Your First Steps to a Profitable Freelance Side Business

What difference would $500 a month make to you? How about $1,000 a month? Would you save for the vacation of a lifetime? Invest in a college fund for your children's education? Stop worrying about how you're going to pay the bills?

We'd all like a little extra money. And thanks to the Internet, earning on the side is easier than ever before. You can advertise your business for free using social media, and with many businesses you can serve clients anywhere in the world. All from the comfort of your home office.

So, what's holding you back?

Many would-be freelancers fall at the first hurdle: "What should I do to earn money?" They struggle to settle on a business idea.

There are several reasons this stage of setting up a freelance business proves to be a stumbling block.

Why It's So Easy to Get Stuck at the Idea Stage

Let's look at the reasons that coming up with ideas proves to be a black hole for many people who could be successful business owners.

• Ideas are way too easy to find. Ideas are everywhere. Want proof of this? Just Google "ideas for freelance businesses". In just a few minutes, you'll have more ideas than you could ever execute in a lifetime. And that's the problem. Having too many ideas leads to analysis paralysis. You don't know where to start. So you don't get started at all.
• You don't know whether your ideas are good. Starting an online business takes time and money. Is it really worth launching a website to promote your services when you don't even know if people will buy them?
• You doubt your own abilities. You've got some design skills, and you think you're pretty good at what you do. But will clients think the same? No one likes to be judged negatively, so this fear makes a lot of sense.
• You've been given bad advice to just 'follow your passion'. Living passionately is a wonderful way to be. It's also good to bring passion to your job. But not all interests and passions can be turned into a career; there's simply not a market for them. It's vital to find out what the market is willing to pay for. Then choose your own place in the marketplace based on your skills and interests.
• Dreams are easy but action is difficult. The idea stage is a lot of fun. It's a playground of dreams. Of course, you should have as much fun as possible while coming up with ideas. The problem arises when you get stuck dreaming instead of taking action on your best idea. A similar problem is waiting for the "perfect" idea to come. No business idea is perfect. Whatever idea you settle on will have flaws. What matters is choosing the idea that's best for you.

Fortunately, there's a simple process you can follow that allows you to overcome these hurdles and settle on a business idea that you'll know has potential.

Ready to get started? Then let's begin...

Step 1: Find Your Freelancing Sweetspot

Your freelancing sweetspot lies at the intersection of three areas:

• the skills you have
• the things you enjoy doing
• the services people are willing to pay for

Find the overlap between these three, and you've hit on the freelancing business that's right for you. In this step, we'll look for an overlap between the first two.

Begin by listing your skills. This means writing down everything you're good at, whether you enjoy it or not. At this stage, don't block yourself with the question "could I sell this skill?" Just write it down. We'll get to that in a later step.

Here are some ways you can uncover your skills:

• Think back to high school and college. Did you always get good grades in tests? Write that down, it's one of your skills. Were you the person your friends turned to when they needed a shoulder to cry on? Add that to your list. Did you excel in sports or music? Again, note it down.
• What skills do you practice in your spare time? Do you play the guitar? Are you a photographer? Do you spend a lot of time working in your garden? Do you come up with interesting activities to keep your kids entertained? Do you enjoy knitting? Do you keep up to date with the latest productivity blogs and software? Include all your hobbies, but also think about the life skills that you "practice" with your friends and family.
• What skills do you use in your workplace? Are you good at interacting with customers? Do you stand out as the lead sales person on your team? Are you the one with a clean desk who is always on time to every meeting? Do you give presentations to big groups of people? Think about your past jobs too.
• What training have you done? This can be as part of your work, your college degree, or in your own time. Are you a skilled programmer or web designer? Have you taken a part-time course in flower arranging? Do you spend a lot of time learning about how to improve your writing?
• What do your friends say you're good at? If you're unsure, ask them. You may be surprised at what they say.

Spend at least 20 minutes working through these questions. Jot down every idea that comes to mind, no matter how small it seems to you. It's worth leaving the list for a day or two, then come back to it for another 20 minutes. In the time you spent away from the list, your subconscious will have been ticking over and coming up with new ideas.

The next part of this step is to consider the things you enjoy doing. Chances are, you've already listed many of the things you enjoy doing as skills. Even so, I'd recommend sitting down and listing everything you enjoy doing, as you may come up with new ideas that you missed when listing your skills. For example, you may enjoy cooking and inventing new dishes, but you forgot about this when you were coming up with your list of skills—even though it's also a skill.

