So, you’re thinking of starting a side hustle business? That’s great! Not only can an extra stream of income help you achieve your financial goals faster, but it can also provide an important buffer that protects you against job loss, major expenses and other potential setbacks.
But while you’ve probably already been researching how to start a side hustle, or even the best way to start a side hustle, have you thought about the costs involved?
In fact, the financials associated with your side hustle idea can make or break both the profitability and long-term sustainability of your fledgling business. Here are several factors to keep in mind, including why it’s so important to look for side hustles with low startup costs:
To be profitable, a side hustle needs to bring in more money than it costs to operate. Pretty basic, right? But, as you’ll find, not all side hustles are created equally. Several factors influence what it’ll take to launch and maintain your new business.
Types of Side Hustle Costs
As you’re planning your new side hustle, there are two primary types of costs you’ll want to consider: startup costs and operational costs.
- Startup costs include any expenses needed to get the business off the ground. Business licenses, business registrations, and initial inventory are all examples of costs that fall into this category.
- Operational costs, on the other hand, represent your ongoing expenses. These are the costs you’ll need to keep your side hustle open, such as advertising fees, software, and taxes.
Another cost factor to keep in mind is the value of your time. All businesses — no matter their size — require upfront investments of time. Be aware of both the amount of time you’re putting into your side hustle and the income you generate for those hours.
Use these metrics to calculate your average hourly income on a regular basis. If it’s still low after months or years, you may have an expensive hobby — not a side hustle.
The type of side hustle business you launch and the industry you operate in also affect your potential costs. As an example, let’s compare a jewelry-making side hustle to a business selling premade lesson plans to teachers.
In the case of the jewelry-making business, you’ll need to purchase everything from tools and equipment to components such as metals, beads, and gemstones. If you’ll be making the jewelry yourself, your available time will limit the number of pieces you can make (unless you partner with a commercial manufacturer to produce your items, which comes with costs of its own).
When selling lesson plans, you’ll still have some upfront costs. You’ll need to invest your time to create the lesson plans (unless you have pre-existing materials from past classroom experience). You may need to hire a graphic designer to produce visually appealing plans, and you’ll need to either set up retail listings on your own or pay someone to create them for you.
However, in contrast to jewelry-making, once your lesson plans are created and listed for sale, you can sell the same items again and again to different people. Because the lesson plan side hustle sells digital (rather than physical) products and because it’s built to be scalable (meaning it can generate more income without a proportionate increase in costs), both its startup and operating expenses are likely to be lower overall than the jewelry-making business.
The example above isn’t meant to say that you should only ever start a side hustle that revolves around selling digital products or that’s inherently scalable. Instead, it should encourage you to think about the potential financial implications of the different side hustles you could start. Even the most exciting side hustle ideas lose their luster if there’s no real financial benefit to pursuing them.
So, with that in mind, what are some cheap side hustles to start? Here are a few ideas to get you started:
- Gig and service delivery platforms. Working through platforms like Uber, Lyft, Doordash, and Grubhub isn’t the right fit for everyone. But if you’re wondering how to start a side hustle with no money, their existing customer networks and delivery models can make them a shortcut to successful side hustling.
- Services businesses. In nearly all cases, launching a services-based side hustle will have lower startup and operational costs than a business selling physical products — simply because there’s no inventory to buy and manage. If you have a particular skill or do a particular activity well, you may be able to convert it into income quickly, without huge overhead expenses. Yard work, tutoring, music lessons, freelance writing, and virtual assistant work all fall into this potentially profitable category.
- Knowledge-based digital products. You don’t have to be an expert to sell the knowledge you’ve acquired — you just have to know more than someone who’s trying to get where you are today. If you have specialized knowledge that would benefit others, transform it into courses for platforms like Skillshare, ebooks that can be sold on Amazon, or standalone information products sold through your own website.
Ultimately, growing a successful side hustle is a lot like managing your personal budget — you can’t have more money going out than you have coming in. There are several things you’ll want to keep in mind when controlling your side hustle costs:
- Have a business plan. You don’t need a 10-page plan when you’re starting a side hustle. But you should at least have some ‘back of the envelope’ math showing what you plan to sell, who you’ll sell it to, what you’ll charge, and what your expenses might look like. Taking the time to put some basic numbers together will help you understand how viable your idea is, as well as give you benchmarks to hold yourself against as you grow.
- Meticulous record-keeping is a must. If you can’t account for all the money you’ve put into your side hustle, you can’t know whether or not your business is profitable (and, therefore, worth continuing).
- Be wary of justifying excess startup costs. By nature, side hustles should be lean (at least, to start). But as a newly-branded business owner, it can be tempting to sign up for pricy training courses, overinvest in promotional materials, or even open new lines of credit to cover your spending. Keep costs low until your profits prove you can afford to invest more.
If your long-term goal is to turn your side hustle into your full-time job — or your future empire — it becomes even more critical that you keep both your costs and your debt load under control.
Keeping your personal spending under control limits how much you need to take out of your side hustle — and more money left in your business can help it grow faster. Further, if you ever want to take out a business loan or line of credit to expand your operations, lenders will want to see a clean history on your personal credit report.
If you’re currently struggling with credit card debt, taking control of it with an app like Tally can help improve not just your personal financial situation, but your ability to invest in growing your side hustle as well. To learn more about whether or not Tally may be able to save you money on your high-interest credit card debt, give our Debt Calculator a try today.