The idea of working a traditional 9-to-5 in a corporate environment was never for me. I always wanted financial freedom and the flexibility to work on my own terms.
So, over the past two decades, while I was a student, a full-time employee, an academic researcher and a stay-at-home mom, I started a variety of side hustles.
Now I have multiple streams of passive income, which include selling card games on Amazon, creating online courses, speaking at companies about emotional intelligence, lecturing at universities and impact investing.
Whether selling goods or providing services, my No. 1 advice for anyone starting a side hustle is to develop a clear profitability plan. All too often, I see people diving into their passions without considering how and when they will turn a profit. This oversight can make or break your success.
Here are three things to keep in mind:
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1. Know your numbers
How much are you willing to invest, and potentially lose, before becoming profitable? Knowing this requires a realistic understanding of your initial net profit margin and ways to boost your profitability.
Your net profit — calculated by subtracting expenses from sales — is the lifeblood of your side hustle. Examples of expenses include materials, labor, equipment, packaging, shipping, advertising, traveling and business subscriptions.
Your profit margin represents the percentage of each sales dollar you keep as net profit. For example, if your product or service sells for $10 and your expenses amount to $8, then your net profit is $2, resulting in a profit margin of 20%. If you’ve invested $100 upfront, then you need to sell 50 units to break even.
To fund my first card game and boost early profitability, I launched a Kickstarter campaign with a $1,500 goal. This funding covered essential expenses like product manufacturing and jump-started my sales by getting products into the hands of early adopters.
I needed to sell 60 units to break even but ended up selling over 400 units. This higher sales volume allowed me to manufacture at a reduced cost per unit, which improved my profit margin by lowering my cost of goods sold (COGS).
2. Avoid common traps that can harm profitability
I found that there are three traps that can severely undermine the profitability of a side hustle:
1. Underpricing your services
When I was selling handmade goods on Etsy, I made the mistake of chasing sales over tracking profit. Hoping to establish credibility, I underpriced my products aggressively and went above and beyond in customer service.
But I soon realized how difficult it was to raise prices once you’ve set a low-cost precedent. Despite making thousands of sales on Etsy over the course of five years, I ended up having to close my shop due to slim profit margins.
2. Failing to accurately account for your time
That experience helped me grasp the difference between running a passion project versus a profitable business.
Recognizing the need for scalability and efficiency, especially when it came to the time I was putting into it, I pivoted to selling products on Amazon and utilized the automated Fulfillment by Amazon (FBA) service to handle logistics.
3. Overlooking opportunity costs
I’ve also stumbled upon similar dilemmas when pricing my speaking and consulting services. When I first started out, I lowered my fee in hopes of securing contracts from big names like Accenture and Google.
But when they came back the following year, I had to raise my fees significantly because my opportunity costs — the cost of what I could have been doing and earning with my time — outweighed what I was charging. I learned the importance of valuing my work from the start.
3. Begin with the end in mind, and put yourself first
Over the years, I’ve developed a more expansive definition of profitability. It isn’t just about money. Profitability is also about how this venture affects your quality of life. Your physical and mental well-being come first.
To see if your side hustle is truly profitable, ask yourself:
- How much money am I willing to invest in my side hustle?
- How much time am I prepared to dedicate to my side hustle?
- Is my goal to make my side hustle into my main hustle?
- At which point do I pivot if the reality is not matching my answers to these questions?
It’s been exhilarating to see my hard work pay off. But this process has also required me to have a very clear understanding of what I value the most, and to get comfortable with saying “no.” Without that foundation, none of my success would have been possible.
Dr. Jenny Woo is a Harvard-trained educator, EQ researcher, and founder/CEO of Mind Brain Emotion. She created a series of educational card games and mental health tools to help kids and adults develop human skills in the age of AI. Her award-winning card games, the 52 Essential Coping Skills, 52 Essential Relationship Skills, and 52 Essential Conversations are used in 50+ countries. Follow her on LinkedIn, YouTube, and Instagram.
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