The Perils of Owning a Side Business

Ben Yoskovitz is THE INSTIGATORA few weeks ago I wrote a post advising “you” to get a side business. I have always loved this advice when I read it in magazines, the newest version of it says that high school and college “kids” should get an eBay business. What a great way to learn about business – fulfillment, customer service, pricing, promotion, vendor relations, income potential, risk… the list goes on and on!

After that post I got a comment from someone who warned about jumping in and starting your own gig. I certainly don’t want to give a false impression that it’s all roses, and it isn’t a tactic for everyone. I love the idea because I don’t want to depend on one employer for my income, especially since I tend to live paycheck to paycheck.

It’s hard, and most business fail early on. Whether it’s a multilevel company, selling homemade doggy biscuits or a service company, there isn’t much that’s easy about getting it up and sustainable.

But imagine what could happen if you could supplement your income by a few hundred, or a thousand, bucks each month.

Last night I chatted with a buddy who is a social/clinical worker who has a side gig where he works one night a week and pulls in about $1,000 a month. Nice supplement.

It takes time from his family and energy and effort to do the job right. I know that many of you have skills or talents that you could “sell” to others – what are they? Bookkeeping? Web design? Ghost writing? Jewelery making or dog walking? These are all things that can cushion your not-so-stable income.

Ok, enough of my rambling… check out the perils that Ben Yoskovitz lays out on his post Exposed: The Pros and Cons of Freelancing. Note the awesome discussion in the comments area…

what do you think? Are you ready to hang your shingle and start your side business?

12 thoughts on “The Perils of Owning a Side Business”

  1. Jason – Thanks for linking over. I’m all for side businesses, I think it’s a great way to expand your horizons, try something a bit new, have a bit more control and earn some money on the side. It also can lead towards much bigger things…

    Hopefully my post isn’t perceived as TOO negative, more “food for thought.”

  2. Ben is a great example of a side business gone good. I believe he went from having a side business, to quitting his “real job” to doing a major startup, all in the space of a couple years since I first met him online.

  3. With all due respect, and I realize you all are those them there internet grazillionaires, but my alarm went off when I heard “paycheck2paycheck”!

    That’s the essence of a problem much bigger than “one job”.

    Now, I’ve blogged, and kept redefining my thoughts. Until this popped out: Success for your generation is: (1) ruthless financial discipline — no bad debt; (2) a life long interest in learning — education — a degree — they can’t take it away from you; (3) a white collar job in order to save big bux; (4) a blue collar skill for hard times — never saw a poor plumber; (5) one or more internet based businesses — your store is always open; (6) a free time hobby that generates income; and (7) a large will-maintained network of people who can “help” you.

    “paycheck2paycheck” is indicative of not having that “ruthless financial discipline” that in item#1!

    One blogger, Build Wealth with a “Virtual Employer” Sunday, 28th October 2007 (by J.D.) gave up the idea of creating a “shadow” employer. Basically direct deposit your real paycheck into an account and “pay yourself” a regular lesser amount. It’s tom foolery! But sometimes, fooling yourself isn’t bad. I used something similar on various occasions when I was in my own biz (three times) and used it to flatten out the peaks and valleys of cash flow from consulting. So there are ways out of it. My Mom taught me to bank half your raise every year and a 100% of any “windfalls”. That enforced education made later life easier because it was a habit.

    Now, I’m not trying to preach or make it seem like I’m so smart. I just made “different” mistakes. For example, when I worked on Wall Street, I was so taken with the Human Genome Project, I bought 25k of stock with my own money and watch it drop to 2k in about ten weeks. Another time, I bought into Delco right before GM tanked. The only nice part of these “mistakes” was that I wasn’t playing with the mortgage money. Lest anyone think I’m a terrible picker, I’d just say that some of my picks were much much better. And, if you believe in Mutual Funds and Exchange Traded Funds, you can bet every horse in the race.

    So, bottom line, you need get out of the hampster wheel of paycheck 2 paycheck. Jumping into sidelines, second jobs, side businesses, or even (Intelligent Designer forbid!) Multi Level Marketing will only sping the wheel faster and not make any progress.


    (Disclaimer: I’m not a doctor, lawyer, accountant, or Indian Chief. Nor, have I stayed in a Holiday Inn Express lately! Blog posts are for entertainment value only; not intended as investment advice. This is neither an offer to sell or an inducement to buy, which can only be made by formal prospectus. Results shown are for illustration only, and are not reflective of actual returns accomplished by actual investors.)


  4. You know one of the best side gigs is a lawn mowing business. I am all for side businesses and I definitely did not take your article as suggesting it was all roses!


    Chris J.

  5. As someone who is about to make his side business his primary business I totally agree with the paycheck to paycheck philosophy. In fact the reason I am leaving my primary employer is because I feel that I am stealing from my family by relying on the “secure” paycheck. Let’s explore what secure means – I’m secure that it will NEVER rise by more than 3% a year. The guy who had the job before me got a 2.08% raise, right before he left. I’m secure that inflation and expenses will rise faster than my income(I live in a freaking disaster zone. Remember hurricane Katrina, it’s still not fixed and s**t cost a whole lot more here) which will mean my quality of life will go down and I have less to save for retirement. I’m secure that if my employer decides to can me there goes my SECURITY! So I’m relying on someone else for my security rather than myself and I’m a moron if I think that is secure.

