Side Hustles For Dummies

Start-Ups Articles

How to Develop a Side Hustle Business Plan

Tens of millions of people in the United States, and hundreds of millions of people around the world, supplement their primary jobs with some type of business activities on the side. These people all spend at least some of their professional lives embracing the idea of side hustles. If you've decided to join the side-hustle world, and you've brainstormed your side hustle idea, you'll want to start pulling together a business plan.

For help with exploring side-hustle ideas, brainstorming, and the planning steps that lead to this business plan phase, check out my book Side Hustles For Dummies.

If you’ve ever done a jigsaw puzzle, you know that you typically start with a little portion of the overall puzzle in, say, the top left corner. Then maybe you shift to working on the bottom right side; then move to somewhere in the middle; and so on. That's sort of how you put a business plan together — a document that eventually shows the whole picture. When it comes to business plans, you have a little bit of a challenge on your hands: If you put 10 people in a room, you’ll get 20 opinions about what a business plan should look like! You’ve probably come across this same problem when you worked on your résumé, with one person telling you to structure your résumé one way, and another person indignantly disagreeing and insisting that you write your résumé a totally different way! I have some good news for you when it comes to trying to make sense out of all the different guidance you’ll find for how to write a business plan: For a side hustle, you have a lot more leeway in the order of topics that you cover — and even what you do and don’t include — than if, say, you’re putting together a business plan in search of a large bank loan or millions of dollars of venture capital investment. Maybe, someday, if your side hustle really hits its stride and starts growing toward your ideal scenario, you’ll have to worry about making sure that your business plan matches the structure that a bank or private equity firm, or some venture capital company, insists on seeing. For now, though, think in terms of pitching your side hustle to yourself — an audience of one. Are you painting a cohesive and compelling picture of how to get your side hustle going? If your side hustle is a gig-economy job, such as delivery services or ridesharing, you can probably skip over the whole business-plan stuff. However, if your gig services are along the lines of pet-sitting or bartending or doing handyman work — basically, if you’re setting up a small-business structure even though you plan to land gigs from side hustle–oriented platforms — you should at least jot down bullet points for most of the business plan sections. Your side hustle business plan should include the following sections.

A short overview and a really short elevator pitch

If you're in the business plan phase of your side-hustle planning, you should be able to clearly articulate exactly what your side hustle is going to be, so write it down! In fact, write it down twice! Start off your business plan with both:

• A one-paragraph (two paragraphs at most) highly summarized version of every key aspect of your side hustle
• A single-sentence elevator pitch that summarizes your summarized version (got that?) even more!

Having an elevator pitch means being able to describe an idea so persuasively in about the duration of the typical elevator ride that the person to whom you’re talking is crystal clear about the most critical or unique aspects of your concept.

As an example, one side-hustle starter's — let's call her Sarah — business plan starts with: "I will design, craft, and sell custom-made jewelry. I will build a Shopify site that I will promote using online marketing and advertising techniques, such as Facebook and Instagram ads, Google Ads, and short demonstration videos on YouTube and TikTok, that will link to my site. I will run the business out of my house. I’ve lined up primary and backup suppliers for all materials and tools." Then Sarah adds her elevator pitch: "I will sell custom-made jewelry from my Shopify site that I will promote through a variety of online ads." As Sarah works her way through the rest of her business plan, she can refer back to this section and adjust the wording as necessary. For now, though, she has placed a stake into the fertile side-hustle soil and is ready to start planting.

Your time commitment

Your business plan is for a side hustle, so you need to be crystal clear with yourself about exactly how much time you plan to spend on your venture. Plus, if you have specific time constraints, like “only evenings after work,” or “only on weekends,” or “only on Wednesday evening and all day Saturday,” you need to acknowledge these constraints and write them down.

As you go through the rest of your business plan, you now have an “official statement” that describes your available time that you can use as a sanity check for your side hustle’s details.

