Main Street Business

#532 The Side Hustle System: How To Make Money In Your Free Time

• Mark J Kohler and Mat Sorensen

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In this episode of the Main Street Business Podcast, host Mark J. Kohler breaks down the roadmap to turn your side hustle into a powerful income stream. Learn how to form an LLC, develop a solid marketing strategy, and implement seven key principles that will set your business up for sustainable success.

Here are some of the highlights:

  • Mark emphasizes the need to turn side hustles into sustainable wealth-building opportunities.
  • Mark introduces and unpacks seven crucial points for impacting side hustles.
  • Importance of clearly stating your business purpose in one sentence.
  • The significance of setting up an LLC for legitimacy and potential tax benefits.
  • How to develop a marketing plan focused on identifying and reaching your target audience.
  • Establishing a board of advisors for support and accountability.
  • Building relationships with potential customers through value provision.
  • Reminder to set aside 10% of revenue for taxes.
Speaker 1:

Welcome to the Main Street Business Podcast with your distinguished hosts, mark J Kohler and Matt Sorenson. Both are best-selling authors and have over 25 years of industry experience, with 10,000 client consultations, making them the leading tax and legal experts in the nation. Together, they'll unpack the most complex tax, legal and financial strategies crucial for saving more, stressing less and building generational wealth. Today they're your personal advisors, ready to break it down for you and make the tax and legal game easier than ever.

Speaker 2:

Here is Mark and Matt. Do you have a side hustle? Have you been building a side hustle? Do you want to turn your side hustle into your main hustle? I don't know where this term came from. I think it evolved during our pandemic, where millions of Americans had to create additional income, but it's here to stay and there's now estimated over 50 million side hustle, which essentially means people that are making income outside of their day job maybe a W-2 or another business, they've got some other gig and that typically means a 1099, creating ordinary income. Well, we're going to talk about it today and I want to help you build that side hustle, to create something sustainable that's going to transform your wealth.

Speaker 2:

Now, my name is Mark Kohler. I'm a CPA attorney, bestselling author, I'm a small business owner myself, real estate investor, and I love Main Street America. I love small business and I think the side hustle is the gateway drug to live in the American dream, and so I want to give you seven ways that is going to seriously impact your side hustle in a magnificent way. Really, this is going to be extremely beneficial for you. You already know it. I've done my 10,000 consultations with small business owners over the last 25 years and the impact I've seen these principles have in their lives has been exponential. Just excited to be able to demonstrate these seven principles. It's going to go fast and hard and you're going to love it. Get a pencil and paper handy.

Speaker 2:

Number one is I need you to know your what and your why. And I'm even going to go a step further and ask you to be able to say it out loud your what and your why. Now I've even received coaching a lot of coaching in my career on what do you do, mark? Oh well, I'm a tax lawyer and I help small business owners with their tax legal planning. And then they're like no, no, make it shorter, make it cleaner. We've got to be able to say what we do in one sentence clean, sharp and clear. Many people call that maybe an elevator pitch, maybe it's the back of an Uber pitch, but you need to be able to say it short and sweet, and then, if they ask more questions, you can go deeper, but at least you make that initial statement and you know why you need it too, because you need to know what you do. You need to be clear on your mission and purpose with this project. So some what's I worked on just a few. As an example, you might say I influence others on how to lose weight. I'm a creative landscaper around people's swimming pools. I'm a consultant on supply chain dynamics. I am a tax advisor and help small business owners. Just be able to say it in one sentence this is what I do. There you go.

Speaker 2:

Number two the why. Why am I doing this? Have a why and it means something to you. Because, people, it is going to be hard to motivate yourself. Get up every day and do that side hustle. If you don't know the why, maybe someone will ask you why you do it. That's fine, but this answer is more for you.

Speaker 2:

Some of these whys could be I'm getting out of debt and then I'm going to build wealth. I'm building my retirement exclusively. Every dollar I make in this side hustle goes towards my future. I'm paying some extra bills right now so in the long run I can build a better future. Another one I'm building the college savings plans for my kids. I've always dreamed I wanted to do. There you go. Have your why. That what and why come first.

Speaker 2:

Number two treat it like a business. A side hustle is a business. So many people are like, oh, I got the side hustle, you've got a business. Like I said, it's the gateway drug to American dream and a bigger business. And so many people are like, oh, I got a 1099. Oh, I drive some Uber. Oh, I do some DoorDash. Oh, yeah, I do a little consulting. I get a check once in a while.

