Decide if you should start a business with your hobby
It’s important to consider a number of factors before taking steps to turn your hobby into a business.
Are you willing to walk away from the security of a consistent paycheck?
What is driving you to take these steps to in the first place?
If your hobby is your stress reliever or creative outlet, will you still enjoy it when you’re on deadline or working 12-hour days?
"If you want to turn your hobby into a business because you think it's going to be as much fun as it was when it was only a hobby, you could be in for a surprise," warns Inc. "You're probably going to be wearing a lot of hats for a while — accountant, customer service rep, brand ambassador, CEO, and so on.”
Are you up for the challenge?
Do your research
If you reflect on those tough questions and still want to move forward with your new venture, it’s time to do your research.
Set aside time to look into:
- Target market: Who is your audience, and what are their needs? Consider age, life stage, marital status, income and other specific characteristics that describe your buyer.
- Competitive analysis: Who are your top competitors? What are they doing well? What could you do better or different (your unique value proposition)?
- Pricing structure: Pricing your product or service can affect the long-term success of your entire business. Some factors you’ll need to consider include revenue goals, overhead and competition.
Create a business plan
Create a business plan to lay out a clear path to an operational business. You’ll want to include:
- Executive summary
- Company description
- Product and/or service description
- Market analysis
- Management team
- Financial analysis
- Implementation plan
It might seem intimidating to tackle, but having a solid plan can help your business hit the ground running toward your goals.
Validate your idea
Is your business still mostly hypothetical? Forbes encourages would-be entrepreneurs, “Before you quit your day job to pursue your hobby, verify that market demand exists for the products or services you hope to offer.”
Validating your idea could include:
- Starting your business as a part-time job or side hustle until you have enough money or a big enough audience to make it your full-time work
- Taking pre-orders
- Running a crowdfunding campaign before launch
- Developing and promoting a “coming soon” landing page with a signup form to gauge interest
Strategies like pre-orders and crowdfunding help you test demand and ensure you have a more concrete idea of what you’ll have to work with before the stakes are higher.
Set your business goals
Whenever you’re starting a business, but especially if you are transitioning from a fun hobby to something you’re hoping will generate income, it’s important to set goals for the next few weeks, months or even years.
Your goals don’t have to be just monetary. They can include your reasons for starting a business, such as the number of people you want to impact, what you hope to accomplish, like establishing yourself as an authority in your niche, or more concrete goals, such as selling a certain number of units by the end of the first year.
It can be especially helpful to set SMART goals. That means goals that are:
- Specific: Get granular and targeted. For example, “attend a networking event” isn’t specific. But “attend a January event and send 10 follow-up emails,” is.
- Measurable: Know what you’re tracking your progress against. For example, “grow my social media” isn’t a goal. However, “Reach 1,000 followers on Instagram,” is.
- Attainable: It’s great to be challenged, but ensure your goals are still just within reach so you’re building momentum rather than fearing defeat.
- Relevant: Do your goals make sense to your industry or circumstances? For example, are your revenue goals relevant to your current salary, or pulled out of thin air?
- Time-based: Document a timeline with specific deadlines in place.
Network and build your presence
It’s never been more important to network and build your brand to attract potential new customers, clients, vendors or even new employees. Make sure you’re taking advantage of networking events, new learning opportunities, and groups or memberships — both online and in person.
Set aside time, and potentially budget, to establish your social media platforms and website so that your business has a presence online and in real life.
This is especially important considering that, according to Sprout Social, after consumers follow a brand on social media, “91% visit the brand’s website or app, 89% will buy from the brand and 85% will recommend the brand to a family or friend.”
Manage your finances
While you may be used to keeping a household budget, you’ll need a whole new skillset to manage your business finances. This includes making sure you:
- Have a product/service that is competitively priced
- Set up a business bank account and keep it separate from your personal finances
- Keep track of cash flow, either through your bank or a software like QuickBooks
- Have a set budget based on data and forecasts
Spend your time effectively
When switching from a hobby to a business, you’ll need to spend all of your time effectively and will likely need to “create more hours within the day.” This can be especially challenging with another full-time job or a family to take care of.
Find ways that you can work your new business into your current schedule, which can mean early mornings, late nights or shifting responsibilities around.
When it comes to balancing a day job and a side hustle, Skillcrush also recommends:
- Upskilling on your lunch break
- Planning ahead and setting a schedule that works for you
- Identifying and then setting aside passive activities, like TV and scrolling social media
Treat it like a full-time job
It’s important when you’re making money from your hobby that you’re treating it like it is a full-time job and taking it seriously. This matters both in terms of your business’s success and in the eyes of the IRS.
This includes staying up to date on industry trends, getting any licenses or employer identification numbers you may need, managing your finances effectively, and dedicating your time and efforts to achieving the goals you set.
The website The Balance explains that the IRS “wants to know that you depend on the income from your enterprise for at least a portion of your livelihood.” Changing your mindset from hobby to full-time job is the first step.
There is so much to consider when striking out on your own to start a business, and Nationwide is here to help every step of the way. Visit Nationwide's Business Solutions Center for more resources along your journey.