For example, suppose you plan to do software development on the side. However, because of extra hours you need to work at your full-time job, you only have about 15 hours a week available for your side hustle. You can certainly take on a little bit of software development here and there, but you’ll need to focus on shorter-duration tasks, such as building template-based websites or doing some light software configuration rather than heavy-duty application development. If you don’t have a full-time job and, instead, have a portfolio of several different side hustles, documenting your available time is still important to help make sure that your side hustles don’t clash because of conflicting demands for your time.

Your schedule and major milestones

Whatever your side hustle is, you have an idea of what you'd like it to be in the future. Maybe your longer-term plan is built around expanding your business, or maybe you have no intentions of growing your business at all, and you just intend to get a little business up and running and keep it going. Think about what your side hustle will look like in time increments that make sense for you — three or six months from today, in a year, three years, etc. Regardless of your expectations and the timeline for those, document it all in your business plan, along with key milestones and decision points along that timeline.

Key players in your side hustle

Your business plan also should include the other people and companies you'll need to connect with. If you plan to make and sell clothing, who will be your wholesale suppliers? Who will be your key points of contact — the actual people — at each one of those wholesalers? As another example, if your side hustle will be buying and selling baseball cards and other sports collectibles, will you do this via eBay, or other auction houses? Revisiting our jewelry maker, Sarah, who will be her suppliers of metals and tools? No matter what your side hustle is, and even if you’re going solo, you’ll almost certainly be involved with other people and companies at some point. Write all of these details down in your business plan, including any designated backup companies or services that you may switch to at some point.

Your customers

You need to identify who will comprise your target market (the people to whom you’ll try to sell your products or watch your videos or take your course, or for whom you’ll provide weekend landscaping or bartending services, or whatever your side hustle is). Sometimes, your target market can (and should) be as broad as possible. After all, if you have a potential customer out there somewhere in the world, why not try to attract that person to your business? For example, you might be selling clothing and accessories online to “the world at large” — basically, anybody who wants to place an order on your website for a blouse or leisurewear or a necklace can do so. You might get to know some of your regular customers, but for the most part these customers will be anonymous to you. In other situations, you should narrow your target market to better focus on catching the attention of a person or another business even more likely to be in your side hustle “sweet spot.” For example, Sarah’s customer base will be broad, at least initially. At some point down the road, Sarah may wholesale her jewelry to other online and in-person retailers for them to retail. At that point, she needs to go back and adjust her business plan to more precisely target certain customers — maybe not specific names of people and businesses, but at least descriptions of the types of retailers to which she’ll sell her jewelry.

Startup money, budget, and financial projections

This part of your business plan includes how much startup capital you’ll need, how to budget, how to forecast sales and expenses, and more. Your business plan needs to include the key aspects of the financial side of your side hustle. (How to figure out all of these things is my book Side Hustles For Dummies.) Pretend that you’re pitching your side hustle to an investor, and you also happen to be that investor. Convince yourself that you have all your financial ducks in a row.

How you’ll operate

This part of your business plan should include the business processes through which you’ll operate your side hustle. And you should add as much detail as possible. For example, Sarah’s side hustle has nine internal processes: buying materials and tools, deciding on her product list, building her website and storefront, and so on. She needs to take each of those processes and break them down into the underlying steps that she’ll do. She can simply list the steps as bullet points or a numbered list.

Risks and mitigation

It's important to consider the risks involved in your side hustle idea, and how you could mitigate those risks. List how you intend to counteract and neutralize the risk. As you’ve been working through your business plan, you may have come across a new risk or two, or come up with a new mitigation strategy for a risk that you’ve already documented. So, spend a little bit of time and take a fresh look at your list, and make any necessary updates.

You can check out Business Plans For Dummies by Paul Tiffany and Steven D. Peterson for much more information about business plan structure and content, especially if your side hustle really catches on and you’re looking to take it to that mythical “next level.”

