When to transition from a side hustle to a business and how to get yours started

Small Business
SBA loans
Business planning
Written By:
Annette Campista, Business Banking Center Manager
Baker cooking in commercial space

In the dynamic world of entrepreneurship, the journey often starts with a side hustle—a labor of love pursued alongside a day job. However, there's a pivotal moment when that side hustle shows signs of blossoming into a full-fledged business. When is it time to make the switch? Here are several hints:

  • Consistent demand: If your side hustle is experiencing a steady and growing demand for your products or services, it may be time to consider scaling up.
  • Limited time and resources: Struggling to balance your side hustle with other commitments? Feeling stretched thin? These are signs your venture is outgrowing its part-time status.
  • Scalability potential: Can you envision opportunities for growth, like expanding your product line or reaching new markets? If so, it may be worth exploring whether your side hustle is ready to evolve into a full-time business.
  • Financial viability: If your side hustle continues to generate revenue and shows signs of profitability, it may be time to develop a business structure which can provide access to resources and funding opportunities to fuel further growth.
When you’re ready to make it a business, there are resources to help you succeed. Here’s what you need to get started:  

Craft a clear business plan:

Think of this as a roadmap that lays out your destination (your business goals), the terrain you'll navigate (your target market and industry), the resources you'll need (funding, equipment, real estate, etc.), your transportation (marketing strategies) and the travel budget (financial projections).

Open a business account:

Maintain a dedicated business checking account to keep your business finances organized and separate from your personal expenses. This simplifies record-keeping and provides a clear view of your business's financial health.

Obtain a business license and permits:

Operating legally is essential. Research permit and license requirements specific to your industry and location to ensure you're compliant. To do this, visit the U.S. Small Business Administration’s website. For help with federal requirements and tax documents, view the IRS website. You can also reach out to your local Small Business Development Center for assistance with state and local regulations.

Choose the right legal structure:

This decision will impact your personal liability and tax obligations. Explore options like sole proprietorships, LLCs and corporations to find the structure that best suits your business needs.

Set up online banking and payment processing:

These solutions can help you manage your business finances. It’s important to find a bank that offers robust online banking features tailored to small businesses. At Banner, we offer Business Online Banking where you can view deposit and loan balances, transfer funds between accounts, make loan payments and more.

Use the right accounting and bookkeeping software:

Investing in good accounting and bookkeeping software will help you track income, expenses and taxes accurately. Cloud-based solutions offer accessibility and scalability, enabling you to manage your finances from anywhere.

Get business insurance:

Protect your venture with appropriate insurance coverage, like general liability insurance, property insurance or professional liability insurance, depending on your business needs and risks.

Microbusinesses often draw upon a variety of funding sources. Consider tapping into personal savings, applying for small business loans, or seeking funding from investors like angel investors, nonprofit microlenders, through grant opportunities or crowdfunding platforms. If you use personal savings, do so responsively, and avoid pulling from retirement accounts, as that can cost you in the long run.

Secure funding:

As an SBA-preferred lender and lending award winner, Banner offers SBA Financing Options specifically designed to help business owners secure funding. For example, the SBA 7(a) loan is the most versatile and flexible, and is often the best choice for younger companies. It can be a great way to access capital to grow your business or even purchase a new one. Learn more about SBA loans in our blogs: Five Tips When Considering an SBA Loan, Five Things to Know About SBA Financing When Buying or Selling a Business or What to know before applying for an SBA 7(a) or 504 loan.

Transitioning from a side hustle to a business is an exciting journey. By recognizing the signs of growth and leveraging the right resources, you can navigate this transition successfully and set yourself up for long-term success.