Dreaming of self-employment is a common aspiration among many workers. But why give up a secure job with a good salary when you can build your own business? This blog delves into the comprehensive guide on establishing a side business while maintaining the security of a full-time job.

Understanding Side Businesses

A side business is not the main focus of one’s professional life but rather an additional activity. From a legal perspective (back when I was still living in Germany), two criteria must be met to be considered a side business:

1. The income from the side business must be lower than the main job’s salary
2. The side business should not take more than 18 hours per week.

Solopreneurs usually operate side businesses without employees, though collaboration with external partners or freelancers is allowed. This model offers a flexible way to test business ideas, explore entrepreneurial opportunities, and potentially transition into full-time self-employment if the venture proves successful.

Despite all the dumb advice from self-proclaimed business gurus, I am strictly against quitting a job immediately, going "all in", and taking all the risk without considering what could potentially be a profitable business model.

Advantages of Side Businesses

Low Risk and Reduced Pressure

One of the biggest advantages of a side business is the reduced risk. Even if the business idea fails, the financial stability provided by the main job remains intact. This security allows for more flexibility and less pressure to achieve immediate success.

The main job covers the living expenses, ensuring the financial burden is minimised. This cushion makes taking calculated risks easier and learning from failures without devastating consequences. Moreover, the societal pressure to succeed is lower, as the side business is perceived as an additional venture rather than the sole source of income.

However, feeling more pressure to succeed can also be a motivating factor, unleashing more of your entrepreneurial potential.

Financial Ease

Financing a side business is also easier and less risky since it often doesn’t require external capital. The steady income from the main job ensures liquidity for living expenses and business growth. Additionally, being covered by the main job’s social insurance adds another layer of financial security.

This dual-income approach allows entrepreneurs to reinvest profits into their businesses, leading to sustainable growth. The financial safety net provided by the primary job means that the side business can be scaled gradually without the need for immediate high returns.

Growing into Entrepreneurship

A side business offers a great opportunity to gain entrepreneurial experience. It allows for testing the viability of a business idea in a low-risk environment. If successful, the side business can eventually become full-time, providing a smooth transition into self-employment.

This gradual approach to entrepreneurship helps build confidence and acquire essential business skills. Tasks like customer acquisition, marketing, and financial management can be practised on a smaller scale, making the learning curve less steep.

When the side business is ready to go full-time (between 5,000-8000€ per month at least over 3-4 months consistently), you are well-prepared for the challenges ahead.

Challenges of Side Businesses

Despite its advantages, a side business also poses significant challenges. Balancing a full-time job with a side business can lead to a lack of free time and increased stress. Effectively juggling both responsibilities requires high discipline and time management. Many side entrepreneurs work late nights and weekends, sacrificing personal time to grow their businesses.

If not managed properly, this can lead to burnout. Additionally, the mental load of constantly thinking about the business while performing well at the main job can be overwhelming. Effective strategies and support systems are crucial to handling these dual demands.

Formalities of Side Businesses

The formal requirements for side businesses are similar to those of full-time self-employment. This includes registering the business with the tax and trade office and paying taxes on the income. Understanding the specific formalities and legal requirements is crucial to ensure compliance.

Both freelance and commercial activities need proper registration, which involves dealing with various bureaucratic processes. Freelancers, for instance, enjoy less bureaucratic burden than commercial activities, but both must comply with tax obligations. Understanding the formalities helps in avoiding legal complications and ensures smooth operation.

Please get professional help from an expert before setting up a side business.

Registering Your Side Business

To start a side business, register it with the relevant authorities. The registration process depends on whether it’s a freelance or commercial activity. Freelancers enjoy less bureaucratic burden, while commercial activities require registration with the trade office - that's how I know it from German and Dutch authorities.

The registration process also involves determining the nature of the business, whether it's a service-based or product-based venture. Consulting with a tax advisor can help clarify the nuances and ensure the business is set up correctly. This step is essential to avoid future legal issues and ensure the business is recognised officially.