    America was built by entrepreneurs. Two hundred years ago about 80% of Americans were entrepreneurs and 20% were employees. Now it is exactly the reverse except for two demographic sectors, immigrants and college students. Immigrants come here for the opportunities available and don’t complain about how hard it is to work your way up from nothing. By the way, in almost every case their idea of nothing and ours is vastly different. College students have seen their parents work their whole lives and then get laid off or end up with nothing to show for it and they’re not buying into it. They’ve grown up with the Internet and don’t see anything wrong with starting four five Internet business because the barrier to entry is low, they have nothing to lose, and if they fail they can always go get job later.

    I have nothing against people working 9-5 until their 65 and then spending their golden years traveling the world or doing whatever they enjoy. The unfortunate reality is that for most it 9-5 to 65 and then part- time at Wal-Mart to supplement their social security (there is that damn word again) and their non-existent pension or under-funded retirement. If people want to disagree with me that is fine, I’m used to it. I have learned to disregard the opinions of others unless they happen to be paying my bills. If you want to put your security in the hands of your employer go right ahead. But check out the layoff report at and search nationwide for just the last week and see how that worked for all those people.

  6. I think having an additional income source is a great safety net. I was laid off by three companies that went out of business or closed their Austin offices. only one gave me any sort of package. The other two were gone. Poof. One with no option of even Cobra, as they were just gone.

    While the extra business does take time, it also is energizing. My employer knows and encourages my side business, which makes it great.

    Better to try to build something of your own and fail than to look back and say “shoulda woulda coulda”. there are dreamers and doers. If you dream about doing this, then do it. If you don’t, then don’t. But don’t dream on the sidelines.


  7. I blog about my work as a contract attorney in Washington D.C. It’s not only an interesting hobby, but it also helps to provide the potential for an additional future side income. In the process it is also socially rewarding to help others similarly situated with questions they may have about the field.

    Not sure where it is headed, but it is definitely steadily growing.

  8. Jason,

    I have mixed feelings about having a side job. I have tried it, through multi-level marketing, for the past three years, and all I got was a bunch of good information and little or no money. The idea is good, the stress may be worse, and the final result is that the “side” job is continually trying to tell you to work hard enough to make it your main job,and then leave the other.

    The problem is, for many people that never happens. True, there are some who find their niche and become extremely wealthy, but there are others who give their life savings and have nothing to show for it. It also means time away from family, time away from taking care of your health (we all need some down time!), and time taken away from your primary job, because your mind is distracted to the “new” business.

    I also had a major problem with leads for our side business. Considering most of my acquaintences are related to my main position, and therefore can’t be morally pitched without a problem with conflict of interest, we were relegated to purchasing leads, which are nothing more than trying to pitch a complete stranger. It’s not considered cold calling, but it should be.

    On the positive side, when a sale comes by (the products of the company are great!) we get a few extra dollars, but it is not something we can even consider counting on. So much for helping the paycheck to paycheck issue!


  9. One thing I would like to point out is that a side business is at minimum a part-time job, if not another full-time job.

    I operated a side business that eventually became a full time commitment requiring more than 60 hours per week. Although I enjoyed a level of success greater than any other jobs I previously held, the journey required more effort than if I had been employed elsewhere. Eventually I suffered a work related injury that required me to close my business, conduct a job search, and ultimately start a new career. However, I look at my years of self-managed employment as a real learning experience. It was often hard, but rewarding work.

    One problem relating to a part-time startup many don’t consider is burnout due to high input that may only result in break-even output or even operating at a loss for a period of time. That is to say, you might dedicate as much time as possible to making your part-time enterprise profitable, only to find you are not making much more than your operating expenses. If you have become involved in a side business that requires a full-time effort to really break free and enjoy its full potential, you may find yourself making less than at your present job, or career. It is precisely because it is a part-time side business that may preclude finding the necessary time for growth.

    If you are not careful, the feeling you’re just not getting anywhere can sink in and begin to affect your overall day-to-day outlook. This is where it is helpful to be passionate about your chosen business. If you were only lukewarm about your freelance venture to begin with you run much greater risk of burnout, or even depression. On the other hand, if you take a hard look at your options before becoming invested, you stand a better chance of narrowing your choices to the ones most likely to carry you over the hump to where fireworks just may be waiting on the other side.

  10. I think the networking you can do in “job 2” if it’s what you really want is more valuable than the actual income. You meet people like you, you help them, they help you, you connect in real life. The network is the priceless part, regardless of the extra money.

  11. Having a side business is usually only a shaky and stressful endeavor if it’s started as a one-man adventure. Going through the birth and growth phases of a company is never easy, and it’s even harder when you don’t have anyone to back you up. That’s why a lot of folks tend to look for franchises or other businesses that they can “own” but at the same time get the support of a much larger organization than themselves. That’s at least one way to get around the perils of going it alone, but certainly not the only option… Others include teaming up with friends, getting a group of investors and businessmen in on the action, etc…

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