Start-Ups Articles

How to Do Taxes for Side Hustles

Even if you’re doing your side hustle on your own rather than with a partner or with the assistance of employees, plenty of other people want to share in your success — specifically, your friends and family. Guess who else wants to share in your success? The tax people. And unlike your friends and family, who share in your success by offering you encouragement and celebrating your accomplishments, the tax people want something from you. Actually, they want two things from you:

• Lots of documents and forms
• Money

Like it or not, you’ll need to deal with all sorts of tax-related matters for your side hustle. Some of the tax stuff is pretty easy to understand, while other tax-related requirements and rules can get tricky. So, buckle up! You won’t find a one-size-fits-all playbook or checklist for your side hustle taxes. Your tax-filing requirements will vary depending on:

• The legal organization you set up for your side hustle
• What type of business you’re doing for your side hustle
• Where you live and work

How to file taxes for a side hustle

If you organized your side hustle as a sole proprietorship or a single-member limited liability company (LLC), I have good news for you: Your U.S. federal tax filings for your business will be just another section of your personal taxes on your Form 1040. You don’t have to file any separate returns, at least at the federal level. You will, however, need to file an additional form — a Schedule C — that is basically an attachment to the rest of your personal tax return. What if you set up your side hustle as an S corporation or a partnership? Or what if you set up an LLC with a partner? Great news … if you enjoy more paperwork. In addition to your personal tax return, you’ll need to file a separate return, not just an additional form attached to your personal tax return. Depending on how you structured your business, you need to file either:

• Form 1065 if your side hustle is organized as a partnership or a multi-member LLC
• Form 1120-S if your side hustle is organized as an S corporation

Don’t worry, your Form 1040 for your personal tax return won’t feel left out if your side hustle financials show up on either a Form 1065 or a Form 1120-S. Technically, you don’t pay taxes on either S corporation or partnership income — at least not directly. If you used either of those legal structures for your side hustle, your business income (or loss) will pass through to your Form 1040, where you’ll mash all those details together with income from your day job, your personal deductions, and the rest of your personal tax stuff. You use an IRS form called a K-1 to carry your side hustle corporate or partnership finances over to your personal return. (You’ll have slightly different versions of a K-1 depending on whether your side hustle is an S corporation, a partnership, or a multi-member LLC.) The more complicated your side hustle’s legal structure is, the more complex your filing requirements will be — basically, you have a straight-line relationship up the complexity ladder. Here’s a little bit of good news: If your side hustle is one of those where you’re paid as a part-time employee rather than as an independent contractor — say, teaching a class or two at the local community college — then you’ll receive an IRS Form W-2 for each tax year, the same as you get from your full-time employer. In that case, all you need to do for your taxes is treat your side hustle just like it’s another job and add your side hustle income to your regular income.

Side hustle tax rules and forms

If your side hustle is service-oriented and you aren’t dealing with any physical inventory, your tax returns won’t be all that complicated, even if you did set yourself up as an S corporation or a partnership. If, however, you’re running an online store where you need to keep track of your cost of goods sold and the value of your inventory, then not only is your overall side hustle record-keeping more complicated, but your taxes may turn into a head-scratcher, too.

Remember this simple equation when you're working on your side hustle tax filing: The more physical items you have that play any sort of a role in your side hustle, the more complicated your taxes will be. If you’re buying goods to resell, or if you need to purchase shelving and containers to hold products, then your taxes will be more complicated than if you’re recording and uploading videos, or doing software work, or doing ridesharing for Uber or Lyft.

Everyone wants a piece of the tax action

If you live in the United States, you’re well aware of the Internal Revenue Service (IRS). If you live outside the United States, then you need to file tax returns with the equivalent of the IRS in your country. You don’t only have to pay up and file returns with the feds, however. Your state and maybe even your city want their cut of your side-hustle profits, and you’ll need to file the proper returns along with writing the checks or doing the electronic funds transfers to pay the taxes that you’ll owe. As complicated as the federal side of taxes can be, in many cases the state and local side is even more complicated. Why?

