How to Know When to Turn Your Side Hustle Into a Full-Time Business

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Starting a side hustle can be a great way to turn your spare time into extra cash. But along with using side hustles for short-term financial goals like paying off debt or boosting your emergency savings account, sometimes a side hustle can turn into something even bigger and better: a new full-time career and a business of your own.

I've seen this happen in my own life -- I went from corporate employee, to part-time side hustler, to full-time "solopreneur" freelancer. Seeing money come into your business bank account , on your own terms, with a flexible schedule, working from anywhere, is the best feeling I've ever experienced in my career.

But how do you know when it's the right time to take the plunge and turn your side hustle into a full-time business?

Here are a few questions to ask yourself to see if you're ready to turn your side hustle into a full-time business.

1. Is my side hustle making serious money?

The biggest question to help decide if the timing is right to quit your day job is: Are you actually making good money from your side hustle? Give yourself a test. Keep track of how much money you're making per hour, per day, per week, and per month with your side hustle.

For example, if you're working 10 hours per week on your side hustle and making $1,000 per week, that means you're making an effective hourly rate of $100 per hour. What if you ramped that up to 40 hours per week -- can you expect to make $4,000 per week if you gave yourself more time to do your side hustle work full-time? How does that compare to your day job salary?

If you believe (with good data to back it up) that you can make more money each month by doing your side hustle as a full-time business, it might be time to quit your day job and pursue your small business 100% of the time.

2. Do I have emergency savings and financial stability?

Ideally, you should have a few months' worth of expenses in an emergency savings account before you take the leap into full-time entrepreneurship. Self-employed people don't get unemployment benefits.

If your business cannot generate enough income to pay your bills, you need to have some cash in the bank to fall back on. As an entrepreneur, you need to be your own safety net. If your side hustle is starting to make money, but you still have credit card debt, or you haven't built up your emergency savings to at least two or three months' worth of expenses, don't be in a hurry to quit your day job.

Keep saving as much as you can. Use that day job paycheck to help strengthen your financial foundation. Grow your bank account before you give notice at work.

3. Does my side hustle have diversified income?

How are you making money from your side hustle? Are you putting too many eggs in one basket, for example, by getting all of your business income from one consulting client, one big project, or one niche market of e-commerce customers? Think strategically about how you can sell your products or services to a wide range of customers to diversify your business income.

Otherwise, you risk getting stuck with the same problem that employees have: all of your income coming from one source. Diversified income can help reduce your risk -- whether it's selling to multiple clients, marketing to multiple industries, offering a variety of products or services, or running multiple businesses at once.

4. Am I getting burned out by my day job?

Keeping your day job paycheck can be a great sense of security as you build up your side hustle business idea. But burning the midnight oil on your small business can get tiring.

If you start to feel unduly stressed, overwhelmed, and frustrated by your day job's demands -- especially if you can answer "yes" to the first three questions on this list -- it might be time to quit your job and focus on your small business full-time.

5. Do I have a plan for health insurance and other must-have benefits?

Finding health insurance as a self-employed person has been the most stressful part of running a small business. If you have a spouse or domestic partner who can get health insurance coverage for both of you through their job, this can be a huge help.

If not, check out HealthCare.gov to see if you're eligible for low-cost health insurance based on your income and where you live -- if you're leaving a full-time job and losing health insurance, you can go to this website 365 days per year and sign up for health insurance, not just during open enrollment.

Other corporate job benefits you might need to replace could include:

• Life insurance
• Disability insurance
• Dental insurance
• Retirement plan

Self-employed people can set up their own retirement savings plan, such as an SEP IRA. This type of plan actually gives you the ability to save more money for retirement than you could save with a 401(k), based on your business income.

Bottom line

Quitting a corporate job to pursue a side hustle full-time is one of the most exciting adventures imaginable. Don't let the hard parts hold you back. You just need to keep hustling, finding clients, making sales, and building your own future as an entrepreneur.

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