Side hustles have surged in popularity in previous years as a way to make money in a shrinking economy. According to a recent Omnisend survey, side hustles are quickly becoming a defining feature of modern work culture. As many as 31% Americans currently run one, collectively earning $83.1B extra cash per month, with 73% motivated by financial need. As 2026 shapes up to be another peak year for entrepreneurship, experts warn that some side hustles that seem to be a “hot” idea can quietly drain time, cash and momentum.

The Biggest Mistakes When Starting A Side Hustle

More Americans launch side hustles that seem to have promise some rivaling full-time wages, earning as much as $4,000 monthly. But there are also high-risk side businesses that look attractive on paper and collapse in practice. Business advisors argue that the biggest mistake new entrepreneurs make is chasing trends without understanding margin pressure, saturation or operational complexity.

Ciaran McArdle, author of The Soccer of Success, argues that side hustlers need to think less like founders and more like athletes–a proven mindset that helps ambitious entrepreneurs grow without burning out. One of the biggest mistakes side hustlers make is pursuing side gigs without a clear plan for achieving sustainable performance.

Sam Taylor, Business Expert at LLC.org, told me that side hustles fail, not because the idea is bad, but because the model doesn’t scale. He says one of the biggest mistakes founders make is confusing early traction with proof of scalability.

Taylor adds that a side hustle that works at 10 customers can quietly collapse at 100 because pricing, support or compliance was never designed to grow. “If growth requires more hours instead of better systems, founders usually hit a ceiling long before replacing full-time income,” he explains.

Plus, if a side business only works when the founder is constantly present, Taylor insists that it’s still not a business–it’s a high-risk job. “The test I advise founders to use is simple,” he told me. “If you stepped away for two weeks, would revenue pause or continue?”

Abigail Wright, senior business advisor at Chamberofcommerce.org, told me that the risk starting a side hustle is underestimating how fast costs surface. “Many founders plan for revenue growth but fail to plan for rising expenses like software, taxes, insurance and customer support, which erode profits long before they notice.”

Wright points out that side businesses fail more because of financial timing issues than bad ideas. ”When income is irregular but expenses are fixed, even profitable concepts can collapse without careful cash flow planning,” she cautions.

Experts Say Reserve Caution With These 7 Side Hustles

Wright and Taylor shared seven side business paths to either avoid or approach with extreme caution in 2026.

1. Oversaturated Content Niches With No Differentiation

The experts emphasize that online courses, coaching and consulting can scale, but only if there’s real expertise and a clear audience. Here’s what they suggest you avoid:

  • Generic “how to make money online” courses
  • Broad coaching offers with no specialization
  • Replicating influencer playbooks without an audience

They warn the reason these paths fail is because low barriers to entry have created extreme saturation. Without credibility, proof or a niche, customer acquisition costs quickly outweigh revenue.

2. Dropshipping With Thin Margins And No Brand Control

The experts point out that dropshipping is often marketed as a low-risk on-ramp to e-commerce, but they say the truth is that many new operators struggle. Here’s what to avoid, according to the experts:

  • Commodity products anyone can copy
  • Overseas suppliers with long shipping times
  • Stores built entirely on paid ads

The reason this path fails is because of rising ad costs, tariffs and customer expectations for fast delivery that make unbranded dropshipping fragile. If you don’t have differentiation, sellers compete on price alone.

“Side hustles that rely on trends, thin margins, or constant ad spend are especially risky right now,” according to Wright. “Rising costs and tighter consumer budgets expose weaknesses very quickly.”

3. AI “Wrapper” Businesses With No Defensibility

Wright and Taylor inform us that AI has opened doors, but not all AI-based side hustles are sustainable. They suggest that you avoid the following:

  • Tools that simply resell existing AI APIs
  • Businesses built on features that platforms can copy overnight
  • No proprietary data, workflow, or customer lock-in

Why do they fail? As AI matures, shallow tools are absorbed or undercut by larger platforms, the experts explain. Long-term value requires integration, expertise or unique insight and not novelty.

4. High-Labor Service Businesses Without Systems

The experts have found that service-based side businesses can generate cash quickly, but many stall or burn founders out. So they recommend several paths to avoid:

  • Businesses where revenue depends entirely on your time
  • No plan to hire, automate, or delegate
  • Pricing that doesn’t account for burnout or churn

Without systems, Wright and Taylor advise that growth increases workload but not freedom. They add that many founders hit a ceiling where scaling means exhaustion, not expansion.

5. Trend-Chasing Ventures With Short Lifespans

The experts recommend that you apprise yourself of business ideas that spike fast and vanish just as quickly. Here are three paths to watch out for:

  • Businesses tied to temporary social media trends
  • Products dependent on algorithm loopholes
  • Fads without long-term consumer demand

“Short-term attention doesn’t equal durable demand,” they explain, leading to failure. “When trends cool, revenue disappears, leaving founders with sunk costs and no pivot path.

6. Capital-Heavy Businesses Started As ‘Side’ Projects

They note that some industries require more upfront investment than side hustlers expect, so it’s important to avoid these paths:

  • Businesses requiring leases, inventory, or staff too early
  • Models that assume full-time attention from day one
  • Expansion before proof of demand

Side businesses collapse when fixed costs outpace inconsistent revenue. Cash flow timing matters more than enthusiasm. “Entrepreneurs underestimate how much planning and capital it takes to scale responsibly,” Wright notes. “A side business should reduce financial risk, not quietly increase it.”

7. Businesses Built To Escape A Job, Not Solve A Problem

The experts state that one of the most common traps is emotional entrepreneurship, offering several paths to avoid:

  • Starting a business purely out of burnout
  • Copying what others are doing without validation
  • Ignoring market research because “it feels right”

Sustainable businesses solve real problems for specific customers. Escape-based ventures often lack clarity, patience and strategy, according to Wright and Taylor.

Four Patterns Behind Most Failed Side Hustles

Experts say most side businesses don’t fail because the founder lacked effort. They fail for four reasons: margins were misunderstood, demand was assumed, not validated, time requirements were underestimated or differentiation was missing.

Taylor says the biggest red flag for side hustles in 2026 is what he calls indistinguishability. “If customers can’t tell why your side business is different, cheaper, faster, or more trustworthy margins disappear fast,” he concludes.

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