• If you’re doing your side hustle in Arizona, you’ll file different state tax return forms than if you’re side hustling in Pennsylvania or California or any other state.
• Some states just wants a copy of your federal return, but others have their own sets of forms. And to complicate matters even further, many states allow different deductions for expenses than the feds do, meaning that the net income from your side hustle for tax purposes may be different for the IRS than it is for the state where you live.
• Some cities get in on the act also, and you have to file yet another set of tax returns — and shell out even more money — to the city where you live and where you’re side hustling. Or maybe you’re getting hit at the county level rather than the city level. Sometimes those local taxes are only on W-2 wages (basically, the money you make from your day job), but in other cases, they’re full-blown tax returns that apply to side hustles.

Decision time

You have two paths you can take when it comes to your side-hustle taxes and filing your returns:

• Do it yourself.
• Hire an accountant.

Even if you decide that you want to do your own taxes, you don’t have to study up on a ton of tax laws that are always changing or do a whole lot of calculations by hand. All of the big tax-filing programs, such as Credit Karma Taxes, TaxSlayer, TurboTax, and many others, will step you through not only your personal taxes but also basic small-business taxes that would apply to your side hustle, no matter how you set up your business (sole proprietorship, partnership, S corporation), even if your side hustle is just another part-time job with a regular old W-2.

And speaking of small-business taxes: You don’t need to be an expert in taxes for your side hustle. After all, you have dozens or even hundreds of other tasks to take care of or decisions to make. However, you should still have a basic idea of the big picture, tax-wise, for your side hustle. Beyond the basics I cover in this article, you can also check out Small Business Taxes For Dummies, 3rd Edition.

Even if you made the command decision to hire an accountant to file the tax returns related to your side hustle, you still need to pay attention to some key points and beware of a few big-time traps that could really trip up you and your side hustle. Specifically:

• Avoid the temptation to use your side hustle to “get creative” with your tax returns.
• Be aware that if your side hustle crosses state lines, your tax picture could get murky and complicated.
• Remember that tax laws change frequently and can be tricky.
• Be sure to correct any tax-related mistakes that you make.

Staying legal and staying honest

Maybe you’ve read or heard someone saying something along the lines of “I deduct all kinds of expenses through my home business — it’s great!” If that person’s statement really meant “I legally deduct all kinds of allowable expenses through my home business,” then no problem. If, however, the statement actually meant “I sneak in all kinds of personal expenses and deduct them through my home business,” then that person may be in for all sorts of tax and legal problems. And if you follow in their footsteps and start playing shady tax games with your side hustle, you could wind up in a lot of trouble.

Business deductions for your side hustle

Suppose your side hustle is an online retail site, where you buy clothing items from wholesalers that you then list and sell. While you’re buying clothing items for your business, why not buy some for yourself that you can “hide” among your business purchases? Then you can deduct all that clothing, and basically get your jeans and shirts and shoes at a 30 percent or 35 percent discount because you’ll owe less in federal and state taxes. Don’t do it! Maybe you do a little bit of traveling for your side hustle, and you deduct all those travel-related expenses. You know what? Why not deduct the costs of your next family vacation as well? You already have a bunch of legitimate tax deductions for airfare, hotels, meals, and other travel expenses, so who would ever know if you added a few more travel expenses that really shouldn’t be on your side hustle’s tax return? Don’t do it! Suppose you send a lot of packages to your customers via FedEx, UPS, and the U.S. Postal Service (USPS). Everything that you spend on packing materials and shipping costs is deductible. Why not also include the cost of shipping about a dozen packages to your out-of-town friends and family members for the holidays? Don’t do it!

Even if you’re not swayed by the morality and ethics of cheating the government by lying — yeah, I said lying! — on your tax returns, how about a practical reason to be honest when it comes to your side hustle’s taxes? If you get caught, you’ll be in big trouble! At best, you’ll owe money — maybe a lot of money! — for back taxes, interest, and (most likely) penalties. At worst, the government could decide to criminally charge you with tax fraud. Even if you escape being convicted, you’ll have to spend a ton of money on attorneys’ fees.