Speaker 2:

People, it's a business, treat it like one and the beauty of it is we may be able to create that income tax-free by taking deductions again that you may not be aware of because you've been in the maybe the W-2 corporate world. When you've got a side hustle, we're going to be writing off things like auto dining, electronics, cell phones, home office travel equipment, furniture so many different things that normally a W-2 wage earner can't write off against their day job. So when you have the side hustle, realize that you've cracked open this whole other world of being able to build tax-free wealth. Yeah, even tax-free. You could even set up your own solo 401k. Do you know? We've set up solo 401ks for Uber drivers and all of their Uber money goes into a 401k. You can have two 401ks people, you can have three, the power of treating this like a business and unlocking all of the business tax strategies and wealth building strategies is almost indescribable. I could spend a whole hour on that. But when you have that side hustle, you've got to realize I'm sitting on something pretty darn cool and I got to take it to. I can take it to the next level or I can eke out of it different strategies that will work, because it's now a business, not just this side thing.

Speaker 2:

Next, once you've got your what, your why, and you're in this business mindset, you're like all right, I'm going to throw down, this is legit, I'm going to build something here. I want you to set some smart goals. I'm not even going structure yet. I'm not even going bank accounts marketing plan or anything like that. You know your what and your why, but where in the hell are you going? What's the plan? Set some SMART goals.

Speaker 2:

Now, if you haven't heard that acronym before, let's go through them S, smart for specific. Be very specific on the financial goal, the impact goal, the number of followers, the number of whatever. Have a specific goal in mind that you can measure. Smart it's got to be measurable, m for measurable, and it needs to be achievable, sma, achievable. So when you set this specific goal of a dollar amount. Let's say and I want to measure that obviously dollars are easy to measure not, oh, I'm going to be happier, I'm going to be more successful. So I set a specific goal in dollars that's achievable and say, in the next six months I'm going to make 20 grand, I'm going to bring in 20 grand in gross. Okay, is that achievable? Sure, you may say, well, 200 grand. Okay, well, slow down, tiger. Let's say I don't know, maybe it is 200 grand, but set something that is achievable.

Speaker 2:

And I like this word that. I think it goes in line with achievable is realistic. It's achievable and realistic. Yeah, they're kind of sister terms that might mean the same thing. But you're being real with yourself too.

Speaker 2:

And why I like the realistic conversation is because you've got to put it in context of your day job, of your family, of your hobbies. It may be achievable, but is it realistic that you're going to be able to balance all of this and stay sane? And some of you are like I'm going hard for my why requires me to do that? Okay, that's okay, but is it realistic and you're going to be happier today and able to sustain what you're trying to do If it burns you out? It's not realistic.

Speaker 2:

And finally, it's timely. And what I mean by timely is, again, stepping back going. What's the big picture of my life? Where am I at in my trajectory? I've got young kids, I just got married, I'm retired, I'm old, I have bad health, I have a lot I need to get done at my day job. I can't, I can't spread myself that thin and so it's again. It's that realistic point of view, but it's also timely in that you're looking at your overall trajectory for your life.

Speaker 2:

When you can just and people, this takes one evening, this takes maybe a weekend retreat doing some yoga. You've got your what, your why and you're like, okay, okay, what's my goal here? And think of the SMART acronym and just write each one of those down and tape it on the mirror in your bathroom. Okay, now we're going to treat it like a business. Right, we got our goals, we know our what, we know our why.

Speaker 2:

Now it's time for some structure. We've got to have the foundational structure and I want to give you four things to do here. Four things super easy. You're going to have an LLC, a limited liability company. Now, llc does not save taxes, but it sets the foundation to where you can convert it to an S corporation when the time's right and save taxes. The LLC legitimizes you. You're going to get a tax ID number. You're going to have a name. You're going to look more important. You're going to feel more important. The LLC is that first step of legitimizing your small business.

Speaker 2:

Do it right. Don't think it's one sheet of paper at the state for 50 bucks. You're going to have to invest a little bit. Our law firm has been setting up LLCs for 22 years. We do it simply, affordably, and a real lawyer walks through all the questions you don't even know to ask. So do it right. Don't try to cut corners and click a button on a website and think you're done. There's a lot of pieces to it. You've got the new BOI report. That's the business owner information report. That's got to be sent into FinCEN. I want you to have a board of directors, a board of advisors, an operating agreement, all the pieces and parts. Do it right. It only costs you more later if you do it wrong.

Speaker 2:

Number two is you're going to open a bank account. Get that bank account set up. The bank account is an important foundation. We're going to talk about a credit card and bookkeeping here in a minute, but just make sure you get that bank account. And why? Because, number three, you need to set up your payment platforms. You want to make it easy for your customers to pay you. Now I get it. If you're driving for Uber or DoorDash, you're on a platform that automatically is going to send you money, but where you got to send it to your business bank account. You're a business owner, so make sure you get that business bank account up and going and it's going to allow you to open the doors of Venmo and Zelle and PayPal and Apple Pay. You've got a business. I don't want that going into your personal account and commingling.

