Whether it's earning extra money for life expenses, building an emergency fund, testing out a new business idea or pursuing a hobby, the number of people with a side gig is growing – and fast. In fact, LinkedIn data reveals nearly one-third of U.S. employees have a side hustle.

Whatever the reason for starting one, there often comes a time when that weekend or late-night side hustle is ready for the next level – to evolve into a thriving and lucrative business. According to data from Xero, where I serve as CEO, 60% of small businesses start as side gigs. That trend continues to grow with the next generation of entrepreneurs: more than two-thirds (67%) of Gen Z started their businesses as side gigs, compared to less than half of the Boomer generation (48%).

So, how can you lay a strong foundation for a smooth transition and prepare yourself for financial and business success, while managing your business efficiently?

We have found that nearly half of U.S. small businesses encounter fiscal challenges due to a lack of financial literacy. This can include cash flow problems, a lack of capital, poor budgeting, debt mismanagement and tax issues. It's crucial to lay a solid financial framework from day one, so when the transition does occur, there is already a system in place.

Related: 'Revenue Within Days': A Teenager's Side Hustle Grew Out of a Video Game Virus — and Into a Multi-Hundred-Million-Dollar Business

As we know, many side gigs start........

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