretary of State to determine which business licenses and permits your company is required to have by the city and state you do business in. These often vary, depending on the location and industry of the small business.
5. Conduct annual maintenance.
As your side hustle transitions into a small business, you may pick up even more legal necessities along the way like an employer identification number (EIN) and doing business as name (DBA). Remember that businesses incorporated as LLCs and corporations are required to file an annual report. This allows them to communicate any changes made in the business and stay in compliance with the state.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.