How To Start a Side Business While Employed
Begin your side business while still employed with these practical tips. Balance your full-time job and entrepreneurial goals effectively.
Many entrepreneurs find scope outside of their full-time jobs to start a business. This lets them build a side business and test their ideas, before fully committing and risking the loss of their main source of income. Being employed provides a steady paycheck and benefits, which you can reinvest in your side business.
Starting any business takes hard work and dedication, especially when you continue to be employed. You must be strategic with your time, learning to maximize productivity and efficiency as you build your business. Once you’re confident you can support yourself with your side business, you can transition from your full-time job and devote all of your time to this new venture.
This guide will walk you through how to start a side business while employed.
Benefits of starting a business
Staying at your current full-time job for as long as possible can help you build up the capital you need to fund your business and give you a safety net along with these other benefits:
- Steady income. You can invest any extra income you have into your business.
- Benefits. As a full-time employee, you may receive healthcare and retirement planning benefits that you’ll need to pay for out of pocket once you leave.
- Less pressure. You can take more time making decisions and planning because you're not solely relying on your new business for income.
- Forces you to be strategic. Because you have limited time, you must prioritize and be as efficient as possible, often leading to innovation.
- Afford to take more risks. When you're still working, you can take risks that you may not be able to if you need to support yourself with the business.
- Networking. Working in a professional environment can present networking opportunities. Your coworkers or employer could offer valuable advice and even become a customer one day.
Starting a business while employed
Working full time and starting a business may mean you need to make sacrifices to your personal life, like putting in hours after your workday ends or on the weekends. Remaining employed can give you more financial freedom and the capital you need to launch and grow this side business. This hard work pays off when you have a successful business model that has the potential to become your new full-time career.
If you’re considering starting a business while employed, these are the steps you’ll want to take:
Steps:
- Consider your current employer
- Decide on your business idea
- Perform a SWOT analysis
- Set SMART goals
- Set aside time in your schedule
- Outsource what you can
- Seek continuous improvement
1. Consider your current employer
The first aspect of starting a business while working full time is to see if you can legally do so. Check your current employee contract for any non-compete clauses. This type of restriction could prevent you from starting a business while working for your employer or even afterward for a set period of time.
Make sure that you don’t have any intellectual property agreements in your contract, either. Some companies include clauses that give them rights to their employees' ideas and innovations that they create while at work or even during off-hours if they are related to the company’s business.
Even if you don’t have any intellectual property agreements, avoid using any company resources while starting and working on your side hustle. This includes company-issued computers, software, and even office supplies. The company may be able to claim ownership of your side business if you use their resources.
When starting your side business, keep in mind any non-disclosure agreements that you’ve signed. You can face legal consequences if you share the company’s intellectual property or use trade secrets in your side business.
Tip: If you need clarification or help going over your contract, you can find contract lawyers and other legal professionals on Upwork.
2. Decide on your business idea
The first step in starting a side business is to figure out what exactly your product or service is. Formulate an idea, and you can then develop your business plan and logistics. A good business idea fills a market gap, often simplifying a process or solving a need. It has a clear use case and a specific audience who would want it.
Signs you have a good business idea include:
- Marketability. You've identified a target audience who would want and need your business and a method for reaching them. This audience could be another business or consumers directly.
- Consumer demand. Through research, you know that your audience would pay for your products or services. You can use Google Trends to see the search interest for keywords and topics. If you're considering freelance, check out the most in-demand jobs and skills for 2024 on Upwork.
- Profitability. You can make money from this idea. Think about the initial investment and startup costs and how many products or services you would need to sell to begin making a profit.
- Clear purpose. Is your product or service useful? Successful businesses solve wants and needs or make life easier. Be realistic about why someone would buy your idea.
- Low competition. Take time to see if your idea already exists and who your competition is. How is your idea better or different? Figure out why someone would choose you over your competition—this is your unique selling proposition.
- Scalability. You’re able to offer more to your customers without sacrificing quality, whether ramping up production or expanding your services.
- Personal passion. Having a passion for your business idea is the most important factor since it takes a lot of time and energy to be an entrepreneur and start your own business. Your business idea should excite you, so you don't mind working extra hours to bring it to life.
Keep reading for more side business ideas that you can do while employed.
