Why Side Hustles Rarely Work & How To Create One That Does

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0:57of a promise. Pacific Life Insurance Company, Omaha, Nebraska, and in New York, Pacific Life and Annuity, Phoenix, Arizona. Most side hustles fail, and it's not because of your idea. It's not because of your marketing strategy. It's not because of the color of the buy bun on your landing page. It's something a lot more fundamental than that. Today, I'm going to share with you three specific conditions you need to have to make sure your side hustle succeeds. I have Nicole Baldino, who's my co-founder, the executive producer of the show, and she'll be helping me with Q &A Wednesday.

1:32Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday to help you start, grow, and scale your business. If this show has helped in any way, it would be amazing if you could drop us a quick review on whatever app you're using to listen to this podcast right now. It helps me and my team bring new episodes every week. And more importantly, more entrepreneurs will be able to discover our podcast so you can help someone else start their journey. Thanks so much. Hey, everyone. I'm excited to be here.

2:08Today's question comes from Mandeep. Mandeep asks, I've been trying to build a side hustle for over a year and I keep starting and stopping. I have the idea. I have the motivation at the beginning, but something always gets in the way and I never get any real traction. What am I doing wrong? Okay, Omar, before you answer this question, I want to name something because I think most people listening to this are probably thinking or have felt the same guilt of starting something and then stopping, or maybe even that embarrassment of having announced it to people and then stopping. And maybe there's a confusion as to why this is happening.

2:43So I guess the real question is, is this a mandate problem or is this just how side hustles work? I think it's a structural problem. I don't think it's a Mandeep problem. I think a lot of people, they think that building a side hustle and growing a side hustle and working on it is easier than it is. You need to create a structure, a framework, an environment that's going to allow you to be successful with the limited amount of time you have. And we're going to talk about how much time you should spend on a side hustle so that you have some leverage, you have some traction and have some success.

3:13Like a schedule as well? Yeah, we're going to talk about all that. But the point that you just made about people failing and then trying again and picking up where they left off, the bottom line is, is that you've got to get serious about if this is a priority or not. You know, often people's side hustle is their plan B. What I want to encourage everybody who's watching and listening is you want to make your side hustle, not even call it a side hustle, your business, even though it's part time right now, is your plan A and your current job is plan B. That is what you're going to be doing for the long term.

3:44And the reason why I say this is because things will come up, right? Game night is going to come up. You know, a friend is going to call you up just visiting out of town. And you're going to always kind of sacrifice the side hustle or not do what you're supposed to be doing because it's not plan A, it's plan B. So we're going to talk about prioritizing, how to make it a priority, how to create boundaries so that you can be able to turn that side hustle into your full-time thing eventually. I feel like we need to rename side hustle. Yeah. Well, I'm going to talk about that, too. I mean, like the language does matter.

4:14I mean, we were going to talk about the idea of validation, the point of the side hustle in the first place. But let's not get ahead of ourselves. All right. So does that mean then side hustles are impossible? Do you have to quit your job? They're not impossible. I side hustled for over a decade before I went into full-time entrepreneurship. And I do believe that side hustles have a lot of merit. But today I'm going to share three conditions I believe that you have to fulfill in order for you to have any kind of traction or any kind of success with a side hustle. This is just from my own experience.

4:45But I also want to say that side hustles are great for learning. When you're starting this path in entrepreneurship, you have to learn business. You have to learn how to find your voice, how to find the right product for your audience, how to build an audience, how to market, how to sell, how to do finance, how to make a hire. These are all moments of learning. And side hustling is a good environment, a safe environment to learn that. You can make some mistakes and it's not a catastrophe because you still have your paycheck. And I learned a lot of things through mistakes through my side hustling days.

5:17So you could also see this as a training ground for you to learn business. I love that because it's like, yes, you have to have the structure, the schedule, you have to treat it as a priority. But at the same time, keep in mind that, okay, there's still this safe zone of I'm learning and it's my opportunity to learn now before things get really serious and it's my full-time gig. Yeah, I mean, the stakes are a little bit lower because your income is not dependent on it. But at the same time, you want to put some pressure on yourself and some accountability, which we'll talk about in one of those three conditions I talked about earlier, because you want to make this your full-time thing.

5:55You don't want this to be a side hustle forever. I personally thought I side hustled for too long. And that's why I'm sharing today's lesson and today's answer to the question, because I think that that's my biggest regret is I didn't go into entrepreneurship full-time earlier. How long did you side hustle for? 10 years. It's a long time. And I had a lot of failures at that time. And the internet was very young at the time. I started in 2001 when I started building businesses on the side. And then it took me about 11, 12 years. So I had like a full-time business that allowed me to kind of go full-time.