Will the government really come after you for claiming $100 in shipping expenses that you shouldn’t have, or for “only” $2,000 in personal travel that you inaccurately claimed as a legitimate business expense? Maybe not — but do you really want to take the chance?

General Small Business Articles

Exploring Side Hustle Opportunities

If you’re thinking about jumping into a side hustle — or if you’ve already taken the plunge — you’re not alone! According to a study reported on Side Hustle Nation, 45 percent of working Americans — about 70 million people! — had at least one side hustle going. Even better: Another 60 million were thinking about jumping into the side-hustle game. Side hustles aren’t only popular in the United States either. According to an article paid for by GoDaddy appearing on the USA Today website, 54 percent of people in the United Kingdom, another 54 percent of people in Singapore, and an astounding 77 percent of people in the Philippines had side hustles. People start side hustles for a variety of reasons. For many people, money is the prime motivator. But to some people, the financial side of their side hustle is so secondary that it’s almost an afterthought. So, why are you interested in a side hustle? Maybe it’s money, knowledge, or experience. Maybe you’re hoping to make a big career change. Maybe you’re looking to monetize a hobby or passion. Maybe you want a safety net in place in case you get laid off. Or maybe you’re trying to make ends meet after losing your full-time job.

How a passion becomes a side hustle

As mentioned above, you might start a side hustle based on a hobby or passion. For example of how this can lead to a fantastic opportunity, let’s consider a man named Sandy. He’s been a sports fanatic all his life. He played sports when he was young, and he collected sports cards and memorabilia. Today, a man with children and many responsibilities, his sports cards and memorabilia were stuffed in a box, somewhere in the basement. Then, at the beginning of the COVID-19 pandemic, Sandy noticed that baseball cards, football, and basketball cards, along with all sorts of sports memorabilia, suddenly became wildly popular. Many people were working from home, and many others unfortunately lost their jobs (but fortunately, millions of them started side hustles!). Overall, people were at home much more than before and had a lot of time on their hands, as well as surprisingly flexible work and personal schedules. For whatever reason, lots of people either discovered sports cards and collectibles for the first time or, as with Sandy, rediscovered their long-forgotten collections. So, it’s settled: Sandy has selected his topical area and is going to start a side hustle related to baseball cards, primarily, but also including other cards from football and other sports along with other types of sports collectibles. But exactly what kind of side hustle is this? Sandy could, under the general umbrella of “sports cards and collectibles side hustle,” focus on any of the following:

• Just baseball cards
• Baseball, football, basketball, and soccer cards — but basically only sports cards
• “Game-used” memorabilia, such as uniforms and hats, or balls and baseball bats
• Autographs
• Old sports books, almanacs, yearbooks, scorecards, and similar items

But wait! Sandy isn’t even close to being done with his narrowing down and filtering. He decides to focus on baseball cards. But what kind? The baseball-card world is divided into different eras:

• Vintage (basically, older cards from before around 1980)
• The so-called “junk wax” era from the mid-1980s to the mid-1990s
• Modern and ultra-modern cards that came after the “junk wax” era ended

Sandy decides to focus on vintage cards. However, he still has some more narrowing down to do! He could specialize in:

• Individual cards
• Cards for specific baseball teams
• Unopened packs and cases of old cards (yes, they still exist)
• Complete sets for a given year

