5 Steps to Turn Your Side Hustle into a Business
A smooth and successful transition to a viable small business starts with some basics.


Whether out of passion or frustration, the pandemic has seen more people than ever get serious about their side hustle. In fact, according to recent figures from the U.S. Census Bureau, there was a 53% increase in new business filings in 2021 compared to 2019.
However, whether it’s interior design or decorative cakemaking, wedding photography or dog walking, how do you go about turning your side hustle into a real, viable business? Here are five steps to take in order to make the transition as smooth and successful as possible.
1. Set up the proper legal form of ownership.
Remaining a sole proprietorship might mean less admin in the short term, but it also creates a lot more risk in the long term! That’s because any credit, legal or liability risk falls on the individual owner. However, by giving yourself the shield of legal ownership, you’ll ensure the buck stops with your business rather than with you.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Being an official legal entity also gives you more credibility with lenders when it comes to borrowing money or raising capital. You can consult with Score, the nation’s largest network of volunteer, expert business mentors or with a local attorney to select the right form of ownership for you and your business.
2. Write a business plan.
When you’re running a business responsible for most, if not all, of your income, having a clear strategy is vital, which is where writing a business plan comes in. Doing so will help you identify your vision for the company, decide what differentiates you from competitors and figure out how much you need to earn to produce enough cash to not just survive, but thrive from your side hustle.
If you’re not sure how to go about writing a business plan, don’t worry! There are loads of great resources and advice out there, including from the U.S. Small Business Administration.
3. Plan to hire.
As a side hustler, you’re the accountant, the receptionist, the salesperson, the marketer and more. But becoming a business means deciding when you can afford to bring in extra support to cope with (hopefully!) rising demands on your time. Say your goal is to make a six-figure income every year. If the average full-time working year is 1,900 hours, that means you’re aiming for every hour you work to be worth around $50 to $55 ($100,000 divided by 1,900 hours).
Anytime you perform a function with a typical hourly rate below that – for example, administrative tasks like processing the mail or answering the phones, which tend to pay around $10 to $15 per hour – you’re reducing your ability to earn your desired $50 to $55. In which case, hiring someone to do it instead makes sense, both financially and to help you avoid burning out trying to do everything.
4. Let go to grow.
As you seek to grow, it’s important you have the bandwidth to focus on the elements of the business you’re uniquely good at while letting go of the rest. If you’re a cakemaker, for example, you’re far more valuable meeting customers and creating products than you are sending invoices or responding to emails.
A good rule of thumb is if someone can perform a task at least 70% or 80% as well as you, delegate it. That might be via a part- or full-time hire or through one of the country’s many small-business incubators. These provide expert support on everything from accounting and legal services to HR and capital investment. Along with benefiting from additional expertise, letting go of some operational tasks will mean your time is spent working on the business rather than in it.
5. Equip yourself for big contracts.
Most side hustles start with stuff like selling to friends of friends, posting your products on Pinterest or making one-off sales at farmers’ markets. But as your business expands, you may wish to go after bigger contracts with larger customers. This means you’ll need to establish certain infrastructure to ensure they’re comfortable working with you. Set up proper cybersecurity and data protection, for example, and arm yourself with property-casualty insurance, too. That way, if something goes wrong or gets damaged while you’re working for them, everyone knows you have the necessary protection in place.
Along with the steps above, there’s perhaps one other key consideration for anyone planning to move from part-time side hustler to full-time entrepreneur: Go into it with your eyes open. Running a business is hard, multifaceted work. And usually it comes with the added pressure of needing to make enough money to support you and your family.
Yet, at the same time, picture this: Every day you go to work, you’re doing something you’re good at. Something you feel passionate about. Something that’s truly yours. If you’re ready to accept the ups and downs and put in the time and energy required to make it a success, turning your side hustle into a business may well be the most rewarding decision you ever make.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Stephen Dunbar, Executive Vice President of Equitable, has built a thriving financial services practice where he empowers others to make informed financial decisions and take charge of their future. Dunbar oversees a territory that includes Georgia, Alabama and Florida. He is also committed to the growth and success of more than 70 financial advisers. He is passionate about helping people align their finances with their values, improve financial decision-making and decrease financial stress to build the legacy they want for future generations.
-
Stock Market Today: Trump Retreats, Markets Rejoice
Stocks rally, yields soften, the dollar rises, and even beaten-down names enjoy the wages of potential trade peace.
By David Dittman
-
In Trump’s Economy Should 401(k) Savers 'Set It and Forget It?'
It’s hard to bury your head in the sand when the markets are volatile. Here’s when it makes sense and when it doesn’t.
By Donna Fuscaldo
-
Bouncing Back: New Tunes for Millennials Trying to Make It
Adele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
By Alvina Lo
-
Early-Stage Startup Deals: How Do Convertible Notes Work?
Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
By Murat Abdrakhmanov
-
SRI Redefined: Going Beyond Socially Responsible Investing
Now that climate change has progressed to a changed climate, sustainable investing needs to evolve to address new demands of resilience and innovation.
By Peter Krull, CSRIC®
-
Here's When a Lack of Credit Card Debt Can Cause You Problems
Usually, getting a new credit card can be difficult if you have too much card debt, but this bank customer ran into an issue because he had no debt at all.
By H. Dennis Beaver, Esq.
-
Going to College? How to Navigate the Financial Planning
College decisions this year seem even more complex than usual, including determining whether a school is a 'financial fit.' Here's how to find your way.
By Chris Ebeling
-
Financial Steps After a Loved One's Alzheimer's Diagnosis
It's important to move fast on legal safeguards, estate planning and more while your loved one still has the capacity to make decisions.
By Thomas C. West, CLU®, ChFC®, AIF®
-
How Soon Can You Walk Away After Selling Your Business?
You may earn more money from the sale of your business if you stay to help with the transition to new management. The question is, do you need to?
By Evan T. Beach, CFP®, AWMA®
-
Two Don'ts and Four Dos During Trump's Trade War
The financial rules have changed now that tariffs have disrupted the markets and created economic uncertainty. What can you do? (And what shouldn't you do?)
By Maggie Kulyk, CRPC®, CSRIC™