Every entrepreneur has unique priorities and approaches to how they do things. You may be the kind of person who jumps straight into the deep end before checking if the water is cold. Or maybe you dip your toe into the shallow end and slowly ease into the water.
But how do you approach your side hustle?
If you’re wondering if you need a business plan for your side hustle, here are some things to consider…
What Type of Side Hustle?
Your first consideration as to whether you need a business plan is the type of side hustle you choose.
Obviously, if you're planning to deliver food on the weekends as a side hustle, you can probably skip the business plan. You may want to run the numbers to make sure it's a profitable gig, especially if you're responsible for your own expenses.
And you should compare it to other side hustles to see if your time isn't better spent doing other things.
But in this instance, you can probably forgo a detailed business plan.
However, if your side hustle is more involved and requires a significant investment, a business plan becomes increasingly important. And by significant investment, I mean significant to you.
For some, a ninety-nine-dollar online course to learn a new skill can be a significant investment. For others, it might be a ten-thousand-dollar investment into an auto detailing side hustle.
At the end of the day, your decision to create a business plan will likely depend on the level of risk and likelihood of success. A part-time job or a side hustle like Uber with little downside generally doesn't require a side hustle. If one of those gigs doesn't work out, you can just walk away.
However, if you're investing money into equipment and building a client base and hours upon hours into developing a new skill, the following reasons you need a business plan are for you…
Get A Deeper Understanding of Your Side Hustle
Drafting a business plan forces you to think through every aspect of your business or side hustle in detail. You might uncover aspects you hadn’t thought of before.
Let's explore this a little further…
- The Big Picture AND The Fine Details – Having gone down this path multiple times now, a side hustle is like a complex puzzle that’s always changing. Each piece of the puzzle, from your target market and operational methods to your competition and costs, not only plays a critical role, but they are, in some ways, moving targets.
So, it’s good to start by fitting these pieces together to gain a clearer picture of what your side hustle will look like while also planning hypothetical scenarios to see if your plan is durable when the pieces no longer fit together.
- Critical Questions to Consider – Start by asking the tough questions.
Who are your customers?
What problem does your product or service solve for them?
How much will it really cost to start and run your business?
These questions are not optional. They are the foundation of your business.
- Market Research – If you’re going to navigate the business landscape, you must understand the terrain. Market research is not a buzzword you can gloss over. It's literally your compass, and without it, there’s a good chance you’ll get lost.
This mistake took me almost two years, a mountain of frustration, and tens (if not hundreds) of thousands of dollars in lost revenue because I “thought” I knew my market and that research was unnecessary.
- Don’t Reinvent the Wheel – This relates to the previous point. Take two side hustlers… a friend of mine and me.
I jumped in without a plan, thinking I knew best. As a result, I struggled because I did not know what I did not know.
Of course, that led to unforeseen challenges and flat-out mistakes… one that caused me to shut down entirely and start from scratch. If I had thought before jumping in, I could have avoided that (not that it wasn't a learning lesson).
Anyway, my friend, on the other hand, took the time early on to plan and understand the market and her customer's needs better.
She reached her goals well over a year before me without the headaches and stress I went through. Not that her journey was easy, but she understood the big picture and the details. As a result, she was able to dodge obstacles that were hitting me daily.
- The Power of Data – Statistics show that businesses with thorough planning have a significantly higher chance of success. They don’t state that success is guaranteed, but if you’re spending a tremendous amount of time, effort, and money on your side hustle, it’s better to have a higher chance than to not.
- Mapping Out Your Journey – Detailing every aspect of your plan might sound daunting, and there’s some flexibility here.
But you should have a rough idea of where you’re going. This includes financial forecasts, marketing strategies, and even an exit strategy. Again, taking a lesson from experience, you should be prepared for everything that could get thrown at you.
- Reflect on Your “Why” – Finally, reflect on what drives you. Why this business? Why now? Your motivations can be as enlightening as your market research.
Do you even care about this side hustle, or is it just about the money, because sustaining a side hustle, if it’s a business you have zero interest in, is extremely difficult.
Again, as mentioned earlier, this isn’t as critical a question if you’re doing rideshare as a side hustle or delivering pizza.