Even if you don’t know the first thing about baseball cards and sports collectibles — and don’t care in the least about them, either! — you probably get the idea. Of course, Sandy isn’t limited to only one particular subcategory, or sub-subcategory, or sub-sub-subcategory, or… . But Sandy’s chances for side-hustle success go way up if he hasn’t cast too wide of a net. Whether he plans to buy and then flip (sell quickly) vintage baseball cards, start a podcast about jumping back into the sports collectible hobby, or provide advice to other returning collectors to help them get the most value when they sell their collections, the more focused Sandy is, the better off he’ll be. Sandy could also head right for the techie world for his sports collectible–related side hustle by focusing on non-fungible tokens (NFTs), a hot new area in the sports marketplace (as well as the art world and other areas of society). An NFT is a unique “digital asset” (basically, an online image, audio clip, or video) that uses blockchain technology to essentially make that digital asset behave as if it were a physical “piece of something” that is actually owned by someone. Sandy obviously doesn’t have any NFTs stashed away in those cardboard boxes up in his attic, but as he jumps into a sports-collectible side hustle, he absolutely could find something interesting and potentially lucrative related to NFTs.

If you don’t have a clue about blockchain or NFTs and you’d like to learn more, check out Blockchain For Dummies, 2nd Edition, by Tiana Laurence, or NFTs For Dummies by Tiana Laurence and Seoyoung Kim, PhD.

Sandy began his side-hustle planning the right way: by first selecting some area of interest and then narrowing that area down. No matter what your side hustle is going to be, you’ll almost certainly find yourself following the same narrowing-down steps. The table below shows a few different side-hustle topical areas and then, for each one, some of the underlying narrowed-down subcategories. Even if you’re doing the “just something to earn extra money” version of a side hustle rather than trying to monetize an interest or hobby, you still need to do at least a little bit of narrowing down. Suppose you’ve decided to do some gig-economy delivery service. Do you want to also do shopping and then deliver what you buy at the supermarket or at other stores? Maybe you just want to pick up food from restaurants and deliver the food to homes, with no shopping involved. Making this particular decision will help you decide between, say, an Instacart side hustle versus doing something with DoorDash or Grubhub. Or you may want to just deliver packages for Amazon.

You can “package up” as many different side-hustle ideas as you have time for or that make sense for you. You aren’t even limited to ones that are closely related to one another, such as baseball and football cards, or hair and eyebrow microblading. Be careful not to spread yourself too thin, especially as you’re first getting started in the world of side hustles.

Taking your side hustle to market

You’ve selected your side-hustle topical areas to focus on, and you’ve decided what sort of side hustle to do (providing a service, selling something, delivering content, or monetizing an asset). Guess what: Your decision-making still needs to march ahead! Now you need to decide how you’re going to take your side hustle to market and how you’re going to reach prospective customers. You could:

• Go to market totally on your own.
• Leverage an online marketplace.
• Join a multilevel marketing (MLM) organization.

Going to market on your own

You can start, build, and run a side hustle that is structurally identical to a full-time business. As another example of someone starting a side hustle, let's say a woman named Breanna went down this particular side-hustle road for her online boutique. She built a simple website and Shopify store and is doing her own social-media marketing. Breanna lined up her suppliers and set aside a spare bedroom in her house to serve as a warehouse and shipping area. She processes customer orders as they come in and then packs and ships each outgoing package herself. Breanna’s brother, Brian, is also in the side-hustle game, but he has taken a different route than his sister did. Brian is a software engineer who wants to do a little smaller-scale contract software development for his side hustle. So, whereas Breanna is selling physical products for her side hustle, Brian is providing a service for his. But other than the product-versus-service and fashion-versus-tech differences, Brian’s side hustle is very similar to Breanna’s. He also built his own website and has been doing online targeted ads to drum up business. Basically, Brian’s side hustle mirrors that of his sister in terms of going to market as a microcosm of a larger business.

Leveraging an online marketplace

Rather than try to market and advertise your side hustle totally from scratch, you can get a head start by posting your services on an existing online marketplace that’s widely known and that your potential customers frequently visit to find providers for what you’re selling. Keith is a software engineer at the same company where Brian works, and he also wants to start a software development side hustle. Keith, however, doesn’t have the patience to set up his own website or to do his own targeted marketing on social media to try to find business. Instead, Keith lists his services on Fiverr, an online marketplace where people and businesses come to find contractors for software development, video editing and production, graphic design, market research, writing a business plan, or other professional services.