Tax Obligations

All income must be reported to the tax authorities, whether from a main job or a side business. This includes income tax and trade tax in the case of commercial activities. Utilising online portals in your country can simplify the tax declaration process. Understanding the tax obligations helps in effective financial planning and compliance.

Accurate records of all transactions and expenses are crucial for preparing tax returns. Consulting a tax advisor can provide insights into deductions and benefits available for small businesses, ensuring that you are not overpaying taxes. Proper tax management contributes to the financial health of the business.

Many people ignore this topic and fall on their faces when they get the bill...

Choosing the Right Legal Form

Choosing the appropriate legal form for your side business is crucial as it affects taxation, bookkeeping, and liability. Due to their simplicity, most side businesses operate as sole proprietorships. However, team-based startups may consider forming a civil law partnership. The legal form determines the administrative burden and the extent of personal liability.

For instance, a sole proprietorship is easy to set up but involves personal liability, whereas a limited liability company (LLC) offers protection but requires more administrative work and capital. The choice of legal form should align with the business goals and structure.

Again, take professional advice here and spend some of your money on a good tax advisor.

Social Insurance Considerations

A significant benefit of a side business is the continued coverage under the main job’s social insurance (depending on where you live!). This avoids the high costs of private insurance typically required for full-time self-employed individuals. However, any increase in income may result in higher contributions to health insurance.

It’s important to inform the health insurance provider about the side business to ensure proper coverage and avoid penalties. Additionally, evaluating the need for additional insurance, such as professional liability insurance, becomes essential as the side business grows. Proper social insurance management ensures comprehensive protection for the entrepreneur.

Communication with Your Employer

It’s advisable to inform your employer about your side business, even though it’s not legally required (check your contract!). Open communication can prevent potential conflicts, especially if the side business is seen as a competition or affects your performance at your main job. Transparent communication fosters trust and can lead to support from the employer.

Some employers may offer resources or advice to help manage both roles effectively. Ensuring that the side business does not conflict with the main job’s interests or performance is key to maintaining a positive relationship with the employer.

Suitable Business Ideas for Side Businesses

The ideal business ideas for side businesses are those that can be managed with limited time and resources. Digital businesses, particularly those offering agency services, are highly suitable as they often have low fixed costs, can be operated from home, and have a high-profit margin of 30-90%, depending on your business setup.

This includes services like digital marketing, web development, or content creation. These models require minimal upfront investment and can be scaled gradually. The flexibility of digital businesses allows entrepreneurs to work on their schedule, making it easier to balance with a full-time job. Exploring various business ideas and evaluating their feasibility is crucial for success.

Starting a side business is a great way to gain entrepreneurial experience with minimal financial risk. Digital business models are booming due to their low costs and flexibility. At APEX, we support you in starting your side business, from marketing to sales processes, systems and tools.

Our comprehensive support includes guidance on the following:

• Positioning & Messaging: Every expert needs a solid foundation on which to grow. Together, we develop systems and processes for your workflows. We help you develop an offer and define your dream customers who are genuinely interested in it.
• Sales Tactics, Processes & Tools: Using templates and individual support, create a perfect customer acquisition, retention, and expansion process that is replicable throughout the APEX sales process.
• Processes, Systems & Tools: Step-by-step instructions for marketing and sales processes will facilitate your lead acquisition strategy and ensure that you steadily increase your sales.
• Reduce Churn: Learn how to make your fulfilment more effective to achieve better customer results in half the time. We will introduce you to the APEX method to streamline processes & reduce churn.
• Omnipresence: We know exactly which marketing strategies work so you can become a trusted authority in your space, earn trust, get more high-quality leads and increase your sales.
• Digitalisation & Scaling: We show you how you can make your internal processes smoother, automated and less error-prone thanks to a modern marketing & sales tool stack.

With our expertise, you can navigate the challenges of starting a side business and position yourself for long-term success.

Book a free consultation with our experts today if you're ready to start or scale your existing side business. Our team of experts will guide you through the process and help you turn your business idea into reality.