When you've got both lists, look for the overlap between them. That means:

• Go through you list of skills, and circle every skill that you enjoy practicing.
• Go through your list of things you enjoy, and circle everything that's also a skill.
• Make a new list of everything you've circled.

After compiling these lists, you'll likely feel really inspired and raring to go. That's a great feeling. Hold on to it, and allow it to push you through the rest of the process.

In the next step, we'll look at how you can find out whether there's a market for your skills.

Step 2: Discover What the Market Will Pay For

What's one of the biggest mistakes business owners make? Believing they have to be different from every other business out there. Your business doesn't have to be unique to be successful. Think of all the plumbers, taxi drivers, and doctors in the world. Many of them are self employed, running their own business. But they're in the same business as thousands—if not millions—of other people. How do so many people maintain a similar business? Because there's a big demand for the service they offer.

Note: Just because you're offering a similar service to other businesses doesn't mean you have to be the same as them. A simple way to stand out is to be better, or to service a particular type of client. We'll come to this in the next step.

Finding out the types of services there's a market for is a simple process. Go to the websites where freelancers promote their services, and see what's selling. Websites where you can do this include:

• Envato Studio
• oDesk
• Upwork
• PeoplePerHour
• Fiverr
• Craigslist

On these sites, you can check out the gigs that freelancers are offering, or that clients need help with.

On most of these sites, you can check out your potential competitors by looking at their profiles. Pay particular attention to the busy freelancers with lots of feedback and high feedback scores. That demonstrates they're working in a rich market with lots of work available.

Craigslist is a bit different. Unlike the other sites, it doesn't include user feedback. What it does offer, however, is an overview of the local services you could provide, such as teaching piano or tutoring math.

This research will give you a good overview of the biggest markets for freelancers.

Another way of checking the market is to reach out to freelancers and see how they make their money. A quick way to find freelancers is to check out co-working spaces in your city. You could turn up undercover, pay for a desk for the day, and see who you meet. Alternatively, let the manager of the co-working space know you're researching business ideas, and ask if it's okay for you to come in and talk to the people using their service.

You've now found the types of services the market will pay for. Look for the overlap between these, and your skills and interests, and you'll find which business ideas have the most potential.

Step 3: How to Make Your Business Stand Out from the Crowd

In your market research, you will likely have discovered that a lot of the gigs on the sites you looked at had low pay. Don't be disheartened! Entrepreneur Seth Godin explains why this is:

The market for freelancers who are average is horrible. I can [always] find an average freelancer cheaper than you.

In other words, the secret to making money as a freelancer is to be better than average. In this step, you make sure your freelance business stands out from the crowd.

Seth Godin again:

The market for exceptional freelancers has never been better. Because if you are the very best in the world at designing websites for chiropractors, the chiropractors are going to find you, because you're the best in the world at it. So if you're a freelancer, you'd better be extraordinary at your speciality.

To stand out from the crowd, you need a clear niche, and you must be the absolute best in your niche.

How do you choose a niche? Your skills and interests that you outlined earlier will help here. Let's say one of your interests is health foods, and you've identified a market for nutritionists who need websites.

How do you become the best in your niche? The good news is you don't need to have a better skillset compared to other freelancers. Instead, you need to be better at listening to what your clients need.

Continuing our example, let's say you've decided to set up a website design service for nutritionists. Now you need to reach out to nutritionists, and ask about the challenges they have with marketing their services online. You can do this by calling them. It's time consuming but will lead to excellent insights. Or ask them to complete an online survey.

Once you've listened and found out what your target market needs, do your utmost to deliver it. That's how you become exceptional.

Step 4: Validate Your Idea

You're nearly at a stage where you're ready to go live with your business. Before you do, there's one final step. This is where you find out whether your idea really has potential.

Don't launch a website yet or print off business cards. For now, your job is to find three clients who are willing to pay for your services. Just three. You can do this through:

• Networking. In Step 3, you will have come across lots of potential clients during your research, and identified their needs. Why not put together a package that meets their needs, and see if it interests them? You can also ask your friends and family if they know anyone who'd be interested in your services.
• Free advertising. Craigslist is great for this. List your service, and see if anyone expresses an interest.
• Reaching out. Look up businesses who could use your services, and drop them a line.

Once you've found three paying clients, you know your business idea has potential. Now you're ready to run with it. Otherwise, test another idea.

This process takes time, but it's worth it. That's because when you hit on an idea that pulls in clients, you'll know it has the potential to become a successful business.

Editorial Note: This content was originally published in 2015. We're sharing it again because our editors have determined that this information is still accurate and relevant.