Is a side hustle a hobby? I will say yes, but it could easily turn into a job or perhaps a career. Then again, would it be bad to make some money full time from a hobby?
If I could make full-time money while fishing, I’d do it. I digress…
If you look into side hustles, you will see many many options out there. I’ve looked at quite a few and most opportunities seem to involve selling the dream of a side hustle to those looking, rather than actually hustling.
Yes, I’m saying that most of the side hustle business is the hustle to separate you from your money. Here is an example, so buyer beware. Do your research.
I listened to 30+ (I lost count) pitches from different people and organizations. You will see things like “get your side business running today!” and “own your own drop shipping business, we take care of everything for you!”. There are a lot of people selling the dream.
Here is what I’ve gleaned from it. Yes, you can get an eCommerce business going on the cheap, however it is going to cost you time and effort. There is no such thing as a zero work or low effort side hustle. Even once you get it going, you will need to spend quite a bit of time and effort minding the store. Making money always costs you something. It could be your time, risk to or loss of your wealth, or perhaps even your sanity.
The very first and hardest step to get into eCommerce is finding the niche to sell in. You see Amazon, Wal-Mart, Target, and a host of other online companies also have stuff for sale today. You will compete against them. It is best to find something they don’t sell, or don’t sell well.
One option is to just join them and do the FBA, or Fulfilled by Amazon program. With it, you use Amazon itself to sell your product. They will hold your stuff in their warehouses and send it out when it is sold, or alert you when something is sold so you can ship from your warehouse. There are a lot of fees with it, but you can potentially do well. There are several people out there hawking systems that will teach you how to do it. I looked into it and, to me at least, it looks like this opportunity is starting to get over saturated. Then again, you never know. It might be worth it. If you are serious about getting something going, go check it out.
If I was to do FBA, I would search for a tool that provided for high sales volume and high margin items. With a tool like this, much of the work is done for you andyou could price yourself just a little lower and sell quite a few. I’ve seen some tools like this hawked, but they do require you to work within their system in order to use the tools. This way they get a little cut of your profits. If you don’t mind sharing a bit, it might be ok.
The real work to get into eCommerce is figuring out what product to sell, what is selling well, and what margin you can make on it. It is the same with any retail business. Figure out what customers want, then sell it to them.
Once you know what niche and what products, you then need to develop distributor relationships to get inventory and pricing. For me, this step is intermingled with the one above. I found interesting products at the distributor and discovered there might be a decent market for them.
Many distributors will not let you create an account unless you have a resale tax certificate from your state. This certificate states that you are a reseller in good standing and any goods you purchase will be sold. You don’t pay tax on your purchases, but your buyers will during the sale. You promise to collect the tax and give it to the state.
Since you need to work with the state anyway, you night as well get some protection. You may want to consider forming an LLC, limited liability company. This protects your house, car, retirement, and other assets in the event of a lawsuit. The only assets they can take belong to the LLC.
This also gives you some legitimacy when dealing with banks and distributors.
Now, having said all that, what’s the story, Dan? What have you been doing?
I’ve formed an LLC to explore the eCommerce realm, as well as have it be an umbrella for any other money making pursuits I delve into. I’m an entrepreneur at heart, so I like the idea of owning a real company that I can do things with.
What did it take to get started? Keep in mind that I’m doing everything as legit as I understand it. I’m not a lawyer or tax adviser or anything else profession in this regard. Do not take what I’m putting here as advice. This is just my story of what I’ve done so far.
The first step is to get a Taxpayer Identification Number. You can use your Social Security Number as your TIN/EIN, if you decide to do things as a sole proprietor. I decided I was going to form a separate entity as an LLC, so I had to get one for it.
You can and probably should get a separate TIN/EIN number to use. This wayl you are not putting your SSN out into the public any more than necessary. The other number to use is called a FEIN, a Federal Employer Information Number. This is the number you use to identify yourself with government entities, as well as with any distributors, banks, and you name it. This is your company’s SSN. When you report your income tax, you will use this number.
Follow this link to apply online. It is quick and easy to do. Be sure to save the information provided! You will not get a copy and they cannot provide one to you. You need to save your W-9 file. Print it, copy it into multiple places, put it in your safe deposit box. Just keep it safe and don’t lose this document.
I then went to my state’s Secretary of State office. This is the government organization that holds the documentation that proves the existence of your company. That we need to get government involved in this is a discussion for a political blog, but I will say that banks and distributors are very much put at ease when they see the government paperwork.
For me, the cost to create an LLC in my state was $40. Yeah, that’s cheap. But there is also a minimum $175 in income tax due every year as a tax to have the business. Keep that in mind. There are setup fees, then there are annual fees. Be serious about starting your company, because there will be expenses, even if you don’t produce a profit. Do your research. Your state’s fees and processes will be different.