But if you’re investing (potentially) thousands into something for equipment, marketing and building a client base, not to mention hours away from your family and friends, it should be something you at least get some enjoyment and satisfaction from. Otherwise, it just becomes another job you don’t particularly enjoy doing.
So, understanding your “why” is as critical as the “how”.
A Business Plan Helps You Balance Passion with Pragmatism
Passion drives entrepreneurs, but pragmatism sustains a business. A business plan helps you balance these approaches. Starting a side hustle or business is a long-term journey, and you’ll need both.
Knowing your route from the start saves you from getting lost, especially in the early stages of a side hustle.
Passion alone might get you off the ground, and that’s probably where you’re starting. But it’s the practical steps outlined in your business plan that provide the nuts and bolts and turn your side hustle from a dream to a sustainable business.
It guides your decisions, from financial management to marketing strategies, ensuring your enthusiasm is matched with equal parts of realism and foresight.
Ultimately, balancing passion with pragmatism isn't about dampening your entrepreneurial spirit, although it can feel like that when the numbers don’t add up.
It’s also about channeling your energy effectively to find real solutions to the many challenges you’ll encounter and create something enduring and successful.
Learn From the Business Planning Process
The process of creating a business plan is an important learning exercise in itself. It can reveal new insights and opportunities about your business, but it also promotes personal growth. After all, not being able to sit down and properly plan out a business is a big blind spot.
Whether it’s because you’re not sure how to do it or don’t want to do it, it’s a management deficiency that could come back to bite you… and, believe me, I’ve learned this lesson the hard way (maybe one day I’ll have the courage to share the specifics).
But this planning process is far more than just jotting down some numbers and a mission statement. It should be an eye-opener (if not, you’re doing it wrong), revealing layers and angles to your side hustle that you might not have considered.
If possible, sit down with a good friend who's not afraid to ask you tough questions.
- Why will your business work?
- What’s your plan if the market shifts?
- Do you have the hours you’ll need to get it off the ground?
This interrogation isn’t to dissuade you or cast a shadow over your side hustle. It’s to help you see the forest through the trees.
As you answer these questions, you start seeing your business in a whole new light. You uncover opportunities (and challenges) that were hiding in plain sight, and you may even stumble upon ideas and solutions that alter your entire strategy.
And again, a business plan is as much about you as it is about the business.
It’ll help you identify your strengths and, more importantly, your blind spots. What parts of the business are you looking forward to doing, and what parts are you dreading?
Nothing has taught me more about myself than my business (and parenting, but that’s not what this article is about).
And building my business (and losing a business) has been as much about building myself as it has been about the business itself. Maybe more.
Realizing where you need help and what you need to improve on is a huge deal. It's the difference between steering your ship successfully through rough waters or straight into an iceberg, sending you to the rock bottom of the ocean.
Success Stories vs. Statistics
Entrepreneurship is popular today. In fact, many entrepreneurs have become celebrities, and we know them not for their actual businesses but for their personalities.
It wouldn’t surprise me if many (maybe most) are far less successful in their actual business than they are at talking about their business.
But those big, flashy success stories and charismatic entrepreneurs who inspire us, also create success bias, a type of survivorship bias that focuses solely on those who pass a selection process (in this instance, those who succeed) while omitting those who did not.
So, while these success stories are motivating and helpful in many ways, it's important to remember that we're looking at the outliers. The lottery winners.
That doesn't mean a lot of hard work and sweat did not go into these successes. It's just that these are the stories we hear because they are unique, rare, and, of course… successful.
A lot of hard work and sweat have resulted in failure as well. But we don’t hear about those, even though they far outnumber the successes.
The entrepreneurs who worked just as hard, maybe harder, but came up short for any number of unfortunate circumstances, are not doing the podcast and public speaking circuit. Books are not written about those who failed and did not make a comeback.
Unfortunately, “unique” and “rare” are not models we can use for our own businesses. We can't copy “luck,” and we can't control when we were born, which is also a success factor, as described in Malcolm Gladwell's book Outliers.
The reality is, for every one of those spontaneous success stories, there are countless others who rushed in without a plan and ended up in over their heads.
As I mentioned above, the stats tell us that businesses that start with a well-thought-out plan have a significantly higher chance of not just surviving but thriving. In other words, the lottery player might win big occasionally, but it’s the chess player who strategically builds a foundation for consistent success.