6:27Yeah. Okay. So what are the conditions then? That accountability, that structure, the schedule, all of that. Yeah. So I've mentioned this before, but it's worth reiterating. My first condition with any side hustle is that you need to put in the right amount of time. You can't just tell yourself, I'm going to do it whenever I'm free or when I have a couple hours on the weekend. No. In order for you to have any kind of traction and to be able to build something that actually makes you money and has the viability of making it your full-time thing, I believe you need to put in at least 15 hours a week.

7:01Now, that may sound like a lot because most people, you know, work 40 hours a week. Where are they going to get another 15 hours? Well, this is what I did when I was side hustling and when I was in my full-time teaching gig, I took Tuesdays and Thursdays after work. I would leave work and I would go into a co-working space. And at that co-working space, I would do about three hours. So three hours on Tuesday, three hours on Thursday. That's six hours. And then on Saturday, I did like nine hours, a long day. So it was like 15 hours. Yes, that meant I only had one day off for the weekend, but I was willing to sacrifice that one day a week plus those evenings for my future.

7:39And I was having fun. I enjoyed it. I love the challenges and I learned so much in the process. And I met so many interesting people at those co-working spaces. But that's the first criteria is you need you block out this time. You got to see this as like a part-time job. Like you can't just like quit on this job or not show up. You can't flake. That's why I like this idea of having dedicated time on your calendar and a place to go. And if you don't want to go to a corking space, or maybe you can't afford one right now, you can go to the library. Public library is a very quiet, nice space with good internet.

8:09You can go to there. You can go to a cafe if it's open or a place that you can just get some work done. But the point I'm trying to make is that you have to see like you're clocking into your business? I think the only thing I would say there is if anyone's feeling like 15 hours a lot, we know that some people have multiple jobs, family obligations, there might be a bit of resistance or pushback. So maybe like whatever's realistic for someone to be honest and say, okay, I can carve out five hours for sure. That's not going to be too unrealistic. I think the point you're making is whether it's 15 or five hours is that you're committed to those hours and that you set it aside and you stick to that commitment.

8:50I don't agree with that. I just think that five hours is not enough. I don't five hours is just not enough for you to have a sustainable business. What do I mean by that? Because if I put five hours a week versus 15 hours a week, it's going to take you three times longer to see any results. And I would even argue it's going to take even longer because you don't have the power of momentum and compound interest of that time. So I really believe that willpower and the desire to succeed, it's not unlimited. You can't just be like, OK, I'm going to wait seven years for the side hustle to work out because I'm putting in five hours a week.

9:24You know, with 15 hours a week, you could start seeing some traction within the first few months. And that's really important in the beginning. I really believe that even the tiniest wins in the beginning give you that motivation to keep going, to recommit, to spend more time, to spend more effort, to spend more money. You're going to spend money in this business. So in my honest opinion is that if you only have five hours a week, then you need to carve out some time somewhere. You need to figure out how you can cut out maybe some things that maybe you enjoy, like watching movies or Netflix or maybe time with friends or even if it's just a season, even if it's just like I'm going to for the next three months, I'm going to put 15 hours.

10:02You're going to see some results that are going to make you feel like those sacrifices are huge. Like, oh, I'm willing to sacrifice for these wins. And you'll get the traction. Okay. I asked the question. You've pushed back. That's good. And that's obviously you're speaking from experience. I know it's from experience. So sorry, five hours ain't going to cut it. Okay. That's fine. We need to know that's that's what the honest truth is. That's that's awesome. All right. So what's the next condition? I just want to piggyback on that. If you feel like I don't have that many hours, Omar, what am I going to do with this situation?

10:32I'm really trying to think like someone's really resisting. They're going to come up with all the excuses. Which is great. And I think that they need to audit their time. You really do need to be honest with yourself and look at your calendar. If you don't have a calendar, a lot of people don't run their life on a calendar like we do. But if ask yourself, what are you doing every hour of the day? Whether it's before you go to work, in the morning, what time you get up, after work, on the weekends, on holidays, on, you know, extended weekends, whatever it might be. Like audit every single hour of your day and figure out, can I put in an hour here?

11:06Can I put 60 minutes concentrated? Is there a way for me to do some of my work or do some of my research while I'm doing something else like working out? Maybe I could talk to Chad GBT while I'm on the treadmill. There are ways to optimize this. Don't just dismiss the fact that I don't have time. If you need something, if you have to make something happen, you will make time. This is my point. And for me, I made the time. You think I wanted to do that after work? No, I was dead tired. I was a chair department at a university and I was going at work and it was dark and I was going home and it was dark.

