Jan
31
Diversify Your Investments by Starting a Side Business
Posted under Goals and Goal Setting, Making MoneyHow to add some fun and excitement to your evenings and weekends and make some decent money too.
A year or so ago my Mother-in-law had stopped by the house, when she came in she noticed the mail on the counter (as mother-in-laws can do ). She noted there was a stack of window envelopes with checks in the pile addressed to me. She remarked how it must be great to get checks in the mail instead of just bills and junk mail. "So what are you up to these days?" She knew my prior side business had failed a few years before and was wondering how I was earning my ’side’ money these days.
I told her I was building software and web databases for people on evenings and weekends. I remember her saying I was ‘one of those people’ - not in a bad way, just I was one of those people who had to always have something going. It’s true. I do like to have something going. In fact, I think everyone should. I told her that I think everyone should have at least one side business.
If you’ve never thought of starting a small business, I would encourage you to do some self-exploration and research into a side business you might enjoy running on evenings and weekends. I’ll get into how to find the right side business in future post. But you can still start thinking about it today.
I’d like to make a clear distinction between what I mean when I say a side business versus a small business. A side business is something you can do to occupy your nights and weekends, where a small business would likely take more of a time commitment (i.e. restaurant or storefront). A small business owner can have a side business.
Here are 4 good reasons consider starting a side business:
A side business gives you independence and self-esteem you normally can’t get working a 9-5 job.
Think of all the negatives that can occur while working for someone else. Employee benefit cutbacks, decreased raises, health plan changes, mileage and hotel red tape can all take an emotional toll on anyone who feels trapped in their job. A small business helps you free yourself from the trapped feeling because you always have a backup plan. You can think, “Hey if the worst happens and I lose my job, I can deal with it because I’ve got my side business to back me”.
Having a side business gives you self-confidence that other employees usually do not have. If your business is bringing in even a little money and covering some of your expenses, you will benefit. Fear of job loss or loss in benefits is no longer a big deal.
Managers and bosses who play on the fears of employees by threatening their livelihood if they don’t obey lose their power. Ironically, since you are playing a different game, the boss will normally promote you or transfer you. But make sure you consider your promotion offers carefully, so as not to destroy your side business.
A side business diversifies your investments
Every investment analyst you talk to recommends diversifying your investments. Why? Because one stock can always tank. If you are holding only one stock and it fails, then all of your money goes away with it.
The same is true with your work and your time investment. If you are working just a 9-5 job and using the employee 401k as your only investment strategy, I have one word for you: Enron. Sure, the job might be great now; you might be making a fortune! but what if? What if 2 years from now the company fails or someone has their hand in the till? Most likely something like this won’t happen, but what if it does? Do you really want to grant someone else so much power?
Personally, I prefer to steer my own boat, control my own course - I don’t want someone else to have that much control over my life and future. That’s why a better plan is to create something that you alone manage.
A side business is a wise use of your free time
If you don’t have a side business, let me ask how do you spend your evenings, weekends and time off? Watching TV? Playing computer games? Sleeping? Drinking?
Don’t get me wrong, there is time for TV, fun and games. I have as much fun as the next guy. But I don’t spend every hour of my free time doing typical “free time” things. I look at my free time as both free and an investment. Considering it’s still my time, I can choose to play the whole time, work the whole time or split up the time between work and play. Personally, I choose to split up my time between the two.
Earl Nightingale in Lead the Field asked a great question. He added up all the time in the week where you are not working. (I am paraphrasing) “There is 168 hours in every week, 8736 hours in a year. The average worker works 40 hours a week or 2080 hours a year. That leaves 6656 hours of free time each year, when you subtract out a generous 8 hours of sleep each night, that leaves 3744 hours of free time each year where you can do whatever you want. But do we really need to dedicate that much time to leisure activities like watching TV and socializing?”
It’s a good point. If you dedicated half of that time towards your own side business, that would add up to being almost the same as having a full-time employee working for you if you counted time off for vacations.
A side business is a great education
Imagine yourself having the opportunity to learn about marketing, advertising, law, customer service, management, incorporation and much more without having to pay to go to a fancy business school or MBA program? Starting a side business is like a crash course in all of those subjects because you have to hit the ground running.
If you don’t learn about advertising and marketing you won’t have any customers. If you don’t learn anything about law, you could get sued or taxed into oblivion. Every day will be a new learning experience. And the more you learn the more you earn.
When you add up all the advantages of starting a side business, it becomes clear it’s worth the effort. Even if it fails or doesn’t replace your day job it still provides a great education. And what you learn in your side business can be applied to all of your future business dealings. So what are you waiting for?
Technorati Tags: Goals and goal setting, making money, small business, work
Also See:
Comments
Why you should start a side business
Ambitious software developer Brad Isaac makes a convincing argument why you should start a side business you run on weekends and nights for some extra cash, experience and security. Isaac says a side business (different from a small business, mind…
I think that diversifying your time investment is a great idea, and I’d encourage folks who are looking at this to consider the returns on various businesses.
One of the best earning side businesses I have had is remodeling an old home and selling it at a price premium. It’s a more risky investment than having a set of clients, but the return is certainly worth it.
Also, consider what kind of side business you can have with the help of your spouse. There are a much wider variety of opportunities available for a team of two talented individuals.
Logich, although I have never done it, I love the home improvement stuff too. Woodworking, lying hardwood floors, painting and tiling (wait scratch tiling - hate that). But “flipping a house” would be a fun side-business I am sure could be used for serious financial gain.
