9 Common Side Hustle Mistakes That Can Damage Your Business

side hustle

Starting a side hustle can be a great strategy for creating a new revenue stream. And, it can even be a low-risk operation for achieving your dream of potentially starting your own business.

However, establishing and running a new business, especially within your available free time, takes plenty of passion and determination. It also comes with its fair share of mistakes.

Although some of these setbacks are unavoidable, some of the biggest side hustle mistakes can be circumvented with a bit of know-how.

Here are nine of the most common mistakes and pitfalls you can avoid when starting a new side gig.

Avoid these side hustle mistakes

1. Leaping before you look

Trial and error is part of running a business. But just figuring it out as you go can wind up wasting precious time and resources. Not to mention delay the returns you’re working for.

“Not defining a profitable niche from the beginning” is a common side hustle mistake, says career coach Jess Chua.

To avoid this, start with some competitive research to see what’s out there and how you can do better and create more value.

“This will help you target an audience that is willing and able to pay for a solution via your product or service,” explains Chua.

2. Failing to set clear priorities

Often times, running a side hustle is only possible if you do it in your spare time.

“You have even less time than you normally would working on a project or business full-time,” points out John Turner, entrepreneur, and founder of meditation aid QuietKit.

With limited time, you have to be clear on what needs to come first and which strategies to focus on.

“You won’t have enough time and resources to actually learn what will work and what won’t,” says Turner.

Learning through trial and error isn’t really an option. First, hone in on a strategy, then proceed.

“Go all in on just a few things that you think will make the difference between success and failure,” Turner says.

3. Spending too much time on menial tasks

Once you’ve identified your key action items, you still need to clear out enough time to tackle them.

However, the menial, day-to-day tasks of simple upkeep on a business can eat into the time you have to grow your business and complete your work.

“If you’re spending say 15 minutes a day on a task (say creating social media posts), the cost to your business over the year could be 50+ hours,” says Ian Wright, founder of payment comparison site Merchant Machine.

“So start asking yourself how to get more out of your time, which in turn will translate to a faster-growing business and ultimately more money,” Wright suggests.

This could include investing in software, services or digital tools that automate tasks as you develop your side hustle business.

4. Trying to do it all

A perk of a side hustle is you can be your own boss. But just because you’re running a one-person show doesn’t mean you should be doing everything yourself.

Side hustling is all about using your unique talents and skills to earn more. But, entrepreneurs
“have to be very aware of where their skills and talents end,” says Brian Bagdasarian, founder and senior growth strategist for Big Idea Marketing Group.

If you’re stepping into unfamiliar territory, essentially you “need to be able to drop any ego, and find support for the rest,” Bagdasarian says.

“Virtual Assistants, other friends with complimentary skill sets” can help, he adds.

5. Spending too much — on the wrong investments

As stated above, identifying key tools or services can free up time and resources you can use to take your business further and earn even more.

However, sometimes new entrepreneurs take this a bit too far.

“It’s easy to overspend when one is feeling optimistic and overestimating revenue,” Chua warns.

She recommends combating this with a clear, realistic business budget. You also should have a clear strategy and expectation of how each cost will benefit your side hustle.

“Stay disciplined and keep your fixed costs low, especially during the early days of your business,” Chua adds.

6. Underpaying (or overpaying) contractors

AJ Saleem, the owner of tutoring startup Suprex Tutors Houston, says his biggest mistake in starting this business was misunderstanding all of the implications of paying his contractors.

“I was simply not keeping track of what to pay my contractors and withhold taxes from them,” Saleem says. “I actually had to deal with the IRS to remedy the issue, but it was a major problem.”

If you start outsourcing work to others, make sure you’re aware of the pay and tax laws that could apply.

For instance, it’s possible that if you do a certain amount of work with a contractor you will have to issue them a 1099 tax form.

7. Failing to incorporate

You’ll need to separate your personal and business pay and expenses fairly early on.

Failing to do so can create a complicated mess. Not to mention open you up to becoming personally liable for business costs.

“If you have a fairly lucrative side hustle and are considering branching it off into a small business, it’s worth it to incorporate or form an LLC,” says Deborah Sweeney, CEO of incorporation service MyCorporation.

“Entrepreneurs who do this are able to protect their personal assets with liability protection and save money on taxes,” Sweeney adds. “Plus an LLC or Corporation legitimizes your company and makes you credible with customers.”

8. Underpaying personal taxes

What you don’t know could hurt you and cause some major pain once your tax bill comes due.

Tanner Callais, who runs cruise information site Cruzely.com as his side hustle, found this out the hard way. Even though he paid quarterly taxes, he wasn’t accounting for the employer-paid half.

“I didn’t realize at first that because self-employed people have to pay both sides of Social Security, the tax bill you will face is a lot higher,” Callais says. “At the end of the year, I ended up owing Uncle Sam about $3,000 more than I realized because I didn’t catch my mistake until it was too late.”

To avoid similar mistakes, read up on the ins and outs of filing taxes when you work for yourself.

You should also carefully track your ongoing revenue and expenses, so you can write off your expenses without guesswork. Or, consider outsourcing this and getting a tax professional’s expert advice for managing the tax work fro your side hustle.

9. Selling yourself short

A common problem with side hustlers is getting underpaid for their work.

When you’re first starting out, you might not have the experience to charge top dollar. Or, you might want to offer more competitive prices to attract customers.

Although this can be a smart strategy, don’t stick with it for too long. And don’t sell yourself short in an attempt to undercut the competition.

Another way side hustlers sell themselves short is by letting late, missed or partial payments slide.

“They are uncomfortable talking about money, so they don’t collect all that is owed to them,” says Andrea Miller, an entrepreneur who runs Music Studio Startup which provides business services to self-employed musicians.

At the end of the day, you want to make sure that you’re earning enough to pay for your time and effort. Otherwise, what’s the point?

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