By Jenny Blake
Last time we talked about the importance of having a compelling personal project you’re excited about, no matter where you work or who you work for (including yourself).
Today I’m going to talk about a specific type of personal project: the side business. This is different from a hobby in that it is tied to earning a living, even if just a tiny proportion of your current income.
Side businesses often represent a calculated risk: I am going to willingly invest some of my spare time and energy (and maybe money) in this side project, something I’m excited about, with the hopes of making a greater proportion of my living off of this someday, or using it to land my next paid gig.
Side Business Sweet Spot
One of my friends, Christian, loves fishing. When he finds a good spot in the lake, he refers to it as a “honey hole.” The honey hole is the secret spot he can return to that’s highly likely to yield a great catch.
The best side businesses are your equivalent of a honey hole: you enjoy them, you are excited to return to work, you feel you have discovered something unique to you, and they are fruitful—they provide value in return.
There are four criteria to a successful side business:
1. Cash Flow
If it does not create income, either now or in the future, your beloved side business is a hobby. The best side businesses will be able to demonstrate a return on your investment; if not now, then at some point in the not-too-distant future. How long you are willing to wait for that is up to you, but I suggest doing something where you can test the ability to generate revenue fairly quickly.
At first, the income you earn from your side business is likely to be very labor-intensive. You invest time and sweat equity for little pay. You do the hardest work up front. In his Startup Schoolpodcast series, Seth Godin calls this “front-loading”—better to do the hard work up front then reap the rewards later, rather than be surprised down the road when you have much more at stake.
A side business doing grunt work is valuable if it helps you pay the bills or save up for the next big trip you want to take. But a side business with swagger is one that gets you into a state of flow. It is one that allows you to tap into your unique zone of genius, and leverages your best strengths. It is one where you lose track of time, and are excited to get to work, whether you have 15 minutes to spend on it that day or five hours.
Questions to consider: What did you love to do as a kid? How might you pilot something similar as an adult?
This is where you get to be a bit of a futurist: what skills will be needed in your field in the next few years? What areas are most exciting to you? What skills, if you were to build them now, while this is a side project, would greatly serve you if/when you were to take this project full-time? For some this may be more formal education; for others self-study or learning by observing others does the trick.
4. Opportunity & Market Potential
This goes hand-in-hand with cash flow. The most successful side businesses are ones that have a solid amount of growth potential. If you love teaching underwater basket-weaving but there’s no one interested in learning it from you, you will be quickly catapulted back into unprofitable habit territory.
Look for side businesses where the market is bigger than your ability to serve it; opportunities that Nassim Taleb would describe as “Antifragile.” Look for areas where, if you were to invest your resources, you could profit almost no matter the state of the economy; opportunities that areasymmetrical in that they have high potential upside with limited downside, or risk.
Be the Scientist
I like to think of side businesses like experiments: you have a hypothesis about something that interests you that could make money, and now it is time to test your theory. For those of you who are already self-employed, this might be testing a new approach, service or product within your overall business.
Here’s a template for this exercise, which will walk you through the following steps:
- Make a list of 10 potential side business hypotheses that interest you down the left-hand side of the page, with the four categories above across the top.
- Rate each idea on a scale of 1-5 for each of the criteria.
- If you don’t have a clear winner, narrow the list down to your top three, and determine one small next step or experiment you could try for each.
Stay tuned for Part Three, where I’ll share more on how to determine when to take your side business full-time.
I’d love to hear from you in the comments:
Which of your personal projects has the most side business potential?
Disclosure: This post was written as part of the University of Phoenix Versus Program. I’m a compensated contributor, but the thoughts and ideas are my own.
Jenny Blake is the author of Life After College and the forthcoming book The Pivot Method. She isa career and business strategist and an international speaker who helps smart people organize their brain, move beyond burnout, and build sustainable, dynamic careers they love. Jenny combines her love of technology with her superpower of simplifying complexity to help clients through big transitions — often to pivot in their career or launch a book, blog or business. Today you can find her here on this blog (in its seventh year!) and at JennyBlake.me, where she explores the intersection of mind, body and business. Follow her on Twitter @jenny_blake.