Speaker 2:

And finally, the website. We're not talking marketing yet we're going to come to that in a moment too but a website. You need a URL, some place that your customer, your client, can go to to see what you're doing and why. And I know somebody. Again, I keep using the Uber example because you're like well, it's Uber, it's a side hustle, I don't need a website. But what's the long-term plan? What's the smart goal? Oh well, I want to maybe become a private driver. I'm going to invest in a Sprinter van. I can charge X dollars more and get off the Uber platform and do even better. Oh, I want to have an Airbnb. Oh, I want to take my driving business and then turn it into a landscaping or a consulting business or a service-based business. The Uber is just a small step in the bigger, smart goal. So, having a bank account, having your LLC, getting your payment platforms lined up and getting your website are all going to be those four steps of creating some structure and, at the very least, if no one else sees it, you see it and it gets you committed, it gets you excited about something you're doing and it helps you again take this idea to the next level.

Speaker 2:

Now number five is bookkeeping, and I know this is a dirty word. Some of you are like oh, bookkeeping, I know you had this gut feeling. I was going to go there and it's the accountant in me. Like I said, I'm a CPA and here's the bottom line everybody, you're going to have to file a tax return. This is not just something you can throw under a mattress, throw in a bank account and think you're okay. Banks, the IRS, the government, they're on top of these payment platforms so that people can't dodge their taxes and that's okay. We can generally make your side hustle tax-free up to maybe $20,000 or $30,000, because we're going to be writing off a ton of stuff against it. But treat it legitimately. Like I talked in point number two, it's a real business which now requires some bookkeeping.

Speaker 2:

Now I'll tell you the 800 pound gorilla out there that I think is really easy to adopt and implement is online QuickBooks. You pay a monthly fee. You can access your books anywhere, from any portal, any device. You're able to receive payments, send invoices, get reports, start getting a feel of how your business is developing. Smart business owners track their income and expenses. They see how the business is developing. Where are their blind spots? Where am I making more money? With which type of service or product or avatar or client, customer, whatever?

Speaker 2:

Your books is the lifeblood of the business. It's going to give you the blood work, if you will, of how you're doing, and if you don't have a set of books, you're at a disadvantage. How much did I make last month? How much did I make in the last six months? What are my expenses? How much should I profit? How much should I set aside for taxes? See, the byproduct of having good bookkeeping is we're going to try to set aside a certain amount of your revenue for taxes. Now, yeah, we might be able to make the bulk of it tax-free, but a big recommendation I have out of the gate and I'll say it now is that you take 10% of your revenue from your side, hustle 10% and set it aside in a separate bank account not the business account, but a separate savings account for taxes. When you come around the corner next year into April and it's time to file your tax return, you're going to have a bank account over there that's peeled off 10% of your revenue and now you can send that into the IRS and no pain.

Speaker 2:

If we did some good tax planning. All of a sudden you're like, oh my gosh, I don't even need all that money. I can take that savings account and deploy it. Maybe I go buy some crypto, I go invest in some stocks in the stock market, maybe I go buy some real estate. And let's think about it If I'm an Uber driver and I'm making, say, $30,000 and I take 10% of that every time I get paid and I put it in a bank account, I've got $3,000 sitting over there. Then I go to do my taxes. I have $30,000 of income, but I also have $20,000 in write-offs. I'm going to be writing off my cell phone, the mileage on the auto, maybe actual expenses with gas. I'm going to write off some home office auto, maybe actual expenses with gas. I'm going to write off some home office, my computer, maybe a little marketing, some dining.

Speaker 2:

All of a sudden you're only taxed on 10,000. So you brought in 30. We wrote off 20,000 of stuff, you netted 10. Let's say you're in a 20% bracket. You're not in one of the big high 30, 40%, you know when you combine Fed and state, but you're like a 20% effective tax rate. So what's your tax on? 10,000 of profit? $2,000. Oh, and over here in this bank account, how much should we set aside? 10% of gross? So you brought in 30, we set aside $3,000, 10% of it for future taxes, out of sight, out of mind. But then we go to do the tax return. The $30,000 is on the top line. We wrote off $20,000 of stuff legitimately. You have $10,000 of profit, $2,000 of tax. You're ahead $1,000. Now you can take that $1,000 and invest it.

