You don’t have to start Google to earn money on the side

July 20th, 2010 - 22 Comments

Yesterday, I was walking around in the afternoon doing some errands. I called my friend, who runs his own company in Chicago. As we were catching up, he suddenly goes, “Yeah, I’ll have ham — no, not ham — smoked turkey. And lots of mustard please.” It took me a second to realize he was ordering Subway, then I started making fun of him. Actually both of us. I said, “Do you realize what kind of degenerates we must sound like? We’re both walking around, you ordering Subway, me checking out lamp stores, at 1:30pm on a Monday.”

And yet, that is one of my favorite parts of being an entrepreneur. I value freedom and flexibility over almost everything else, so the simple act of being able to walk around in the middle of the day makes me LOVE what I’m doing.

Many other news sources are starting to write about the increasing move to entrepreneurial work (especially in this economy), pointing out the good and the bad. From a recent New York Times article:

“SITTING in their cubicles, rolling their eyes over the latest bureaucratic slowdown or marveling at the near-incompetence of higher-ups, some employees are thinking: If only I were my own boss, I wouldn’t have these problems.

No, they wouldn’t. They’d have a host of different problems. Still, some people make the leap to self-employment and find it was worth the risk.

How can a salaried employee with some savings tell if the idea of becoming self-employed is a viable option and not just an escape fantasy? And how can a recently laid-off employee with some severance pay determine whether this is the right time to pursue her dream of being an entrepreneur?

At one of her consulting clients, Ms. Pryce-Jones once talked to a high-level employee who was complaining bitterly about having to work 40 hours a week. “He thought that if he went freelance he would magically become happy,” she said.

She asked him, “How many hours a week do you think you’d have to work if you were freelance?” The man put the number at about 35. She told him he needed to double that number, at a minimum.”

I’m thrilled that the NYT and other media have started acknowledging that Americans can take their income into their own hands and start earning more.

In fact, my own proprietary data confirms what the NYT author notes: The #1 reason people decide to earn more is not because they want to fly to Vegas for the weekend, or because they want to pay off debt. It’s because they want have the option of eventually quitting their job and working on something they love.

BUT…there are a few things I want to note:

  • The NYT article confounds “being an entrepreneur” with “earning money on the side.” The term “entrepreneur” is loaded and often makes people feel uncomfortable, conjuring up images of having employees, massive payroll, and a complicated setup. Guess what? I know 1-man entrepreneurs who make more than 20-person companies. You don’t have to describe yourself as an entrepreneur, but you can think entrepreneurially.
  • It’s sexy to write about being an entrepreneur (i.e., dropping everything and going to work for yourself with no life vest). Yet this happens for perhaps less than 1% of the population — and rightfully so. For the vast majority of people, there are better ways to manage risk and earn more than jumping head-first into an unproven idea.
  • Again, there’s a more common, long-term, and sensible method of thinking entrepreneurially and earning money on the side. As I teach in my Earn1k course, you employ the Tuner Strategy to execute a series of small, increasing wins. For example, once you earn $500, then $1,000, then $5,000/month, you mitigate risk and you’re far more equipped to make decisions about what you really want to do.
  • The vast majority of my students who are earning more money on the side — whether $100/month or $10,000/month — will never quit their jobs. They’ll just earn more on the side, saving/investing/spending it and living a rich life. Nobody says you have to quit your full-time job if you enjoy it.

Bottom line: When you equate “earning money” with “I need to start a company like Google,” that’s ultimately paralyzing. You don’t have to put it all on the line or make a huge life change.

Instead, think of earning money as an opportunity to make a series of small bets in order to rapidly find one that’s profitable. If you want to scale up and go full-time, great! But most people don’t ever need to do that. It’s nice making extra money on the side and giving yourself more opportunities to do the things you love.

As always, you can get extremely comprehensive material (videos, case studies, worksheets, and more) from my free Earn1k preview course.

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22 Comments

 

Comments

  1. Making money on the side is what working for yourself is all about. Although relying entirely on side money is not the same as working for yourself..

  2. You work full time for someone’s business and I agree what ramit wrote.. it’s same thing as tell us to “mind your own business” like the book said “rich dad and poor dads” by Robert Kiyosaki (great book)

  3. “The man put the number at about 35. She told him he needed to double that number, at a minimum.”