11:37So like my point is, is that the reason why I did it is because I wanted to get out of that situation. I wanted this future. I wanted to be an entrepreneur. I wanted to build a successful business. I was so hungry for it. I didn't want to lose. So I wanted to optimize my schedule and optimize my life to help me be as successful as possible. I love the passion. And I think that first point, audit your time, that's a great step before any of this if you're considering it. That's a great exercise to do. Love it. Running a business means you're always reachable until you're not. And the moment you miss that call, that text, that follow up, a competitor is the one that picks it up.

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12:53Try Quo for free, plus get 20 % off your first six months when you go to Quo.com slash M-B-A. That's Q-U-O.com slash M-B-A.

13:07Mazda has been named Consumer Reports' safest new car brand. It starts with our approach. Every Mazda comes standard with proactive safety features, so you're more aware of what's around you, more focused on the road ahead, and ready before problems ever start. Mazda, more of what matters most to you. Go to mazdousa.com to learn more. Consumer Reports does not endorse or promote any product. Let's get into condition number two then. Before I get to condition number two, I just want to add this thing. When you put in those hours in your schedule, whatever it's like, like I did three hours after work and on the weekend, these time blocks where you're working in your business are sacred.

13:53You cannot be flexible with these hours. What does that mean? If this is a commitment you have to go to, like you have to go or you're going to be arrested. All right. That serious. Okay. What would you do in that situation? Well, you're going to tell the people around you. You're going to tell your family, you're going to tell your friends, you're going to tell people that you're going to see on a regular basis. Hey, I cannot do anything during this time. Do not schedule a dinner, a night out, movie time. If there's responsibilities I need to do, pick up kids, go to the, you know, to get some groceries.

14:21I have to work around this time. This is just like you going to a job where you can't just say, hey, I can't go to work. No, you have to go to these hours. They're non-negotiable and you will be tested. There will be times where people are going to be like, hey, you know, Mildred is coming in from town and she's only has these two nights and we have to have dinner. What are you going to do when now that's when the rubber meets the road, when Mildred's in, Aunt Mildred's in and she wants have dinner and she's going to feel so upset if you don't go and it's time for you to work on your business that night.

14:49Are you going to sacrifice it? Are you going to tell Aunt Mildred, can I come a little later because this time I'm busy? Or can you can we do breakfast instead? Is your business a priority? That's where the rubber meets the road. Love it. OK, so audit the time and then also get people on board and communicate as passionately as you have how serious you are about this business. Yeah, for sure. That makes total sense. Makes total sense. Okay. Condition number two. And we're doing condition number one. Condition number two is high profit margins. This is very important because you have limited time.

15:25So you need to maximize how much money you keep with your business. A profit margin is basically the profit you make in your business. And I believe that when you're side hustling, your profit margins should be at least 50%. That means if you make revenue of, let's say$1 ,000, that your profit is at least$500. Because you're going to need that profit to grow your business, because there's only so much you can do in 15 hours. Eventually, you're going to need to hire somebody. You're going to need to get some part-time help. You might use one of our sponsors like Upwork. And the reason why I mentioned Upwork as our sponsor is because we've been using it for over a decade.

16:01I used it when I was side hustling where I couldn't afford a full-time hire. and you're going to need to reinvest. So this is why you need to make a certain profit margin that makes it sustainable for your business. Otherwise, it's not going to make sense for you. And let me give you some math. I wrote down this math so I don't mess it up. Let's say, for example, your profit margins are 20 % and you want to make$2 ,000 a month. Let's say that's your goal for your side hustle. In order for you to make$2 ,000 a month with 20 % profit margin, that means you need to make$10 ,000 in revenue. That might mean having like more than a few clients, five, six, seven clients, whatever your business is, whatever your product is.

16:39But you need to make$10 ,000 in revenue to make$2 ,000 in profit. But if your profit margin is, let's say, more than 50%, let's say it's 80%. Let's just aim for something that's really good. If you want to make$2 ,000 a month, all you need to make in revenue is$2 ,500. That's how math is mathing, okay? That's how it works. And this is why this is so important, because that means you only need a client or two to make your goal. And the more money you keep, like I mentioned, the more money that you get to reward yourself for your hard work, but also reinvest in your business. A 50 % profit margin, that's generally considered quite high, isn't it?

17:18So you're really saying this at that early stage of side hustle versus like, okay, once I've fully launched my business, maybe those profit margins might fluctuate. But I guess you can answer that question. Is that generally quite high? But the other question that I have for you is, how do I know if I'm starting out that I'm going to even achieve those profit margins? Is there a way I can test it? A hundred percent. I mean, everything when it comes to margins can be researched before you even sell a certain product. So, for example, if I'm in the t-shirt business and I'm selling graphic tees, I can find out how much it's going to cost me to make this t-shirt.

