Diversify Your Investments by Starting a Side Business

by Brad Isaac on January 31, 2006

How to add some fun and excitement to your evenings and weekends and make some decent money too.

A year or so ago my Mother-in-law had stopped by the house, when she came in she noticed the mail on the counter (as mother-in-laws can do ). She noted there was a stack of window envelopes with checks in the pile addressed to me. She remarked how it must be great to get checks in the mail instead of just bills and junk mail. "So what are you up to these days?" She knew my prior side business had failed a few years before and was wondering how I was earning my ‘side’ money these days.

I told her I was building software and web databases for people on evenings and weekends.  I remember her saying I was ‘one of those people’ – not in a bad way, just I was one of those people who had to always have something going.  It’s true.  I do like to have something going.  In fact, I think everyone should.  I told her that I think everyone should have at least one side business. 

If you’ve never thought of starting a small business, I would encourage you to do some self-exploration and research into a side business you might enjoy running on evenings and weekends.  I’ll get into how to find the right side business in future post.  But you can still start thinking about it today.

I’d like to make a clear distinction between what I mean when I say a side business versus a small business.  A side business is something you can do to occupy your nights and weekends, where a small business would likely take more of a time commitment (i.e. restaurant or storefront).  A small business owner can have a side business.

Here are 4 good reasons consider starting a side business:

  A side business gives you independence and self-esteem you normally can’t get working a 9-5 job.

Think of all the negatives that can occur while working for someone else.  Employee benefit cutbacks, decreased raises, health plan changes, mileage and hotel red tape can all take an emotional toll on anyone who feels trapped in their job. A small business helps you free yourself from the trapped feeling because you always have a backup plan.  You can think, “Hey if the worst happens and I lose my job, I can deal with it because I’ve got my side business to back me”. 

Having a side business gives you self-confidence that other employees usually do not have.  If your business is bringing in even a little money and covering some of your expenses, you will benefit.  Fear of job loss or loss in benefits is no longer a big deal. 

Managers and bosses who play on the fears of employees by threatening their livelihood if they don’t obey lose their power.  Ironically, since you are playing a different game, the boss will normally promote you or transfer you.  But make sure you consider your promotion offers carefully, so as not to destroy your side business.

  A side business diversifies your investments

Every investment analyst you talk to recommends diversifying your investments.  Why?  Because one stock can always tank.  If you are holding only one stock and it fails, then all of your money goes away with it.
The same is true with your work and your time investment.  If you are working just a 9-5 job and using the employee 401k as your only investment strategy, I have one word for you: Enron.  Sure, the job might be great now; you might be making a fortune! but what if?  What if 2 years from now the company fails or someone has their hand in the till?  Most likely something like this won’t happen, but what if it does?  Do you really want to grant someone else so much power?

Personally, I prefer to steer my own boat, control my own course – I don’t want someone else to have that much control over my life and future.  That’s why a better plan is to create something that you alone manage. 

  A side business is a wise use of your free time
If you don’t have a side business, let me ask how do you spend your evenings, weekends and time off?  Watching TV?  Playing computer games?  Sleeping?  Drinking? 

Don’t get me wrong, there is time for TV, fun and games.  I have as much fun as the next guy.  But I don’t spend every hour of my free time doing typical “free time” things.  I look at my free time as both free and an investment.  Considering it’s still my time, I can choose to play the whole time, work the whole time or split up the time between work and play.  Personally, I choose to split up my time between the two.

Earl Nightingale in Lead the Field asked a great question.  He added up all the time in the week where you are not working.  (I am paraphrasing)  “There is 168 hours in every week, 8736 hours in a year.  The average worker works 40 hours a week or 2080 hours a year.  That leaves 6656 hours of free time each year, when you subtract out a generous 8 hours of sleep each night, that leaves 3744 hours of free time each year where you can do whatever you want.  But do we really need to dedicate that much time to leisure activities like watching TV and socializing?”

It’s a good point.  If you dedicated half of that time towards your own side business, that would add up to being almost the same as having a full-time employee working for you if you counted time off for vacations.
  A side business is a great education

Imagine yourself having the opportunity to learn about marketing, advertising, law, customer service, management, incorporation and much more without having to pay to go to a fancy business school or MBA program?  Starting a side business is like a crash course in all of those subjects because you have to hit the ground running. 

If you don’t learn about advertising and marketing you won’t have any customers.  If you don’t learn anything about law, you could get sued or taxed into oblivion.  Every day will be a new learning experience.  And the more you learn the more you earn.

When you add up all the advantages of starting a side business, it becomes clear it’s worth the effort.  Even if it fails or doesn’t replace your day job it still provides a great education.  And what you learn in your side business can be applied to all of your future business dealings.  So what are you waiting for?

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Logich February 3, 2006 at 11:49 am

I think that diversifying your time investment is a great idea, and I’d encourage folks who are looking at this to consider the returns on various businesses.

One of the best earning side businesses I have had is remodeling an old home and selling it at a price premium. It’s a more risky investment than having a set of clients, but the return is certainly worth it.

Also, consider what kind of side business you can have with the help of your spouse. There are a much wider variety of opportunities available for a team of two talented individuals.

February 3, 2006 at 11:58 am

Logich, although I have never done it, I love the home improvement stuff too. Woodworking, lying hardwood floors, painting and tiling (wait scratch tiling – hate that). But “flipping a house” would be a fun side-business I am sure could be used for serious financial gain.

February 3, 2006 at 12:05 pm

There’s something to be said for making your side job different from your day job and not just a case of “What I dont get to work on during the day I’ll do on my own.” This is particularly true of software geeks (like myself) who will inevitably face the battle of whether to work on the technologies demanded of their side businesses, or those that could benefit them in their daily grind.

Go around the issue altogether. If you write software for a living, then write greeting cards at night.

Bil February 3, 2006 at 1:26 pm

Hi Brad, thanks for writing up your though