While most entrepreneurs go all-in when launching a business, starting a side business isn’t unheard of. According to a report from the Global Entrepreneurship Monitor, six percent of the American working population launch businesses while within organizations. This number might seem small, but given the employed population of the US, millions of people are launching businesses on the side.
But there are risks to devoting your precious free time on a side business idea. What if it’s the wrong idea? What if it doesn’t make money? What if, it turns out, you don’t have enough time to work on your side business?
That’s why it’s best to invest an hour or so to dig deeper into your idea before you spend your weekends and hard-earned salary on it. This guide and its accompanying worksheet will help walk you through the process.
Free PDF Worksheet Download
Download the free Side Business Idea Evaluation – Worksheet to use with this tutorial.
1. Evaluate Your Business Idea
The first thing you can do is to evaluate your business idea on its own, without looking at many external factors yet, such as pricing or marketability. Here are some questions you can ask yourself:
How Painful Is the Problem You’re Trying to Solve?
The more painful or the more urgent the problem, the more likely you’ll have potential customers looking for a solution.
For example, if you’re thinking of becoming a photographer during weekends, one of your options is to become a pet photographer. Since many pet owners already have adequate cameras on their smartphones to document their pets’ lives, only a minority would have this service professionally done.
A wedding photographer, however, needs to capture a special event where the participants—the couple and their guests—are supposed to experience the event rather than professionally document it. Weddings are usually once in a lifetime for the couple, so photos must be done with care. Given these differences, wedding photographers are solving a more urgent problem than pet photographers.
Ask yourself what problem your products and services are solving and how frustrating or urgent that problem is.
How Well Does Your Product Solve It?
As a follow-up question, consider how well your idea works as a solution to your customers’ problems.
Let’s say your plan is to work as a social media assistant on the side by helping small business owners schedule and create posts on social media networks such as Facebook or Instagram. You’re helping clients with the problem of what and when to post, but unfortunately you aren’t necessarily addressing the bigger problem behind it.
Often, business owners are using these tools to make more sales or increase brand awareness. If you can use your services to help them with these more painful problems, then you can make a more compelling pitch and provide an indispensable service.
Even if you’re selling a simple product, such as throw pillow cases, you can still go the extra mile with solving your customers’ problems. You can list or display example sofa colors that go well with each design, since your customers are likely looking for products that go well with their existing furniture.
Look at your ideas for your products and services. Do they solve customer problems completely, alleviate them temporarily, or not address the problems at all? Are there any larger or deeper problems that you can address more comprehensively?
Are the Costs Associated With Your Product Lower Than the Pain of the Problem You’re Trying to Solve?
This is the key question to ask when you’re initially evaluating your idea. Will the cost and hassle of obtaining your products or services be less painful than the problem you’re trying to solve? Include not just the price, but the effort your customer has to go through to learn how to use your products or services, waiting times, and other steps your customer needs to take to reap the benefits of your offer.
One example of a business idea that fails this question is the Ionic Ear featured in the TV show Shark Tank. It’s basically a Bluetooth headset you can constantly wear—by having it surgically implanted near your ear.
The problem the Ionic Ear tried to solve was the inconvenience of fiddling around with headset accessories. The solution it provided, however, was more costly, painful, and dangerous than the problem.
This might be an extreme example, but many entrepreneurs don’t consider the price and effort that customers have to pay. If your business idea will create more or bigger problems instead of solving them, you’ll have trouble making sales.
Once you’ve asked yourself the above questions and aren’t satisfied with your answers, try to think about other business ideas you might proceed with. Here are some guides that can help:
IdeationHow to Simplify Your Business Ideas
StartupsHow to Come Up with Startup Ideas Worth Pursuing
Creativity7 Business Ideas to Make Money in The Creative Economy
Otherwise, if you find that your business idea is addressing a painful problem for your customers and presents a good solution, then take the next steps. It’s time to figure out how well you can execute on a side business.
2. Assess Your Capabilities
Now it’s time to look into your own capacity for a side business. Do you have everything you need to get started? You can find out with the following questions:
Which Skills Are Needed to Create, Run, and Market This Business? How Proficient Are You in These Skills?
Start by listing all the tasks needed to launch the business, as well as fulfilling and shipping each order. Do you know how to do these things?
If there are some tasks that you don’t know how to do yet—such as how to accept payments online or how to create a Facebook page—are these things that you can easily look up and learn on your own?
If there are still things you need to learn, find out if these skills only require a few minutes of your time or if you actually need to dedicate regular study hours for them. For skills that require more serious study, such as how to buy online ads profitably or how to take professional photos of your products, see if you can afford to take the time to study these skills or, better yet, hire someone to help you.
How Much Time Is Needed to Create This Business?
How much time is required each week to run and market the business? How much time can you afford? Be realistic about this by watching your energy levels throughout the week.
Even if you feel like you have three hours free after each work day, you might be too tired to use all of those hours for your side business. Take into account your personal commitments as well. Work-life balance will be hard to achieve once you start working on your side business.
Here are some tutorials that you can use to figure it out:
Small BusinessHow to Start a Side Business – While Working a Day Job
ProductivityHow to Improve Work-Life Balance in Your Small Business
ProductivityYour Productivity Style: Find It and Use It for Better Work
How Much Money Is Needed to Create This Business?
Apart from the initial investment you need to make, how much money is
required to run and market the business each week? How long will you be
able to afford sustaining the business given these expenses? More
importantly, consider how difficult it will be for you to acquire these
funds regularly. Investing this money will be a kind of sacrifice—whether you’re taking it out from savings, borrowing it, or re-purposing
funds you normally use for recreation. Understand whether you’re willing
to make that sacrifice.
3. Examine the Market
Once you’ve done an inventory of the skills and resources you’ll need to start your side business, it’s time to take stock of the other side of the transaction—your target customers. Have a clear picture in mind of who your intended customers are. These tutorials can help you describe them in detail:
FreelanceHow to Identify Profitable Clients: A Step-by-Step Guide
Content MarketingThe Definitive Guide to Buyer Personas for Beginners
Next, consider how likely you are to have a profitable business with these customers in mind.
Do They Have Disposable Income for Your Products or Services?
There’s a reason why CEOs wear more expensive suits than interns—they have a higher disposable income. This is why it wouldn’t make any sense to have a side business selling tailored suits to entry-level employees. Is your business idea attempting to do something similar? If that’s the case, can you choose another customer segment?
Let’s say your initial idea was to sell resume writing services to people who are unemployed. This means it’s likely that your target customer doesn’t have much income. Consider retargeting it towards professionals who are looking to switch to a higher paying position.
How Large Is Your Customer Base?
Your target customer base should be broad enough for you to make enough sales to reach your goals. If you want to eventually work full time on your side business, you’d need a larger customer base than if you were just happy with sporadic sales to augment your income.
To estimate your customer base, go back to your description about your target customer. Are there any statistics that can help you figure out how many of them are in the locations you’re targeting? You can find these by doing a simple Google search. If you’re targeting stay-at-home parents in Melbourne, you might run a search like the one below, which turns up some news articles and government statistics pages:
If your customer demographics include their profession, you can also run an estimate by running an Advanced Search on LinkedIn. You can search by industry, location, and pick additional keywords. The number of results can give you a good estimate of your customer base.
Remember to be conservative with your estimates so that you don’t end up underwhelmed with the response when you start marketing. Of course, it’s still possible to have a profitable side business targeting a small customer base—it just limits your ability to scale.
How Difficult Will It Be to Reach These Customers?
Some customers are easier to reach than others, making them easier to sell to. For example, if you’re looking to be a life coach targeting CEOs of Fortune 500 companies, know that they are harder to directly contact than other markets such as small business owners, college professors, or sales representatives. However, this doesn’t mean it’s impossible. For difficult to reach customers, do you have an “in” that will give you access to their time and attention?
Do You Have Multiple Direct Competitors?
Usually we see competition as a bad thing, but if there are enough similar businesses that are thriving, it means there’s a healthy market for it. If you can think of a few direct competitors, that’s a good sign.
4. Test the Waters
When you’re satisfied with your answers to the above questions, it’s time to move beyond theory and start taking action. You can do this by testing your side business idea in the following ways:
Step 1: Get Feedback on Your Side Business Idea
Look for online communities within Facebook Groups, LinkedIn Groups, and discussion boards where your target customers are likely to post. Tell them about your idea to start a side business and ask what they think about it.
Go deeper and ask whether they’ve bought from businesses like yours before and what their experience was like. This will help you make valuable adjustments on your idea based on what your target customers actually think.
Step 2. Do a Limited Sales Run
Nothing beats testing your business idea than trying to make actual sales. If it’s a product, put up one or two items for sale to target audience. If it’s a service, offer up a limited version. The following guides can give you ideas on how to do this:
StartupsStartup Idea Qualification and Risk Elimination in the Early Days
EntrepreneurshipHow to Start an Online Business: Driven by Your Customers’ Needs
By releasing your idea into the wild, you can get more concrete feedback on the elements you should change before you invest all your time and money on a launch.
Failure-Proof Side Business Ideas
By answering the above questions and running some sales tests, you’ll have an idea about the possible challenges your side business will run into. More importantly, you’ll understand these challenges long before you go all-in with executing your idea in your spare time.