Turning Your Hobby Into A Business
by Kenyon Riches of the Buffalo-Niagara Chapter of SCORE
If you are not among those blessed with a job you enjoy, you may consider making a business out of your hobby. Entrepreneurs often make a living doing what they enjoy. However you need more than just a passion for your hobby. You must recognize that running a business will be hard work – often with long hours – and you may find that having to do your hobby will cause you to enjoy it less. Operating your own business can have a toll on your family life too, although it does offer the opportunity for them to join you in the operation.
In addition to having the technical skills of your hobby, you also need people skills to deal effectively with customers and suppliers; leadership skills to lead employees; organizational and business skills to make reasonably sound business and marketing decisions. And you must, if not enjoy, at least be comfortable in these roles.
Many who try to make a business out of a hobby find disappointment because they are undercapitalized, under-planned and under-marketed. When you decide to take a hobby and turn it into a business, it’s necessary to plan thoroughly because a business perspective is different from a hobby perspective. How much time did you spend to make the item? What would you except to be a reasonable return on that expenditure of time? How many folks do you think would actually pay that much for the item? If you can find the niche that will pay – great, if not, find another business
Your plan should include sufficient capital to cover all expenses during the time required to build the business beyond the break-even point – and sustain you during that period. A plan that includes sufficient initial capital, and provides for additional needed capital as you grow demonstrates that you have a business perspective and are not limited to “hobby-size” thinking.
The business plan that you develop needs to include your labor and overhead costs that, as a hobby, may not be a factor. If it’s a manufacturing business, the amount of production that will sustain a going business may not be possible from a home operation and the plan should include (as you grow) a separate manufacturing location with attendant costs.
In order to develop sufficient sales volume, costs for market research, advertising, promotion and distribution should be included. Your product line must be broad enough to cover marketing expenses and allow you to compete with other well-established, broadly marketed companies. Your plan should be flexible to provide for your development in different market segments as you gain experience and knowledge of each market segment’s profitability and competitive situation.
Developing a business plan requires that you research your market and competition and think through every facet of the business. The resulting plan is then a business tool to guide you as well as help you to present your ideas and sell your project to potential lenders and investors