Layoff Lesson 3 – Develop a Side Hustle

I define a side hustle as anything that generates active income from work done outside of your primary income, your W2 income. It is active in the sense that you must do something to generate that income, and it is not encumbered with financial obligations.

A side hustle is inherently different than a second job because it includes significant autonomy, the schedule is flexible, and you can generally throttle the income up or down at your discretion.

I had matched roughly 50% of my annual income through several side hustles that my wife and I had spun up over the years. These included my wife’s online tutoring, financing builders on spec homes, and pooling capital for syndicated investments. This income has allowed us to invest a significant amount of money in syndicated investments over the past few years which generates its own revenue and requires zero work once the investment has been made.

Do’s and Don’ts of a side hustle. Before you jump feet first into a side hustle, here are a few do’s and don’ts. These are general guidelines that we have found to be effective, but they are just guidelines.

• Do start small. You do not need to bet everything on your side hustle starting out. Start small to keep your capital investment low and so that you can start immediately. Starting small allows you to get going quickly, learn valuable lessons without losing significant money, and you get to decide if you like what you are doing.
• Don’t do anything on company time. Most companies frown heavily on employees that use company time and resources for a personal business. While there may be some organizations that are okay with a limited amount of crossover (a math tutor at a high school), be sure you have a clear understanding of the boundaries you can cross.
• Do think of scale. The more systems and processes you can put into place the better. This allows you to be more efficient and profitable. It allows you to spend more time working on your business instead of working in your business.
• Don’t neglect your family or friends. Easier said than done. Be sure to carve out time between work and side hustle for the people who mean most to you. This is where systems and discipline are important. It is amazing how much you can get accomplished in 30 minutes every day.
• Do grow your business with technology. We have helped advise multiple people on their side hustle from real estate investors to wood working to tutors to fitness instructors. Technology allows individuals to scale and profit in unprecedented ways, and the best part is that expanding often results in higher profits with less time invested.
• Don’t create a conflict of interest. Do not do anything illegal or unethical. I don’t know if attorneys can practice law outside of their law firm, but if this is a conflict of interest, you would not want to put your license to practice at risk in addition to your primary income. In other industries this may be more of a guideline, and you will need to calculate risk verse reward on these situations.

I have a side hustle, what now?

Take the income you are receiving and pay your taxes. We like to avoid (legally) every tax dollar that we possibly can, but you want to show your side hustle with your income. Showing a consistently profitable business venture allows you to obtain financing if you ever need it (especially important should you lose your W2 income). It also allows you to declare expenses that you would not otherwise be able to declare.

Next, take your income and either reinvest it in your business to increase your income, or invest it in other passive businesses that will generate income without you having to do much work at all. Again, we are negative on the stock market, and we will discuss why later. We focus more on syndicated investments for our portfolio. We invest income from our side projects into passive income. This income adds up dramatically over time. We have followed investors that have been able to achieve full financial independence simply from their passive cash flowing investments.

Having trouble coming up with a side hustle or determining how to grow your current side hustle? Feel free to engage us. We can help brainstorm ideas and opportunities to 1) identify a side hustle for you, 2) grow your side hustle, and 3) enhance the profitability of your side hustle.