Once the LLC was formed, I had to visit the state’s department of revenue to get my reseller tax exemption certificate. This didn’t cost me anything, but I did need to register for it. Don’t forget to get one of these. Distributors won’t sell to you unless you can prove you are a reseller.
The process to create an LLC and get a reseller certificate is different in each state. Do your research, or hire a firm to do this for you. There is nothing wrong with seeking out help for something you are not familiar with. There are numerous online companies who can help you for a fee, or look up a CPA or small business attorney in your area to help you.
Your business should have a separate bank account. The government gets upset when you co-mingle funds. Talk to a lawyer who specializes in small business as for the reasons why. My local banks and credit unions have zero cost options, provided you start with a minimum balance. Explore your options and don’t be afraid to ask questions.
Speaking of managing money. You should be familiar with maintaining a ledger of some sort. You need to have an accounting system, even if it is just a spreadsheet. Most people use Quickbooks and that’s a decent option. Document your money spent and the money you bring in. This is important. Talk to a CPA if you need help. They can also make a recommendation for you.
You now have a very real business of your own. Crazy, right?
Hopefully you have figured out what niche you are going to sell in. Since you are now a legit business, it is time to locate distributors to order your products from. Look to the manufacturers of items you want to sell. Usually they will have a link or other information about how to become a reseller, or they will point you to the distributors you can buy from.
Also locate any industry trade organizations. Those organizations should have lists of distributors you can contact. Don’t be afraid to send an email or three to get your questions answered. Keep in mind that you are the customer! Well, middleman, but you get the idea. The more time you spend in research, the less time you will spend scrambling to locate something later.
Ok, so you have some products that you’d like to sell, so let’s get the store going. There are many many options for this. Your technical skills and comfort level will play a part in this.
If you are less technical, then a company like Shopify or BigCommerce might be a good choice. They handle the back-end of your site for you. The downside is that it is really hard to leave those organizations if you want to move to another company or do your own site. They have what’s called vendor lock-in. It’s a pain to move, so you stay.
They also cost a bit every month. Keep that in mind. There are infrastructure expenses even if you don’t sell a thing.
Me, personally, am very comfortable with hosting my own site. I’m also comfortable with WordPress, which is what I use to publish this blog. The option I’ve gone with is to use WooCommerce, which is made by the same people who make WordPress. It is a Plugin and Theme that sits on WordPress.
WooCommerce comes with free integration with Stripe and PayPal for credit card transactions. You just need to establish accounts with those companies. If you want or need to use a different card payment option, there are many plugins available. Some are free some cost a bit.
The important thing, at least to me, is that I an make the site look and function however I want. The downside is that I have to do all the work myself and it can be very time consuming.
To host your own eCommerce site (or blog or whatever) you will need to work with a hosting company. They own the servers, the internet connection, and any infrastructure behind the scenes. Most will also offer various levels of support, up to full management of your site. Go with what you can afford, or what you are comfortable with.
I’m currently using A2 Hosting, and I’ve been very happy with them.
I previously hosted with BlueHost, and they also did a good job at a good price.
Full Disclosure – I’m an affiliate and get a little money in my hosting accounts if you sign up with them. Every little bit helps, and these companies do a good job and the price is pretty good for new customers.
Ok, blatant self-serving capitalism aside. You will need a web host of some sort. If you decide to go with WooCommerce, you will need WordPress set up for you. One thing I like about A2 Hosting are the tools they have available to roll out most web applications. With a few mouse clicks you can have a WordPress or fully formed WooCommerce site up and running in a few minutes. There are also several other things you can roll out, such as an ERP solution, or file sharing, or email. I’ve not yet explored everything they have to offer.
You should keep your new site hidden while you are developing your store. You don’t want people buying stuff when you are not ready to sell, do you? Plus, a half-done site looks very unprofessional. I found a couple of WordPress plugins that allow me to place the site in to a maintenance mode, which will only show the public what you want to show them.
While developing your store. You will need to create products, add images, add sizes, set shipping information and prices, establish sales tax system, and a host of other tasks. I’m two months into developing mine and I’ve still not gone live with it. Take your time and try to work out all the details.
I’m currently working on my terms of service and privacy policy. I’m also sorting out my method of inventory control and product ordering. When I go live, I want this thing to function well and for me, that means having policy and procedures already established.
Then again, sometimes the hardest part of getting a business started is to get started.
A great resource is to get in touch with your local SBA – Small Business Administration office. They routinely hold classes and training opportunities and you can discuss your business with a real live person.
You can’t call me an expert on this subject. I’m still very much a student, however I want to share my journey with you as much as I can. Look for more updates on this as time permits. I’ve also got some other hobby posts cooking, and the weather is finally starting to warm up here in north central Kentucky.