Speaker 2:

That's the beauty of doing good bookkeeping is it helps you make intelligent decisions on setting aside money for taxes and tracking your write-offs. Now in this bookkeeping section, I want to point this out too this is a good time to dedicate a credit card to your business. You don't have to have a credit card in the name of your side hustle you know great landscaping LLC. You can have just a credit card that you dedicate to your business, that you don't use for personal, so you don't co-mingle but you say, oh yeah, I'm going to use my Capital One card for anything business. Or I'm going to use my Amex for anything business. You may even start doing some point management tracking the points, redeeming those for airline miles and la, la, la, la, la whole other strategy. But if you have a clean debit card bank account for your business and a credit card set aside for your business expenses at the end of the year, it makes life so much easier Because remember back to the beginning you have a what and a why. You have a small business and you're owning that. You've got an LLC, you have a tax ID number, you've set some goals and you're headed in that direction. The bookkeeping tells you how you're doing. It helps you make better decisions and prepare for taxes and build wealth.

Speaker 2:

Number six we are now to your marketing plan, and I love marketing, I love building a marketing plan. I carry around my own marketing plan. I love talking about my avatar. Who is that perfect potential client? And I've got multiple businesses I own and every avatar is going to be different, obviously, right. But what's yours? The first step in a marketing plan? And I mean you can go Google the crap out of this, but and of course there's going to be all sorts of templates out there and yada, yada, yada.

Speaker 2:

But let me just make a few simple points. Don't pay someone to go create a marketing plan for you. Don't pay someone to go do your social media posting, maybe. Or pay someone to go do your marketing strategies. Own it first, be engaged in it. Be involved in it. Learn really the mindset of who you're trying to sell to.

Speaker 2:

So the first point is I'm going to ask I'm going to make three or four points here. The first one is who's your customer, who's your avatar? How do they think? How do they make decisions? Where do you find them? Where do they hang out? If you're going to sell a particular type of person on your service, you want to be able to know how to reach them. That's point number two have a plan in your marketing plan that's very targeted to reaching your customer, for example. It's funny Someone may say well, I'm a consultant on supply chain strategies, import, export, blah, blah, blah, blah, blah.

Speaker 2:

Maybe your customers are not on Instagram or TikTok? Okay, so let's play where your avatar hangs out. Now, if you're going to be doing some landscaping around swimming pools and decks and backyards, you're going to be heavy on Instagram or TikTok to make taking pictures and videos. You might even join the house app. You're going to be playing on apps where your avatars hang out. I know it's hard because some people are like oh, I just started a business, I got to open a Facebook account. Well, your avatar may not even be on Facebook, they might be on LinkedIn. So just have a reality check and as you can describe who your typical customer is and if you were right here, you're the listener if you were right here in the room with me, I'd go.

Speaker 2:

Okay, what do you do? What's your why? Who's your perfect customer? You should be able to say in one sentence my perfect customer is X, boom, okay, where do your customers typically hang out? What are the social media platforms they like? Are you going to go to conferences instead? Are you going to go to monthly meetups in the local area? Are you going to go to conventions, events? Are you going to be on a podcast versus a YouTube channel? Where do your avatars hang out? Do some testing, do some little focus groups, play around with it. See if they're going to be reading blog articles more than listening to podcasts, or vice versa.

Speaker 2:

You've got to be able to reach them. Number two I like the word build or present. You need to be able to present what you're doing, building a relationship, having them drink your Kool-Aid. Present what you're doing, building a relationship, having them drink your Kool-Aid. Give something away, teach, talk about what you do, provide value, get followers. If you're going to be reaching these avatars, have them with top of mind, awareness. Toma be thinking about you. How are you interacting with them? You've got to be building that relationship. It could be a newsletter Again. It could be a regular broadcast or podcast or live, a tweet.

Speaker 2:

What is it that you're giving them so that they will someday be okay with you asking for something? If you're giving and giving and giving and building relationship, making deposits with them once in a while, you can make a withdrawal. You now can convert them. You can give them a call to action and say I would really like you to buy this product or buy this service, or come to an event, or come to this or spend money with you. Once they spend money with you, now they've gone to a whole new level. Not only did you reach them and they're following you now, they've invested in you. People want to know they're going to get their money back. And if I'm going to invest $300 and go to a workshop a virtual workshop of Mark Kohler's, for example now I'm invested with him and I'm going to learn more about him and I want to get that investment back. So now that customer, you may have bought that customer for another year or two where you can continue to build a relationship.

