I’ve become somewhat of a (self-proclaimed) expert at doing random things on the side.
In the last few years, I’ve created online courses, launched a self-published book (under a fake name—not proud of this one), done marketing consulting, launched an email course, Airbnb-ed my apartment, traded stocks, bought cryptocurrency (my best investment to date), bought a condo and put it on Airbnb, wrote a book (a better one), bought a business, put affiliate links on my site, given paid talks, written book summaries, and built an affiliate site for a basketball dribbling course I never took (also not proud of this one).
And those are just the ones that worked! I’ve tried tons of other things—buying motorcycles on Craigslist and flipping them, buying cars and paying people to use them to drive Uber, starting an affiliate site for people with eyebrow dander, starting an email course for people interested in nootropics … the list goes on.
Heck, even my current company began as a side project.
It feels extremely freeing to make even $1,000 a month on your own.
It’s a complete game changer. Making money via side businesses (or side hustles) gave me the confidence to quit my job and go out on my own four years ago. Having a few thousand dollars a month coming in on autopilot gave me the freedom to charge rich rates as a growth consultant, as I knew I’d be okay if they said no (for the record: they said yes and it worked well for both parties).
Through all these experiments, I’ve gotten a sense for the kind of side hustles that are doomed to fail, and those that are likely to work.
The biggest key to successful side hustles that I’ve seen? Understanding that you’re not starting a startup.
Get this idea out of your head.
You’re starting a profitable side business to bring in cash and build your capability as an entrepreneur. You are not starting the next Facebook—just bringing in some cash to buy your freedom.
Side hustles can grow and evolve, but to work they need to have a few traits. they need to:
- Solve a problem someone is already aware of
- Give someone something they’re looking for
- NOT require a lot of maintenance or hand-holding
- Have a no-brainer path to profitability
As far as I’ve thought about it, I think there are four ways you can build a successful side hustle:
- Buy an existing asset
- Launch a product on a marketplace with existing demand
- Launch a unique, one of a kind product in a new space where you can buy demand (Adwords, Facebook)
- Arbitrage (Craigslist, Airbnb, Trading, Uber)
Let’s cover them one at a time.
Buy an existing asset
This one is probably the easiest, and (annoyingly) requires the most money to pull off.
It’s also pretty self explanatory. Buying an apartment and renting it out to someone is a common way to generate income in the US. You buy an existing asset (a house) and rent it out on a monthly basis. After a few years, you’ll have made your initial money back and the rest is just profit. Easy!
Real estate is the easiest example, but you can apply this concept (pay a lump sum up front in exchange for regular payments later on) to all kinds of things.
My partner Ryan and I did exactly this when we bought a company called fomo. We loved the app, it was growing well and kicking off steady cashflow. So, we bought it.
It’s the way we structured it that’s key. We seller-financed the deal, meaning we bought it for an upfront price and made the payments over time.
Beyond real estate and apps, there are all kinds of existing assets you can buy. I know one guy who found a watercolor tutorial site with a ton of organic traffic. To monetize, the site was showing Google ads on the sidebar and using Amazon affiliate links. All told, it was pulling in between $500 and $1,000 per month.
My friend then bought the site, developed a paid course around learning to paint watercolor, and was making more than $10,000 a month after fewer than six months.
I’ve had other acquaintances buy the rights to unpopular songs or jingles and collect on royalties, others who buy Youtube channels or Instagram accounts, and still others who buy Amazon businesses. The list of existing assets you can buy are practically endless, and if you have one or two ideas for improving an asset, you could have a winner on your hands.
Even better, with shopify exchange you can now buy existing sites for next to nothing (some sites go for $250) and get some experience building a business.
Launch a product on a marketplace with existing demand
This is my favorite way to launch a side business: spend time on a marketplace where people are spending money and figure out how to create a product that people are looking for.
For example, a few years ago, my roommate and I ran the second-ranked Airbnb in San Francisco. We were renting out our living room for $250 a night and our entire apartment for more than $500. We were making a killing.
Mainly, by paying close attention to what Airbnb wanted. We realized the company favors hosts who do a few things:
- Communicate quickly with potential guests
- Accept as many stay requests as possible
- Get lots of 5 star reviews
- Have a listing with great photos and a high conversion rate
A listing with the above qualities is one that will make Airbnb the most money.
We created a profile with TONS of photos of our place, the surrounding area, tourist attractions, fun things to do. Basically every photo of our area we could add, we did.
Next, we asked our potential guests to message us the dates they were thinking of booking BEFORE they booked or submitted a request.