A Benchmark for Changing Circumstances
A business plan isn’t set in stone. It’s a flexible guide that evolves with your business, a living document that grows and changes as you gain more insight and experience.
That begs the question, “If a business plan keeps changing, why bother creating one at all?”
Great question. Your business plan is a critical benchmark that helps you track those changes. For example, if in six months the numbers are not adding up, you can go back and identify exactly what the problem is.
You may have a vague idea of what’s going on. It may be a new competitor or an existing competitor who dropped prices. Maybe economic circumstances reduced demand for your service or a situation like those of us who create content… a new technology like AI is disrupting your market in unpredictable ways.
What we think is happening, though, might not be exactly what’s happening. Or it is happening, but the impact is less (or more) significant than we realize. We tell ourselves stories to justify our successes and failures, and while there is usually some truth in those stories, they don’t give us the granular information we need to solve problems and adapt to new situations.
When starting out, you've got this plan that seems rock solid. But as you roll along, things change. The market shifts, new competitors emerge, or maybe you discover your customers want something a bit different. Your business plan is a tangible document that allows you to plug in those variables and chart a profitable path.
Time and Resource Allocation
Jumping into the deep end might seem like the most direct and fastest approach, and there is some truth to that. But it’s not faster if you miss something important that sets you back or puts a stop to your side hustle entirely.
A business plan helps you prioritize your time and resources effectively because being busy is not the same as being productive.
Without a plan, it's easy to get sidetracked or spend cash on stuff that doesn't really move the needle. You might pour hours into perfecting a logo or a website when you haven't even validated your product idea yet.
Or maybe you spend a chunk of your budget on office supplies that are not necessary for this stage of your business. How you spend in your business is more difficult than it may seem.
For example, if you’re buying a relatively expensive piece of equipment, do you spend extra for the higher quality item so that it lasts and doesn’t break down when you need it most? Or is that just a justification to buy the thing you want when the much cheaper version is all you need?
A business plan keeps you focused on what matters most right now. Your competitor is probably making smart decisions, so you need to make smart decisions too.
It Helps Determine Viability
Your business plan is also a litmus test for your side hustle, forcing you to do your homework and potentially face reality. After doing market research, financial projections, competitor analysis, etc., if the numbers don’t add up, your original idea might not be viable.
Your business plan will help you tweak your idea so that it is doable. Maybe you scale down, find a unique niche or approach, or adjust your core product or service entirely.
For someone who prefers a more spontaneous approach, it might be useful to consider a lean business plan. Keep it simple. At a minimum, cover your basics without wasting time. This approach strikes a balance between careful planning and the flexibility to pivot quickly.
More Reasons You May Need a Business Plan
Some of the following reasons may overlap with those above, but they are also worth highlighting…
- Clarity – A business plan helps you clarify your ideas and goals. Sometimes, what seems clear in your head gets complicated once you start digging into the details. A business plan forces you to articulate your vision and strategy, making them more tangible and actionable.
- Understanding Your Market – It forces you to properly understand your market. A good business plan involves real research, which requires learning who your customers are, what they need, and what your competitors are doing. Without this, you may be making costly decisions based on assumptions (which are often hard to distinguish from hopes).
- Risk management – Every business and side hustle endeavor has risks. A well-prepared plan won’t eliminate risk, but it will help you identify risks and provide strategies to mitigate them.
- Funding – Finding and convincing investors to invest in your business is one of the biggest reasons for a business plan. In fact, some kind of business plan is mandatory if you’re soliciting funding… for your own peace of mind and for your investors.
If things don’t work out, you’ll need specifics as to why. And you want your lender going in with eyes wide open, fully understanding their risk.
With that said, I didn’t focus on the funding aspect of a business plan because you’re probably reading this in the context of starting a side hustle rather than a full-scale business. However, if you are seeking funding for your side hustle, a business plan is (or should be) non-negotiable.
Make sure your investor knows what they are investing in and what the risks are.
Finally, you want your side hustle to be a success. You want to make money and you want to do something you enjoy. Something that gives you satisfaction and autonomy.
Those are life-changing benefits that a good side hustle can provide. And your best chance of enjoying those benefits is to start with a business plan.