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Whether it’s earning extra money for life expenses, building an emergency fund, testing out a new business idea or pursuing a hobby, the number of people with a side gig is growing – and fast. In fact, LinkedIn data reveals nearly one-third of U.S. employees have a side hustle.
Whatever the reason for starting one, there often comes a time when that weekend or late-night side hustle is ready for the next level – to evolve into a thriving and lucrative business. According to data from Xero, where I serve as CEO, 60% of small businesses start as side gigs. That trend continues to grow with the next generation of entrepreneurs: more than two-thirds (67%) of Gen Z started their businesses as side gigs, compared to less than half of the Boomer generation (48%).
So, how can you lay a strong foundation for a smooth transition and prepare yourself for financial and business success, while managing your business efficiently?
1. Treat it Like a Real Business from Day One
We have found that nearly half of U.S. small businesses encounter fiscal challenges due to a lack of financial literacy. This can include cash flow problems, a lack of capital, poor budgeting, debt mismanagement and tax issues. It’s crucial to lay a solid financial framework from day one, so when the transition does occur, there is already a system in place.
Related: ‘Revenue Within Days’: A Teenager’s Side Hustle Grew Out of a Video Game Virus — and Into a Multi-Hundred-Million-Dollar Business
As we know, many side gigs start out as a passion and therefore, financial management may not be a strong skill for every founder. As such, it’s important to keep personal and business finances separate, and streamlined (in different buckets) for tax purposes. One option is to set up a corporate entity to keep your side gig separate from your personal affairs.
If finance isn’t your forte, utilizing online accounting software is one way to keep finances in check by creating routines and structure. It can automate invoicing, while providing expense tracking, bank reconciliation and payroll. It can also simplify tax time by improving accuracy and reducing risk, analyzing real-time financial insights and ultimately helping support business growth.
2. Know When to Go Full-time
Every journey, from side hustle to growing your business full-time, is different. Having checklists in place can help assess the risks to determine whether it’s time to make the leap, and also help you explore your intrinsic motivation once this becomes all you do. Consider practical things like:
- What about the business is succeeding and why?
- Is there more demand out there for the service you provide than you can fulfill part-time?
- How do you envision marketing your service and will it require any investment dollars?
- Is your business income consistently replacing or nearing your current full-time job salary?
- Do you have 3-6 months’ savings in place as a buffer?
And deeper questions like:
- If you took this side hustle full-time, would it still be fun? Would it give more or less satisfaction than your current gig?
- What parts of your side hustle give you energy and what drain your energy? How much of each will you have to do if it’s a full-time job?
Answering practical and deeper questions for yourself helps you make a more informed decision about taking a leap like this. Don’t have the answer to the deeper questions? Think about someone who knows you well — a family member or long-time friend — to help you reflect on “you,” and talk things through with, without judgment.
Related: She and Her Sister Started a Side Hustle to Help People Elevate Their Homes — Now Their Brand Pulls In Hundreds of Millions: ‘Get to Work’
3. Develop a Tailored Business Plan
No matter the size of your business, developing an “outside in /market view” of your business category, and then a roadmap can enable entrepreneurs to grow with a sense of purpose. Our research shows that nearly half (49%) of small business owners cite self-doubt or fear of failure as a top challenge when starting out. Building a framework helps to define what success looks like while ensuring systems can support future growth and expansion.
Make sure you start with the market you’re serving and where it’s growing, and how your business fits in. Consider the value a business idea brings to customers, the market demand, and how to differentiate your business from competitors. Then identify goals and key milestones for the next 6 to 12 months. This could include hitting revenue benchmarks, launching a website or gaining your first 10 clients.
An accountant and/or financial advisor can help you build a business plan, including a financial forecast. This is money well spent if you are planning to bet your full-time career on it. Also, seek out friends or acquaintances who are small business owners, too. Their expertise and support can go a long way to ensuring you’ve thought about all angles.
Within that overall plan, entrepreneurs should determine the funding needed to launch a side hustle, where the money will come from and a budget that outlines projected revenue, expenses and profitability over a specific duration of time.
Related: 50 Side Hustle Ideas to Make Extra Money in 2025
4. Prioritize Cash Flow Management Early
Another area to focus on early is cash flow management. Issues can sneak up fast if you’re not prepared or actively monitoring what’s coming in and what’s going out. There is often a gap between spending and making money, especially when there’s a need to invest in new business growth or marketing before seeing any income. Other challenges can include forgetting to account for hidden costs like subscription or website fees, packaging and taxes.
In order to maintain healthy cash flow and build resilience against any future economic uncertainties, small businesses should also prioritize strategies that encourage their customers to pay promptly. Late or missed payments can add up quickly and can significantly impact operations. Offering diverse payment options, adding ‘pay now’ buttons on invoices, and sending timely reminders, are simple yet effective ways to reduce these wait times.
Cash flow management is one of the most critical pillars of a successful small business. It should go beyond just tracking money in and out and focus on setting up the right systems, such as those that streamline invoicing, encourage prompt payments, from the start. There are also tools today to schedule and manage your bills and spend out, giving you flexibility on when and how to pay. Digitizing your business can also enhance operations, boost efficiency, and add value for customers. With the right tools in place, maintaining control over cash flow can provide the stability needed to weather any unpredictable storms and grow with confidence, while enabling you to stay focused on your business and your customer.
5. Grow Smarter, Not Harder
Making the transition from a side gig to a full-time business can sometimes feel like a lonely journey – especially if you’re running your business solo. Leaning on other small business owners, a friend you can confide in, accountants and bookkeepers, technology – and engaging in a community of others facing similar challenges – can allow business owners to grow smarter.
Shifting from a side hustle to a successful business requires careful planning and a strategic vision. By treating it like a real business from the beginning, developing a tailored business plan, prioritizing cash flow, leveraging expert advice, and digitizing your business with the right tools like accounting and payments software, entrepreneurs can set themselves up for a thriving full-time business.
Whether it’s earning extra money for life expenses, building an emergency fund, testing out a new business idea or pursuing a hobby, the number of people with a side gig is growing – and fast. In fact, LinkedIn data reveals nearly one-third of U.S. employees have a side hustle.
Whatever the reason for starting one, there often comes a time when that weekend or late-night side hustle is ready for the next level – to evolve into a thriving and lucrative business. According to data from Xero, where I serve as CEO, 60% of small businesses start as side gigs. That trend continues to grow with the next generation of entrepreneurs: more than two-thirds (67%) of Gen Z started their businesses as side gigs, compared to less than half of the Boomer generation (48%).
So, how can you lay a strong foundation for a smooth transition and prepare yourself for financial and business success, while managing your business efficiently?
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