Many people like Keith use online marketplaces such as Fiverr, Upwork, Freelancer, Guru, and other sites as the foundation for their side hustles.

Online marketplaces aren’t limited to professional services side hustles, either. For example:

• If you do dog walking or pet sitting for your side hustle, you can list your services on Rover, Holidog, or Puppy Friends Social Club.
• If you provide home-related services, you can go to market through Angi or Thumbtack.
• If you do freelance hair styling or tutoring, or provide dance lessons, you can post your services on the aforementioned Fiverr under the “Lifestyle” category.

Suppose Sandy decides his sports collectible–related side hustle will be to help other people figure out how much their long-forgotten vintage card collections are worth. Sandy could list “Vintage Baseball Card Appraisal and Valuation” on Fiverr under “Lifestyle” services. In fact, if you happen to be a Pokémon collector, you’re in good company with other side hustlers who post that they’ll help you figure out how much your Pokémon collection is worth. Another side-hustle freelancer posts that they’ll appraise Peanuts (the comic strip with Snoopy, Charlie Brown, and their friends) collectibles. If you can imagine a product or service, odds are that you can come up with a related side hustle!

Multilevel marketing organizations

MLM organizations — also called network marketing companies — are the most controversial topic in the world of side hustles. Some people swear that MLMs are the absolute best way to do a side hustle, while others swear at MLMs and regret the day they ever signed up for one. So, what’s the story with MLMs? Suppose you’re interested in selling exercise clothing, activewear, and leisurewear for a side hustle. You could do what Breanna did:

• Build your own website or storefront.
• Decide which specific products you want to sell.
• Find suppliers for the products you want to sell.
• Figure out the tricks of social-media advertising to reach potential customers.
• Pack and ship orders if you’re handling your own inventory.

On the other hand, you could find an MLM that markets the type of activewear and leisurewear that you want to sell and then join that MLM. You don’t just sign up with an MLM, however. The term multilevel is part of the name for a reason. You typically become part of the sales network for someone who is already a member of that company (thus, the significance of the work network in network marketing). Further, as illustrated in the figure below, that network is constructed in multiple tiers, or levels, thus, the name multilevel marketing. If you join an MLM, you make money from selling products to other people. But you also make money by bringing other people into the company and typically by receiving a small portion of the sales made by each person in your network. Basically, the larger your network, the more money you can make from products that other people sell. The pyramid-like structure of the typical sales force within a multilevel marketing company is why many people view MLMs as a “pyramid scheme.” The full story is somewhat murkier. If an MLM company has a viable product that its independent contractor sales associates — basically, a whole bunch of people doing side hustles — offers and sells to the public, then despite the pyramid-like structure the MLM likely isn’t a pyramid scheme in the classic financial fraud sense. But the key is that the company does need to have real products or services that you and others actually sell. You need to do your homework and determine:

• How to figure out if a given MLM’s compensation model is good for you
• Whether you can make any money if you’re way, way down the sales ladder
• How sales territories are allocated
• If you’re required to purchase a monthly allocation of products, or if you can purchase products as you sell them

From a side-hustle perspective, MLMs have some interesting advantages and possible disadvantages. On the plus side, you can find an MLM for almost anything that you want to sell for your side hustle: clothing, health and wellness products, cleaning supplies, cooking-related products, makeup, and even (ahem) “adult” products. If you can imagine something, you almost certainly can find an MLM to join!

One possible drawback, however, is that if you join an MLM, much — maybe even most or all — of your selling will be to family members and friends. Before you head down the MLM road for your side hustle, think about the possibility of constantly pushing new products on your friends and family, or dealing with them as dissatisfied customers, or telling your sister or a parent that the automatic payment on their credit card was rejected last month — yeah, might not be a whole lot of fun.