This step allowed us to respond quickly to guests (boosting our #1 criteria) and meant that—as long as we verbally approved the requested dates— we had nearly a 100% rate of accepting booking requests.
Just by optimizing these areas, we pretty quickly had a top-three Airbnb in San Francisco.
Once you recognize what a given platform wants, your job as a side hustler is to fulfill that algorithm’s desires.
This is the truest side hustle there is, as the marketplace will do the hard work of acquiring and servicing customers for you.
If I were to start another side business now, the platforms I’d look at are:
- Skillshare / Udemy
- Ebay / Amazon
- Amazon Ebooks
- The Shopify app store
- The Google Chrome app store
- Any sort of niche marketplace where people buy stuff: Wordpress themes, Woocommerce themes, etc.
Launch a unique product in an area where you can buy customers via paid acquisition
This one is the most similar to building a startup. However, there are a few things that make this different:
- You want to focus strictly on small niches. Not because you don’t want to make money, but because you don’t want to face a ton of competition. The smaller the space, the less likely it is that a larger company launches a similar product, or a VC-backed startup raises $5 million to come after you. Not fun.
- You must be able to acquire customers via paid acquisition: Ads on Facebook, Instagram, and Google.
- Your product must be unique, or uniquely solve a niche problem that several thousand people have.
Great businesses I’ve seen in this category include things like Healthfit.biz (directory of functional medicine clinicians), journals of all kinds, and a software app for florists.
Doing this with a product is hard. It requires some direct experience with a problem (even a small one), and some creativity and original thinking. The key here is doing something differentiated that’s appealing to a given niche.
A good way to get ideas in this area is to look at niche products that have been successful elsewhere and apply them to a niche you care about.
For example, I’ve noticed over the last few years an explosion of popular daily journals: the 50minute journal, the daily quotes journal, the 5-year journal, the daily stoic, etc.
What if you combined this interest—people want daily journals—with a niche you cared about?
For example, if you created a journal for people just starting a ketogenic diet—one with recipes, challenges, educational material, and a community they could turn to for support—would that work?
I don’t know. But I have a hunch it might.
The other iteration I’ve seen work well here is applying your skills to a niche in a way that’s a low time investment but high ROI for your clients.
For example, if you have some expertise in A/B testing, set up and run between one and three tests for ecommerce or software as a service businesses a month. charge between $1,000 and $2,000, and give high-level reporting.
This would likely take you two or three days of setup per month, and then another couple of days to fully report everything. And yet—if you know your stuff —the ROI will almost certainly be there for the company.
In fact, all of my companies pay an agency to do just this model. They run between three and five A/B tests a month for us, report back, and make changes. We pay them between $4,000 and $5,000 a month and always make more than that from the tests.
This flavor of side hustle works especially well if you have expertise in something that can make a company more money (i.e. marketing or sales), or expertise in an area where you can save them some serious dough.
This one works, but is probably my least favorite of the bunch. It involves finding an arbitrage between two assets and exploiting that for profit.
What do I mean? Here’s an example.
A few years ago, I realized there was an arbitrage opportunity in the San Francisco Bay Area, where I lived. People were selling motorcycles for $2,000 in Oakland, and the same bikes would go for $2,500 in San Francisco, right across a bridge.
This is clearly an arbitrage opportunity. A bike in Oakland is not worth less than the same one in San Francisco.
So, there’s the opportunity: Buy the bike for $2,000 in Oakland, drive it across the bridge, and sell it for $2,500. Instantly profit $500, with relatively little risk.
Similar arbitrages exist everywhere. There are similar opportunities in buying goods on craigslist and selling them on Ebay or Amazon, buying goods wholesale and selling them off on Craigslist, or even buying bottled water at Costco and selling it by the bottle outside baseball stadiums. All arbitrages.
Now, why don’t I love these sorts of side businesses? A few reasons.
First, they tend to become crowded pretty quickly. Markets trend towards efficiency, which makes it really hard to consistently have very profitable arbitrage opportunities. In fact, with the motorcycle thing, I suspect a few other people started doing the same thing, and I was quickly getting outbid for bikes. Not great.
Secondly, these sorts of arbitrage opportunities can be rare, which makes them not ideal for a side business (since the income is unpredictable).
Last, arbitrages can take a lot of time upfront to find, and can go away quickly enough that the upfront investment isn’t worth it. Such arrangements can be great in the financial world, but not as great in the world of side hustles.
Justin Mares is an entrepreneur, investor, and author. A version of this article originally appeared on his website.