3. Perform a SWOT analysis
Once you've decided on a business idea, you need to look at it objectively to build your business plan and prioritize your to-do list. You can do this by creating a SWOT analysis, which identifies strengths, weaknesses, opportunities, and threats.
A SWOT analysis gives you an overview of your business and helps you make informed decisions. Successful organizations regularly use SWOT and other types of competitive analyses as tools for planning and decision-making.
Conducting a SWOT analysis
The first half of a SWOT analysis looks at the internal factors—your business's strengths and weaknesses. The second half examines external factors—the opportunities and threats.
Performing a SWOT analysis requires introspection and self-reflection, which can be challenging. The goal is to be objective; one of the best ways to conduct a SWOT analysis is to ask questions for each category.
Example of SWOT questions by category:
Strengths:
- What is your biggest selling point?
- Why would someone choose you over a competitor?
- What do you do best?
- What are you most proud of?
Weaknesses:
- What is your biggest barrier to entering the market?
- What could you improve on?
- What's holding you back right now?
- What resources (talent, knowledge, capital) are you lacking?
- What advantages do your competitors have?
Opportunities:
- What is the market missing?
- What could your competitors be doing better?
- Could you benefit from any upcoming trends?
- Is there a customer need that none of your competitors are meeting?
- What changes in the industry could help you?
Threats:
- Could any of your weaknesses prevent you from achieving your goals?
- Do you have any direct competitors?
- What are the negative factors in the market right now?
- Do you predict any changes in your customer’s preferences and behaviors?
- How could projected social and economic changes affect your business?
Example of a SWOT analysis:
Tip: If you need help with your SWOT analysis, you can check out market researchers in Project CatalogTM.
4. Set SMART goals
What do you want to accomplish in the first three months? Okay, what about six months, a year, or five years? Figuring out your business goals lets you know what to focus on and what actions to take. Goal-setting is fundamental when starting a new business and working full time. When you have a to-do list that never ends, how do you know what to start on first? Set SMART goals and let them guide you.
SMART goals are specific, measurable, achievable, relevant, and time-bound. When goal-setting, you need to create clearly defined objectives that are possible. Dreams and goals are different. A goal should be reasonably attainable within a set timeframe, for example:
- Specific. Each goal should be a clear objective. Narrow down your goals based on the different outcomes you want.
- Measurable. The goal needs to be quantifiable. You should be able to monitor your successes to see how close you’re getting to your ultimate objectives.
- Achievable. Your goals should be doable within reason, so you're setting yourself up for success and not wasting time that could be better spent on another goal. If you have a larger and more difficult goal, break it up into smaller actionable milestones.
- Relevant. Stay on track with your vision and make sure each of your goals aligns with your overall mission. Ask yourself why you're setting each goal.
- Time-bound. Every goal should have a deadline so you know the order of importance and which goal you should be currently working on. Having a date you want to reach a goal by also helps you evaluate success.
See an example of how you can rethink a goal using the SMART technique:
Idea: I want to see my products in all of the local grocery stores.
SMART goal: I will pitch my hand-made soap to three local health food stores within the next three months.
While your vision of success may be seeing your products on the shelf at your local grocery stores, you need to break it down into steps that you can take to get there, such as:
- Specific. Instead of saying products, the goal narrows down to specify which products.
- Measurable. Your goal identifies how many stores you need to pitch to.
- Achievable. Instead of having the goal of seeing your products on the shelves, which you have less control over, the goal is to make the pitches.
- Relevant. The goal still works on expanding commerce channels.
- Time-bound. The goal has a specific deadline of three months.
5. Set aside time in your schedule
Entrepreneurs and business owners know how to manage their time effectively. You can work full time and start a business, but it requires discipline and sticking to a schedule.
Start working on your business venture an hour or two before or after your job each day, and try dedicating time on the weekends if you can. Finding the time to work on your business may be challenging, but creating a set schedule can make it easier.
You don't want your new business to affect your current job negatively. When you're excited about a new business and have a to-do list that you can't wait to start, it's easy to feel less enthusiastic and motivated at your current job.
Maintaining work quality is important in case you decide not to pursue your new business and instead stay at your job. Your current employer could also become a client later on, or you may need a recommendation or introduction. Cultivating good relationships as a business owner is essential.
Tip: Make sure you don’t work on your side business during company time or on company property (computers or phones) to avoid any legal issues.