There’s something to be said for making your side job different from your day job and not just a case of “What I dont get to work on during the day I’ll do on my own.” This is particularly true of software geeks (like myself) who will inevitably face the battle of whether to work on the technologies demanded of their side businesses, or those that could benefit them in their daily grind.
Go around the issue altogether. If you write software for a living, then write greeting cards at night.
Hi Brad, thanks for writing up your thoughts on this, starting something on the side is something I’d like to get going for myself soon. If you have the time and desire, I hope you could write a little bit about how you deal with this from a legal/taxation standpoint. Did you have to do anything special to get started? That’s an issue I’ve always been concerned about.
I’m enjoying the blog very much! Keep up the good work.
6566 hours of free time?!? You’re not married with kids, are you…?
Hey Brad– You’re really kicking butt lately. Great post, and I think it’s pretty good stuff. Keep up the great work!
As for my side jobs, none of them are paying money yet, but they sure are fun!
Put free time into perspective
There is 168 hours in every week, 8736 hours in a year. The average worker works 40 hours a week or 2080 hours a year. That leaves 6656 hours of free time each year, when you subtract out a generous 8 hours of sleep each night, that leaves 3744 hours…
Use Your Free Time for a Side Business
Think about starting a side business. It may turn into a small business. Or maybe even turn into your full-time real job. Or you may never make a penny of profit. But even if it doesn’t work out, it’s still better than watching that Mama’s Family mar…
What is this thing you call “free time”? As a previous poster said, you must not be married with children.
Haha…thanks for the great posts and challenges.
Yes, I’m married with 2 kids, sure they take a lot of time. But that doesn’t make a side business impossible.
At stages of life, there is less or more free time than others. For instance, 2 weeks ago, I had 0% time for side business stuff because there were non-stop family gatherings, doctors appointments, parent teacher meetings, dates with my wife… But then this week there’s been more time..
There are different periods in everyone’s life where they have more time and less time. Unmarried 20-30 year-olds may have 7000 free hours a year, where a senior citizen may have 16 free hours a day.
How much time a day do you spend surfing, checking personal email and Instant messengers? All that time adds up. If you can trade 2 hours of surfing a day for exploring ideas on small businesses, once you find one, you might have ways of trimming other time wasters to get it rolling.
Bil,
First a disclaimer: I am not an accountant or lawyer, plus, taxes and laws vary from state to state so use your own discretion :)
One of the advantages of the side business in my state, is you can start it claim it is a “hobby”. Only until you hit a certain amount of earnings do you have to file quarterly. Incorporation would protect your personal assets but it might not be necessary if you qualify your side business under the “hobby” designation I used above.
So depending on the side business you are considering, you may want to google hobby business taxes and law for your particular state.
Also, I think the cheapest and smartest thing to do to alliviate your tax and legal concerns now and to get the right info for your state would be to ask around and find a good accountant you could meet with to discuss these matters. It might cost you $80 to get the info you need. I’d say the accountant would be the first stop because he or she could answer whether incorporation was necessary and what type of legal issues might require you retain a lawyer.
P.S. That exactly how I found out about the hobby status in NC. :)
Hope this helps
Hm. Either your wife carries most of the family management, or you don’t sleep much, or you don’t spend as much time at your day job as I do. I spend NO time surfing the web or any of that, and in general I make very efficient use of my time. I do spend more than 8 hours a day at my day job. I do sleep 7 hours a night or so. But I wouldn’t be able to find more than a couple of hours a week to spend on a side business; anything more than that would be taking away from either my day job or my time with my family, neither of which I’m willing to do. Indeed, I find that when I start thinking about a side business, it’s time to get a new job. I could find a few hours a night after the kids go to bed, but I currently either spend that time working (at my day job) or with my wife. In any event, good for you.
Diversify Your Investments by Starting a Side Business
Here is a great article about diversification:
http://goalsuccess.typepad.com/goaltips/2006/01/diversify_your_.html
…
Happy Links
20 Ideas for a Great Podcast. Podcasts are fragile things because you’ve got someone’s full attention, here are some ideas for how to use that attention wisely. (written by yours truly). Fire And Motion, a classic from worship-worthy entrepreneur Joel
“So what are you waiting for?”
A good idea.
Check out my post today Are you REALLY motivated by money? One way to start getting more ideas is to dig in and explore your main interests and hobbies. Do some deeper research into the things you find yourself thinking about. And ask your friends for a second opinion - they often see you in a way you might not.
Hey Brad, I kinda like your stuff…
Shudn’t you also write something for compulsive websurfers and bloggers…? or have you already…? (in which case i m sorry)
I believe the present generation is spending a lot of time away from work (and family) due to this addiction… side business would be a good antidote from that point as well…
Nilesh,
Sure, those would be great topics to blog about.
hahaha
Are you laughing because of a joke I’m missing or the fact I dedicated a blog post to you? ;)
http://security.piccola.us/security/index.php?/archives/120-unknown.html
Network Security Podcast, Episode 13I
like the way the podcast sounds at 128kbps, and no one complained, so
I’m going to leave it at that for the foreseeable future. Preperation
for the RSA conference continues, and I’m definitely leaning towards
I agree with your views but where to start from?
Aman,
Start with what you do best. Are you good with computers? Start a part time computer consultant business. Are you good at art? Start a design business. Are you good at cooking? Start a part time catering business.
Think about what you’d love to do if you could make a living doing it. And then get out there and do it. Don’t worry about all the incorporation stuff, getting storefronts or any of that nonsense until you are successful. Just spread the word that you are now doing ____________ among all your friends and co-workers. People will want to help you so they’ll send you business.
Any other side-business owners who can help Aman out with this question?