17:54How much does it cost me to make one T-shirt versus 10 T-shirts versus 1 ,000 T-shirts versus 10 ,000 T-shirts? You know, volume, there's discounts. But you're going to understand what your profit margin is going to be. And you have to include all the expenses that you have in order for you to deliver this T-shirt, whether it's the packaging and the delivery and the customer service and all that kind of stuff. You want to make sure that those margins are 50 % or higher. Now, the reason why I say 50 % or higher, by the way, it depends on the market. 50 % is not a lot in software. Like there are software businesses that make 90, 95, 97 % profit margins because at scale, they do very well because they create a product once and then they resell it over and over again to allow people to have access to.

18:35A physical example of this is like a gym, right? The gym exists once and they just resell it over and over. Now, a gym has a capacity. It's not infinity. They can't have a million people in that gym because there's only a certain amount of people that can fit in the gym at a certain time. But the point is, is that you should know ahead of time by researching. Generally, physical products, physical products have lower margins because there is a physical cost to creating that product every time you make the cost, every time you have to sell that product. So, for example, if you're creating a pair of jeans or you're creating a car, for example, every time I sell that car, I need to create a car.

19:12right? But for a book, for example, especially like an ebook, you create it once, it's digital, and it lives in the cloud and people can just download it and pay for it. And you don't need to recreate the book. A physical book is a different story. You need to reprint it. But the work involved of creating a book is done once. Yes. And so it's pretty easy, I suppose, with a physical product to cost out everything and then figure out like, okay, what am I going to make in addition to my time that I'm going to be spending. And obviously if it's a digital product, then yeah, the profit margins are definitely going to be much higher there.

19:45Yeah. And the other thing is that people sleep on services. Services are quote unquote, they're not digital products, but they're not physical products either. You know, people spend a lot of money to get something done. When I was starting out, my first full-time business was creating websites for our clients. Remember that? And I was building websites for bloggers and bloggers were the first influencers. But when I was creating these websites, I thought like I was charging a lot of money at$5 ,000. Then I met other people creating websites for$50 ,000 and$100 ,000. And then I read this article that, you know, I think some big Fortune 500 just did a rebrand and their website cost them like$1.5 million.

20:24I was like, what? $5 ,000 is nothing. So it's all relative. It depends on who you're offering this service to, their needs, their budget, all that kind of stuff, how price sensitive they are. So services are a great place for you to have a high margin business as well. Okay. All right. That sounds good. So definitely consider your profit margin to make the side hustle worth going into. Exactly. And just to recap real quick, high margin businesses are like digital products, software, communities, online courses, coachings, all the things I just mentioned that scale up very well. Low margin products are like things like food, physical products, things that will have a cost involved every time you need to produce it.

21:06I just want to also mention one more thing. So say, for example, your dream is to create healthy meals that get delivered to people at their door. Okay. That's a great idea and a good dream to have. But I really would encourage you to think a little bit broader and think, hey, maybe I can be in the same space and start my first business so I can make some money and learn about business and scale in that space. But maybe I don't have to sell actual physical food. I can sell recipes. I could sell advice. I could create content around this area of eating healthy and become an authority there. And then once I build my audience and I made some traction and I maybe made some money through consulting or coaching, I can then use that momentum and that leverage and that audience I built to sell my meals.

21:50My point is, is that like, make it a little bit easy on yourself with a higher profit margin business, at least for your first business. Let's take a quick break from this convo just to let everybody know that we have an upcoming episode that I don't want them to miss. So please, please, please subscribe. This is for your benefit so that you don't miss this episode. You get the episode automatically. This episode is all about how to set your prices in your business so that you hit that million dollar in revenue mark in your business. You want to make a million dollars a year. How do you set your prices to get there and how to reverse engineer it?

22:23We recently recorded this episode and we can't wait to release it. It's coming out soon. hit subscribe so you don't miss it. All right, let's move into condition number three. And I actually think this is the most important condition. And it's all about what's in your head. It's your mindset in building your side hustle. And we talked about, I really love this word because you really should be building something that will be your full-time thing. And you really should see this period where you're putting those 15 hours a week or more, if you have more time, as a chance for you to validate your business idea, a chance for you to get traction, a chance for you to get some sales and learn about your customer and see it as the beginning of your full-time business.

23:04If you put yourself in your mind back when you started your side hustle, where was your thinking or how did you perceive like those early days and where this was going? Well, the reason why I share this advice is because at the start, I wasn't thinking that way. I was thinking about, I'd just like make a few bucks on the side. I was thinking, I'm not sure if I'm good at this business thing yet. Let me just experiment and not really go all in. I was kind of dipping my toe into the pool. And I felt that the side hustles or the businesses that actually did well were the ones that I really had the vision for being my only thing.