6. Outsource what you can
Another aspect of effective time management is knowing when to outsource. Building a business takes a lot of time, but you don't have to complete every task yourself. While you could learn how to build a website or use Photoshop to make a logo, what if you hired a freelancer instead? Find independent talent specializing in precisely the skills you need, saving you time and energy.
Even if you don't have startup capital to hire a staff, you can still find independent talent to work within your budget. On Project Catalog, you can shop fixed-priced projects, so you know exactly how much any project will cost. See which freelancers are available in your price range for each project you need help with.
What to consider when deciding to outsource a project:
- Does this require any specialized skills?some text
- If so, is this a skill that would be beneficial for you to learn?
- Do you have the time to learn it?some text
- If so, how much time would the project take you to complete?
- And what other tasks could you be finishing during that time?
- If you had to pay yourself your hourly salary, how much would that cost?some text
- Could you hire a freelancer for less?
7. Seek continuous improvement
Successful entrepreneurs are lifelong learners, continuously looking for ways to improve. When starting a business, you can't know everything: no one does. The top business people are lifelong learners who stay up-to-date in their industries, keeping up with trends and new technologies. They’re also able to look at themselves and their companies objectively to see what could be made better.
One way you can improve is by asking for feedback as you build your business. Listen to your customers and figure out what works and what doesn't. Ask the people around you if they would do anything differently.
Having an open mind helps you to see other people's points of view. Someone on the outside may notice something seemingly obvious that you can't see when you're in the middle of the action.
Being able to accept feedback and look at yourself objectively and self-criticize is a powerful skill. As a business owner, you have to be able to separate yourself from your business and not take feedback personally. Even if the input is negative, use it to improve your product or service.
Tip: Freelancers can stay competitive and offer more services to their clients by upskilling.
Don't quit your full-time job right away
When you start a brand new business, it rarely earns money on day one. You likely will need to invest some of your savings upfront for startup and operational costs.
While you may want to quit your job and go all-in on your business, unless you have the financial security to live off your savings until your business starts to thrive, avoid quitting your full-time job.
Ideally, wait until your new business brings in enough income to support you before resigning. Not all businesses succeed and become profitable. Sometimes, even the greatest ideas fail or need to be readjusted and reworked.
Avoid leaving your job until you can safely project that you’ll make enough at your new business to meet your living expenses without having to stress financially too much.
Tip: You can hire a freelance financial planner to help determine a budget and evaluate your business's profits.
Businesses you can start while employed
Many entrepreneurs create a side business around their hobbies, finding ways to monetize them. This hobby could produce a product or service that they can offer customers or clients. When you’re spending time doing something that you love, it often doesn’t feel as much like work. You could also start a side business around a skill that you already have or one that you’ve always wanted to learn.
If you don’t have an idea of what side business you want to start while employed, these are some ideas to help you brainstorm:
- Freelancing. Freelancers are independent professionals who pitch and provide services directly to their clients, negotiating their contracts and deciding what they want to charge. On Upwork, you find projects you’re interested in, submit proposals, and get paid all within the platform.
- Online Store. You could earn money by setting up an e-commerce site and selling your own goods, sourcing wholesale or artisan products, dropshipping, or becoming an affiliate.
- Blogging or vlogging. If you have a topic or niche that you’re interested in, you could start a blog or vlog and monetize it by running ads once you have enough traffic or promoting products as an affiliate.
- Tutoring or coaching. Teach and help students and professionals with a subject, skill, or software, or provide career guidance as a tutor or coach.
- Social media management. Use your experience with social media to create content and manage channels for brands and individuals.
- Real estate investing. Develop passive income streams by investing in real estate. You can rent out rooms or entire apartments and homes on platforms like Airbnb and Vrbo.
- Event planning. Offer your services as an in-person or virtual event planner specializing in corporate events like product launches or consumer events like weddings.
- Handmade crafts. Sell your physical or digital crafts by setting up your own e-commerce website or using a platform like Etsy or opening a local storefront.
- App or website development. Depending on what languages you can code in and the programs you use, you can develop websites or mobile apps for clients as a side hustle.
- Photography. If you have experience with photography and image editing software, you could start a business working on-site taking photos or have clients send you products and stage them at home.
FAQs about side businesses
When entrepreneurs are considering starting a side business while employed, they naturally have questions. Below we cover some of the most common.
