Thousands of American entrepreneurs supplement their income by starting and maintaining part-time small businesses. The circumstances and goals of these business owners run the gamut, but many are operated out of the home and are utilized to supplement income derived from other sources (a full-time job, retirement benefits, etc.). But not all people establish part-time enterprises out of economic necessity. Statistics also indicate that many individuals—and especially people which higher levels of education—launch part-time entrepreneurial ventures to make use of skills that may not be tapped in their full-time work. Finally, the ability and desire to launch a business on a part-time basis is often impacted by family considerations; in some instances, the cost of raising children may serve as an incentive to start a business on the side. In other cases, a parent may decide that the hours involved in looking after his or her children precludes the possibility of a part-time business. Many owners of part-time businesses, however, contend that if the desire is there, a part-time venture can be managed by most people.
Part-time businesses are also regarded by many entrepreneurs as a sensible option in situations where the ultimate success of the venture seems unclear. "Part-time entrepreneurs can …limit their risks compared with those taken by individuals who plunge in full-time," wrote David E. Gumpert in Working Woman. "For one thing, part-timers don't have the same pressure to produce cash flow, because they can hold down a job at the same time and operate out of their homes. For another, part-timers can go more slowly and learn the skills of running a business as they go along; they have the luxury of making errors and revising their business concept as they proceed."
Experts point to several important factors in creating and maintaining a profitable and healthy part-time business venture:
Recognize importance of full-time job. It is vitally important for entrepreneurs who already have a full-time job to make sure that their part-time business does not interfere with their obligations to their employers. Moreover, it is important for part-time business owners to make sure that their employers do not begin to perceive that the side business is taking priority, for in the final analysis, your ability to meet the demands of both businesses is irrelevant if your employer begins to feel—fairly or not—that the arrangement is detracting from your job performance. For this reason, part-time business owners may want to weigh the likely reaction of their employer before even publicizing the existence of the part-time venture. Daugherty also noted that "your employer may well have rules on outside work…. If you don'tknow, ask. And if you value your job, do your best to comply with them."
Type of business. The nature of a part-time venture is often an important factor in its long-term viability. Certain businesses can be more easily maintained without unduly complicating regular job obligations. "Service businesses often allow for this kind of flexibility," explained Gumpert. "Men have for years carved out entrepreneurial opportunities as part-time plumbers, electricians, and carpenters. Women [are] discovering similar opportunities in such areas as consulting and teaching." Retail stores and manufacturing establishments, on the other hand, are far less conducive to part-time businesses.
Scheduling flexibility. The individual's full-time job is flexible enough to give him or her the time and resources to take care of the entrepreneurial business's needs during normal business hours or during particularly busy periods.
Realistic workloads. Entrepreneurs launching part-time business ventures should also be wary of overextending themselves. Many individuals tend to take on more part-time work than they can easily handle, especially during the first few months of operation, when they have less experience in estimating the time involved in executing various tasks. While finances are often a factor in establishing a part-time business, most part-time entrepreneurs do not begin a venture with the expressed intention of turning their life into a chaotic rush of impending deadlines. Complications associated with underestimating the amount of time a given project or assignment will take are also typically compounded if the entrepreneur in question has significant family obligations (child or elder care, for instance).
Scaling back existing businesses. Small business researchers also note that some of the most successful part-time businesses are those that were formerly full-time endeavors. Indeed, many full-time entrepreneurs choose to scale back their hours after a certain number of years. They may do this for any number of reasons; some simply reach retirement age and wish to relax a little more, others decide to start a family, and still others may decide that they wish to spend more of their time traveling or indulging other interests (including other promising entrepreneurial ventures). In many instances, switching a business from full-time status to part-time status can actually strengthen the enterprise's hourly productivity. For example, the entrepreneur who decides to turn his 50-hours-a-week venture into one that requires him to spend half that amount of time on the business each week will naturally do his best to maintain relations with his best clients, while letting less valuable or more problematic clients go. As many business owners will quickly attest, having greater freedom to pick and choose who you do business with can be a most valuable side benefit of going part-time.