    Ms. Pryce-Jones forgot one thing: He could double his rates (or a bit more than double) and meet his criteria of only working 35 hours per week. Of course, that’s not the real barrier. The real barrier is selling yourself as worth that much to potential employers, and getting told “no” a lot. Get through those barriers, and your income potential is basically unlimited.

    -Erica

  4. One of my best buddies is an awesome chef and loves being creative with food. Naturally, his dream is to own his own restaurant. The problem is he sucks with money and his girlfriend forever is even worse. That’s cool though, because there are 10,000 ways he could make money using his talents and passions without opening his own restaurant. We will talk about them from time to time and he will get excited, only to never do anything because, as he says it, “I want to stop working for the man and start my own restaurant.” I’ve finally realized that owning the restaurant is his crutch so that he can talk big without ever having to do anything. The restaurant is his Google, in that he can cop out and say that it is all or nothing, and because he will never have the money for all, he will always have nothing.

  5. I agree with Erica above.

    First thing, the client should do is fire this consultant telling him that he needs to work 70 hrs per week. She just created a clutch for him. I can hear him saying now, “I don’t have that much time. Oh well, back to the cubicle for me.”

    He should double or triple his rate and shoot for 20 hrs per week of billable hours and spend the other 20 hrs on marketing and sales. The fact that he’s working less will make it easy to find customers willing to pay higher rates and provide service levels that will command a higher rate.

    Have you ever called 5 plumbers for a job and only one calls you back? I have and gave that plumber the work just because he called me back even though he was more expensive. Guess what? He did the job quickly and my wife was very pleased with his work. If we need a plumber again, we’ll call just him even knowing that he costs more. All the cheaper plumbers were too busy and missed the opportunity to get a higher end client.

    I could go on and on about this one. It’s like the difference between a Hyundai and a BMW. A Hyundai owner will say that people are crazy for buying a BMW. A BMW owner couldn’t imagine driving a Hyundai. They are both made from the same metal and rubber, but the BMW is worth more. We should all work toward making our business the BMW.

    Dan Kennedy puts it best by saying, “You don’t want to roll in the mud with Wal-Mart” trying to compete with them on price. Instead offer something they don’t.

  6. Great point – it’s so scary to think about every single aspect of owning your own business, scary enough that most people back off. On the other hand, it’s easy to say, “Hey, I like to knit. Let’s see if I can sell a couple of my hats while I keep working my daytime job.” Not nearly as much fuss as “omg I have to set up an entire online store and get tons of inventory and order business cards and wait for someone to find me.”

    [Full disclosure: I did the latter for awhile. It sucked.]

  7. I feel that apart from earning more, if you spend wisely as well, getting more mileage from every dollar, a dollar saved would equal a dollar earned!
    A combination of earning more and spending wisely, getting more value for money is, in my opinion, a killer combination.

  8. ‘The term “entrepreneur” is loaded and often makes people feel uncomfortable…’

    I agree it does. It seems to insinuate someone who takes risks and then achieves huge returns. Although this may be the case for some, earning money on the side before taking the leap is probably far more attractive to most people – and it doesn’t seem as daunting as thinking ‘I will wake up one day, quit my job and become an entrepreneur’.

  9. As a college student, sometimes it can be daunting to “start a company” because the very images you talk about come to mind. The reassurance of being able to make money on the side – without having employees – is helpful in creating wealth while in school.

  10. more great advice- thanks!!

    i do feel guilty about this recent rash against business cards- i just ordered a new set! but to be fair, the last set i ordered was just to have something to hand out with my name and number on it- i finally designed a nice card with some art and branding to match the style of art i’m working in presently. i don’t think it’ll magically bring in work, but it’s nice to have some matching stationary to look professional.

    but as penance, i emailed a client i’d love to have and asked to set up a meeting to review my portfolio, and made contact with some old clients- actual real steps to getting work.
    perhaps i shall hand out my new business card if i get the meeting :>

  11. You got to love the myth of the great idea/big business. A few years ago I really wanted to help people with their finances. I had done extensive research myself in the field and I felt that I had a lot to offer.

    So what did I do? My buddy and I would meet up for beers to discuss our big plans. We would just end up giving up, getting drunk, and then going out. We kept on creating excuses/fake plans to get work done.

    In the end I just decided to start a little blog where I helped a few people. I’m not going to compete with Dave Ramsey any time soon, but I certainly do love earning more money on the side/writing a blog post while everyone worries about Lebron James

  12. Don’t be daunted by the fear of having to work long hours as an entrepreneur. Apparently Ms. Pryce-Jones’ job is to crush people’s dreams. If you have a standard American office job, you’re not “working” anywhere near 40 hours a week anyway. You’re sitting through useless meetings and gender diversity workshops, filling out TPS reports and trying to look busy instead of getting stuff done: stuff that’s going to be hard to quantify anyway.

    [Ramit's response: I don't think her job is to crush dreams. A lot of people who dream about starting their own business are unrealistic. Doesn't it help for someone to point out that it's not as easy as you think?]

  13. This, “trying to create the next Google” mindset is a spot that is so easy to get stuck at. I think this is where people start thinking about hiring a web designer, creating their own business cards, etc. when they should be out pounding the proverbial pavement for some actual paying clients, drumming up business for themselves. I like the point about making $500, then $1,000, then $5,000; once you find your first paying customers, it then becomes that much easier to find more.

    All of this Masters of Earning, Earn 1k on the Side stuff has been great Ramit. Thanks for all the great work!

  14. So this is timely. Yet another bureaucratic blockade in my department this morning as a matter of fact that has me in a very bad frame of mind. Just found out the CEO is going to start micromanaging our department as of today. I don’t know what it’s going to take before I finally take action. My job is making me very unhealthy. I feel like it’s time to make a plan, but perhaps it’s more time to just *do*. Wish I could get un-stuck.

  15. This feeling of being stuck I believe, is fear, in many cases. We get used to the “devil we know”. In actuality though, trying some freelancing on the side while you’re working shouldn’t be scarey at all. You still have the security (such as it is these days) of your job. If a freelance idea doesn’t pan out, no harm no foul. You can try something else without putting your full time job at risk. That first step is always the hardest, if you can get past it, then it gets much easier.

  16. When I want to start my Martial Arts Business, I got caught in the “Next Google Syndrome”. I crunched the numbers and told my wife “Hey, we can start the Martial Arts Business with $60,000.” My wife looked at me and said, “Are you crazy? Where are you getting $60,000 from?” This estimate was to quit my job, pay for start up costs, and have enough cash flow for 6 months.

    Some times, if you are not getting the right answer, you need to change the question. After this, I asked myself, “How could I start a karate school with $1000 and make a profit the first month?” I scaled back my dream instead of renting at a shopping center $3000/ month, I found a spot at a local church for $300/month, used my cell phone as my business phone, and cut most of the other expenses of renting. A year and a half later, I ended up in the shopping center and instead of $60,000, it only cost $1000.

    If you scale down their big dreams, you will be able to start building that dream today. Oh by the way, it took me a long time in the shopping center to become as profitable as I was in the church. Just another plus of being small.

    • What a fantastic story!

      I find it so beneficial to test the waters before you jump into a business. Even Bill Gates didn’t actually “drop out” of Harvard, but simply took a “leave of absense,” with the full capability of returning if Microsoft flopped.

      I’ve launched 6 businesses and most were a resounding failures. Mainly because I thought you needed a business plan, an official address, business cards, a 1-800 number, and a secretary, for anyone to take you seriously.

      The one business I own that has been a phenomenal success (business consulting) was started as a side hobby. I’m happy to say that because of fantastic referrals, I was able to acquire my first multi-million dollar client (worth, not bill :p) when I was only 22.

      I now consult several businesses with similar financial profiles, and make a healthy side income. To think, this was started without any of those “official” business accouterments.

      Starting small allows you to stop creating barriers for yourself, to just start. It’s your choice, you can either make dust or eat it.

  17. I am very partial to starting out side businesses and building up the income over time. This approach is less risky as it doesn’t require you to perform a leap of faith into an unproven idea, but allows you to ramp up the idea as the reward becomes proven.

  18. [...] You Dont Have to Start Google to Earn Money on the Side by Ramit Sethi – I really enjoyed this article because Ramit shares my philosophy of broadening the definition of entrepreneurship. It’s more about focusing on gaining freedom and options than a strict definition of business-building. [...]

  19. As one who has almost always had a “side” business as well as being married to someone with several sources of outside income (7 books, consulting etc), step one is being “entreneurial focused.” Always consider your own skills and how they can be used to generate revenue. Step 2 is being patient, and tenacious, keep on working towards your goals bit by bit until they become a reality. DO NOT EXPECT overnight success.

  20. [...] Your goal is to make it to that initial $1,000 — NOT start the next Google. [...]

  21. [...] Your goal is to make it to that initial $1,000 – NOT start the next Google. [...]