Can an employer fire you for having a side business?
Whether or not an employer can fire you for having a side business depends on where you live. Many states in the U.S have “at will employment,” which means that an employer can fire you at any point without notice and without cause.
Your employer may also have legal clauses in your employment contract that prevent you from being able to start or even work a side business if it’s in the same industry and could “compete” with your current position. Carefully read your employment contract and consider seeking legal counsel before starting a side business.
Choose a side business that is different from your current role, company, and ideally industry. Make sure that working your side business doesn’t affect your ability to perform your job. This will help reduce the chances of your employer noticing or interfering.
Which side business is most profitable?
The earning potential for a side business depends on your current skill set and how much time and resources you’re willing to invest upfront. You may already have a hobby that is easily monetizable or a skill that is in high demand by clients. Some businesses take time before they become profitable.
As a freelancer, you get to decide how much you want to charge clients based on the average hourly rates for your skill. You may be able to make significantly more as a freelancer than you would as an employee, since you can increase your rates based on demand instead of having to ask for a raise from your manager.
How can I balance working full-time and starting a side business?
Your side business should never affect your job performance while employed. If you have a full-time role, you’ll need to work at your side hustle after hours, during your lunch break, and on weekends. Working both a full- and part-time job can lead to burnout, so you’ll need to be realistic about the hours you work and outsource what you can.
Be strategic with your time and spend it wisely. Make a list of tasks and order them by deadline and importance. Instead of multi-tasking, focus on one item at a time. Set a time limit for each task, do what you can and then move on to the next. Think about what you need to do yourself and consider outsourcing other tasks to freelancers.
How do I scale or grow my business while working full-time?
Once your business starts to succeed, you’ll need to figure out how to grow and scale. The goal will likely be for your side business to become your full-time career. You may hit the limit of what you can do by yourself, and then it’s time to hire help.
Finding the time to scale and grow on your own can become difficult. Working with other independent professionals can help you grow and scale faster. As your business begins to bring in income or if you have savings you can invest, hire freelancers to take over the tasks you don’t need to be hands-on for.
What are the tax implications of having a side business?
When starting a side business, you may have to create a business entity before you can legally sell your products or services and accept payments. As a small business owner, you can set up a Sole Proprietorship or LLC depending on your business needs.
Your business will also have to pay taxes. Freelancers pay self-employment tax. If you’re selling products you may need to set up sales tax based on where you live. Working on Upwork or selling on a platform like Etsy can make this process easier, keeping all of your business in one place.
Tip: A freelance legal business consultant can help you register your business and set up the right tax documents.
Start your business with Upwork
Whether you’re looking to start your freelance career or build a business, you can find the resources you need on Upwork. Search for jobs that fit your skillset on the Talent Marketplace™ and submit proposals. There are thousands of opportunities every day.
Maximize your efficiency by working on what you do best and using specialized talent for everything else. Build a team of freelancers, your Virtual Talent Bench™, with the right skills that you can turn to. Explore Project Catalog and find fixed projects in your price range, or post your project on the Talent Marketplace and see what proposals come in. Make Upwork your home for work.
Final tip: If you need help starting your business these are the types of freelancers on Upwork that you can work with:
- Business consultants. Provide expert guidance, advice, and help develop business models and strategies.
- Legal advisors.Offer legal advice to make sure your business is compliant and set up properly.
- Accountants or bookkeepers. Manage finances and business budget ranging from daily transactions to tax preparation.
- Graphic designers. Create visual content for your business like logos, social media graphics, marketing collateral, and packaging.
- Web developers. Build a responsive and user-friendly website for your business.
- SEO expert. Drive traffic to your website through search engine optimization and organic content.
- Social media managers. Oversee the day-to-day of your social media channels by posting content and running ads.
- Digital marketer. Develop a marketing strategy to drive traffic and increase brand awareness using online channels.
- Content writers. Create engaging written content for your website, marketing collateral, and social media channels.
- Virtual assistants. Provide remote support with daily administrative tasks.
- Lead generation specialists. Identify and find contact information for new potential customers.
This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.
Upwork is not affiliated with and does not sponsor or endorse any of the tools or services discussed in this article. These tools and services are provided only as potential options, and each reader and company should take the time needed to adequately analyze and determine the tools or services that would best fit their specific needs and situation.