Speaker 2:

So you want to be able to reach this avatar, be able to build with this avatar a relationship and then, third, be able to convert them with a call to action, and that call to action is going to generate sales for you. So, as you're going back to your SMART goals, one of those goals might be I want to have X number of followers. I want to be in front of X number of people at regular events. I want to have so many downloads on this podcast or this blog or whatever. Your SMART goals can not only be related to production, but to your marketing plan. What am I going to be doing to convert these avatars into customers or clients or dollars? At the end of the day, we're trying to make money here, so that marketing plan needs to equate to some goals for financial purposes. Now, number seven I bet you I could do a survey right now and no one would guess what number seven is. I bet you I could do a survey right now and no one would guess what number seven is.

Speaker 2:

Number seven in your effort to build your side hustle and take it to the next level, or to provide the financial goal of your why is to have a board, a board of advisors. This is your think tank. These are the people you're going to share all of this with, people you're going to share all of this with. It is scary because you're going to take these smart goals and your what and your why and your little brand book for your LLC and your website and your colors and your logos, and you're going to go to dinner or you're going to invite them over for a legitimate meeting at a table where it's not watching football and you're talking during halftime. You're going to have a legitimate board meeting and you're going to say, hey, check out what my plans are. And once you say it out loud to someone else, it takes on its own life, it becomes real. It becomes very real.

Speaker 2:

I've had clients say, mark, that was the worst thing I ever did, because then I could never go to the grocery store. I'd be walking around the grocery store and see a friend or this family member that I shared my goals with and they'd be like, hey, how's it going? And you're trying to hide behind the produce aisle. No, no, no, they're gonna see me and now I'm gonna have to talk about my goals. It gets real really quick. So I think this is such a powerful tool because they're not there just to hold you accountable. They're there to give you support, emotional support, advice, direction, feedback, and they have to be people that will give you direct but loving feedback, people that are not going to just beat you up. Probably you shouldn't have family, that was a joke. So make sure that this board is established when you do your LLC.

Speaker 2:

Every time we set up an LLC for clients, we say who's your close friends and family that you might travel with Because it's going to be a tax deduction to travel with them, by the way, and have these board meetings and right off the dining. Who are these people you travel with that you spend time with? Mom or dad, husband or wife, brother, sister, adult children, maybe even teenagers. Who's this close network of family around you that you want to share your dreams with? You want to share this side hustle with and these smart goals? And once again, you get those people around you and you start talking about it. The relationship evolves too. It gets to be pretty cool. All of a sudden, your kids are like whoa, you've got dreams. Oh, we're talking about. What is this financial literacy? What's that mean? You're trying to make more money. Why You're trying to get out of debt Maybe I should too and you start having deeper, more meaningful conversations with family members and friends. And what was the catalyst? What was the gateway drug? A little side hustle, people. The side hustle will change your life for the better. It's going to help you live your American dream, make more income, build more retirement, do something you're passionate about for fun.

Speaker 2:

I just had a call with another client the other day that started a fly fishing business, they were like this is what I'd love doing and I'd like to make money at it. Do it Go? Do you have to get licensed? What do you have to do? Where do you go? Can we get a website going? Where are you going to take people? What's your pitch? How much? What's your product? Just go through these seven steps for fly fishing. That's it.

Speaker 2:

Whatever your passion, you want to make online clothing. My daughter, allison, has an online clothing business. She also sells patterns online. My other daughter, molly, does pottery and jewelry. My other daughter, sydney, she's a realtor. My son, dylan, he's in marketing and in ad management. Every one of my kids have a side hustle or a main gig and they're passionate about it and they love it and I love talking to them about it. It brings us together.

Speaker 2:

Have a side hustle that is front and center in your life. It's a badge of honor. It shouldn't be something you're embarrassed of. Oh, I got a side hustle because I can't make ends meet. No, I got a side hustle because I'm gonna build some freaking wealth. I'm gonna build a retirement that's second to none, because I'm taking ownership of my own future. I don't care what's happening in politics or interest rates or finance. I know what's going on in my economy and my economy is going in the right direction. I'm making more money, I'm cutting costs, I'm getting out of debt and I'm passionate about something.

Speaker 2:

Let me tell you my what and let me tell you my why. That, my friends, is a side hustle and when you can nail these seven things and I know there's more and we can talk all day long and I love teaching workshops. Oh my gosh, I've got a three-day workshop in December in Phoenix. Please come. I've got a crypto tax summit this weekend and if you missed it, the recordings are available. I'm always teaching or presenting something to help you build your wealth. I'm not going anywhere. If you just fell upon this video, please give it a like, give it a subscribe, give me some love. I will not let you down. I am here for the rest of my life doing my what, and that is helping Main Street America live their dream. And why? Because I just love people and I love building something and seeing people live that experience. It makes me wake up every day. So you can do this. That side hustle is the coolest thing in your life. Own it, take it to the next level, and I'll be right alongside you with your journey.

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