Public perception of business. Some customers, especially if they are other businesses, may be wary of contracting with part-timers. The most effective way to counter the perception held in some quarters that part-time business owners are less reliable and responsive (because of obligations to their full-time employer) than full-time entrepreneurs is simply to not advertise your part-time status. Of course, you should also not lie about it if the issue comes up.
Owners of part-time businesses should also consider the potential legal and tax ramifications of their activities. "Taxes may be one of the last things anyone thinks about when starting a part-time business, but they out to be high on the priority list for anyone who is serious about making money in a part-time venture," said Los Angeles Business Journal contributor Bob Howard. "Additional income from a part-time business means additional taxes, but those who wait until the end of the year may wind up paying penalties or not being able to take deductions they had counted on." Part-time business owners should thus consider doing one of the following: 1) have their regular employers take out more withholding taxes, or2) file quarterly estimated tax payments. Either approach can go far toward helping the part-time entrepreneur avoid tax penalties or a big end-of-the-year tax blow.
In addition, owners of part-time enterprises should make sure that they take full advantage of available tax deductions. Gumpert noted that "parttimers get the same tax advantages [as full-time entrepreneurs], including deductions for travel, entertainment, home office, and related expenses, plus deductible retirement plans." Howard noted, though, that home-based business tax deductions can vary significantly, often depending on whether the business is a full- or part-time venture. "The IRS now requires that a home office be used 'exclusively and regularly as a place of business to meet or deal with patients, clients, or customers' in the normal course of the business. The world 'exclusively' is very important because it means any room or space designated as a home office must be used 100 percent for business in order to qualify for the deduction."
Many part-time entrepreneurial ventures eventually expand into full-time businesses. Indeed, business owners who nurture their side-businesses into enterprises that are capable of covering their living and business expenses often waste little time in giving their employer two weeks notice and devoting their full attention to further expansion of their own business. But experts caution small business owners not to leave their long-time employer prematurely. For example, Entrepreneur pointed out that would-be full-time business owners can schedule health exams and other routine medical procedures while they are still covered by corporate insurance, and that they can sometimes convert existing health coverage to post-job use. In addition, entrepreneurs thinking about leaving their full-time job to devote their energies to their own business should first determine if they are enrolled in any benefit plans that will vest or increase in value in the near term.
Entrepreneurs are also urged to organize their credit situation to their greatest advantage before leaving the security of their job. "Pay off or pay down the balance on your credit cards while you're still generating a steady income," stated Entrepreneur . "This helps your credit rating and enables you to finance various start-up costs." Finally, many entrepreneurs take out a home equity line of credit before leaving their full-time job. According to Entrepreneur, "having a line of credit to draw upon is invaluable during the first two years you're in business, although you probably won't qualify for one once you leave your job until your business has been successful for more than two years."
Amirault, Thomas. "Multiple Jobholders: What Else Do I Want to Do When I Grow Up?" Occupational Outlook Quarterly. Winter 1996.
Anthony, Joseph A. Kiplinger's Working for Yourself: Full Time, Part Time, Anytime. Kiplinger Books, 1995.
Bowers, Brent. "Finding the Best Part-Time Job for You." New Choices for Retirement Living. November 1994.
Daugherty, Greg. "Part-Time Writing, Full-Time Success." Writer's Digest. July 1996.
Dunnan, Nancy. "The Part-Time Solution." Parents Magazine. May 1996.
Edwards, Sarah, and Paul Edwards. "On the Side." Entrepreneur. July 1999.
Gumpert, David E. "Doing a Little Business on the Side: How Entrepreneurs Start Up a Business and Hold Down a Job." Working Woman. October 1986.
Howard, Bob. "Part-Time Business Income Can Cause Tax Trouble for Wage Earners." Los Angeles Business Journal. December 23, 1996.
"Nurturing Part-Timers to be Entrepreneurs." Nation's Business. March 1996.
Comment about this article, ask questions, or add new information about this topic: