What is the difference between a hobby or a business?
The difference is; if you are selling goods or services and making money (profit) at your venture, then it is a business. If you are providing goods or services and giving it away or just barley breaking even-it’s a hobby.
There is no dollar threshold to cross or any sales numbers you must achieve to be considered a business. All you need is a reasonable expectation of making a profit and proving the profit motive. If you are profitable year after year, there’s no argument you’re in business. But if you have losses year after year, the IRS may view your activities as a hobby.
Hobbies that could potentially be monetized and turned into businesses -- literally anything that provides value to others. Would people buy from you? If so, you really could create a profitable business. If you can do something you love and get paid for it, that’s not real work right? But before you go and quit your day job, I want to encourage and caution you at the same time. There is a big difference between making some extra pocket change at holiday time and running a small business full-time.
Every year people millions of people believe they can turn their hobby into a business. A very high majority of them fail in their new venture. WHY?
The problem is that many of us are afraid to take action, even when we know we have a marketable skill, because we are afraid of failure. We fear that if we attempt to monetize a hobby and fail, we’ll no longer feel joy or satisfaction from the activity at all… or others will regard us differently.
This can be a scary proposition that may prevent many talented individuals from pursuing their dream. If this sounds familiar to you, then listen up.
Trying to monetize a hobby isn’t easy, but on the other hand, it certainly isn’t rocket science. With a little preparation and strategic execution, you can enjoy a positive result.
Here are the first 10 steps on how to get started.
- Do a Self-Assessment. Do you have the energy and stamina to crank out your hobby in volume enough to make it a viable business? Make sure you don’t ruin something that brings you joy. People pursue hobbies to blow off steam. If you add a lot of pressure, you could blow your stack. Do your research to make sure there’s a paying customer before you bet the farm on your hobby. Successful businesses require dedicated work and responsibility. It’s easy to take the fun out of your hobby if you do not plan well.
- Be sure you'll still enjoy your hobby if you're doing it for money. Making money from your hobby may mean meeting deadlines, pleasing demanding customers, and doing your hobby even on days when you don't feel like it. You'll have to manage marketing and finances. Be sure you're willing to juggle all these balls before you turn your hobby into a business. When you leverage your passions and your own personal experiences, you become far more likely to develop a solution that other people are searching for.
- Know Your Goal. Do you want a full-time business so you can quit your day job? Or are you just looking for a little extra cash to cover expenses? The more you'll depend on the income from your hobby-business, the harder you'll need to work at it.
- Start Your Business as a Side Hustle. You need to first test the waters while you are still working to make sure you have a viable revenue model for your small business. Don’t quit your JOB before making sure your hobby could be a business. Save all the money you can-I mean really save-not leftover change. You need to save enough money to cover 4 to 6 months of expenses, which includes your personal income and expenses.
- Get really good at what you do — before you quit your job. To make money from your hobby, you've got to be good at it. If your skills aren't yet up to par, make a plan for improving them and put off your business idea until you're ready.
- Brainstorm all the ways you could make money from your hobby. You may need to do more than one thing to create a financially sustainable business. For example, if you're a quilter, you could sell your quilts, but you also could teach quilting classes, open a quilting shop, or design and sell quilting patterns.
- Adopt a business mindset. A hobby is something you do at your leisure. When you make it a business, you must show up to work. Think of your hobby as your second job and make it a priority in your life. If you want it to become your main source of revenue someday -- or at least a sustainable second stream of income -- then you have to give it the attention it deserves. Carve out time to work on your hobby, read about the industry, learn about sales and marketing and dedicate yourself to steady improvement. This is how to achieve positive results.
- Write a business plan. When you write a business plan, you'll evaluate the market for your hobby-business and prove to yourself that it's a viable business idea. You'll learn how much money you need to get started, you'll set goals, and you'll plan how you'll market the business to your customers.
- Maximize your time. For many people, working a full-time job and then spending extra hours pursuing a hobby isn’t practical. Between kids, significant other, friends and social requirements, you simply don’t have enough hours in the day. In the initial stages, you’ll have to get creative about how you use your time. Perhaps you need to wake up an hour earlier than you’re used to and get some stuff done before your regular job.
- Learn about marketing. You can be the best in the world at what you do, but if you don't market your business, you'll never get customers. Read up on small business marketing and observe how similar businesses promote themselves. Set up a website for your new business and get comfortable using social media. Start making connections online and in your community.
Turning your hobby into a full-time business is a great way to become your own boss. Why not work at something you love to do? Just do your research before you start your business. Take the time to write business plan. You’ll need a lot more customers than the 30 people that buy your jewelry to replace your full-time salary. Make sure there’s a market for your goods and services, and start saving money. And remember to give yourself 12 months to develop a plan to become your own boss.
We all have those things we’re most passionate about—so why not turn your hobbies and interests into a career? As you follow these steps, you’ll begin the journey of turning your hobby into a business that can bring you even more satisfaction in the years to come.
Steve Feld, MBA, provides training and business performance coaching to business owners, professionals and executives. Steve also speaks to organizations, conducts workshops and training. Focusing on the lead generation and revenue creation to get growth results for the business. Contact Steve today to see how he can assist you grow your business, firstname.lastname@example.org, or www.bizcoachsteve.com. He is in the business of growing businesses. #bizcoachstevef #entrepreneur #smallbusiness #business #smallbiz #coaching #businessowner #businesscoach #leadership #marketing