Businesses That Begin as Side Hustles are More Likely to Succeed (New Study)

September 22, 2014

Know how we’re always talking about why you should launch your business as a side gig, while still working your full-time job? How investing in yourself and your business while continuing to earn from your day job is a smart way to prepare for full-time entrepreneurship?

Now there’s a study that shows that businesses that are launched while the founder is employed and only later become that founder’s full-time focus are one-third less likely to fail than those that began as full-time ventures. (Click to tweet this.)

Say whhhat? You mean we’re more likely to create a business that’s sustainable and profitable if we build on the side of a day job? You mean side-hustling not only reduces risk but also increases the chance of us basking in autonomy, freedom and moolah down the road?

You bet. The study comes from the Academy of Management and is published in the August/September issue of the Academy of Management Journal, a peer-reviewed publication. I’d never heard of this group before their press release hit my inbox, but looking at their website, they have some pretty cool research and ideas on which tactics are most effective in the workplace.

side hustle success

Why this study is good for entrepreneurs

What I love about this study — in addition to how it supports the build-before-you-leap approach that we talk about on this blog — is that it proves WRONG the sexed-up stereotype of the entrepreneur who takes a huge risk by quitting his day job and throwing himself into a new business. In truth, business owners who succeed often do a lot of scheming, preparation and business-building before taking that leap.

“The hybrid route [of starting your business as a side hustle while working your full-time job] to enterprise is superior in terms of business survival,” said Joseph Raffiee, a doctoral candidate who researches entrepreneurship at the University of Wisconsin, Madison, and co-author of the study. “Yet, so strong is the stereotype of entrepreneurs as brave mavericks who quit their day jobs to pursue their dreams that we are only now coming to realize that there may be a better way than plunging right in.”

It’s kinda like how the startup community has glamorized investor funding, when bootstrapping is often a smarter option.

WHY is this the case? The authors of the study surmise it’s because running a side gig gives founders a chance to learn more about the business and assess its potential before going all in. It also gives you the opportunity to make mistakes while you still have a safety net, so you’re able to pick yourself back up and keep on keepin’ on, rather than losing everything at once. Finally, entrepreneurs that jump in head-first tend to be less risk-averse, the authors report, which likely affects other decisions they make for the business as well.

What do you think? If you’re thinking about starting a side gig, does this push you even more in that direction?

P.S. When you *are* ready to go all in with your business, I offer a guide on that topic: Turn Your Side Hustle Into a Full-Time Business. It details exactly how I did it, and is most useful for writers and other creatives.

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