As recently as the 1800s, it was extremely common to find businesses run from people's homes. Many of the artisans of old did everything from weaving to woodworking in their home workshops, and though that period of history has passed, the pandemic caused a lot of folks to consider the benefits of reviving the "cottage industry."
Could you be the next person to turn your hobby into a business and begin pursuing your passion professionally from home? It's an intriguing idea — anything from spice blends to earrings to wooden crafts could become your next source of income. But before you write in a date with a loan officer on your dry erase calendar wall decal, there are some important considerations that you should look at first.
What does it take to make it with a hobby-turned-business, and what should you be aware of if you're considering taking this route? Here are five questions to ask before you take the plunge.
1. What's Your Motivation?
It's always smart to work out the internal motivations behind your plans when contemplating a big life change. Do you want to turn your hobby into a business:
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Here's the thing: Turning your hobby into a business will often drastically change your relationship with it. When you make that leap, you always run the risk of changing what's enjoyable and personally nourishing about your hobby. If this is a big concern for you, remember that your hobby business doesn't have to be full-time. Many hobbies work better as side hustles.
2. Is There a Market for Your Product or Services?
First, you need to determine if there's a demand for your product by doing market research. That might sound difficult, but it doesn't have to be. The U.S. Small Business Administration offers a good collection of market research resources that include huge amounts of data on subjects like consumer prices, demand, and the state of various industries. You can also conduct market research on your own through social media sites like Reddit and Quora or through consumer survey data.
It's also important to realize that being good at something and having a professional-level product is often not the same thing. Take some time to look at your competitors' products and honestly assess your level of technical skill.
3. What’s Your Business Plan?
Every business, from the smallest home t-shirt maker to the largest multinational corporation, needs a business plan. This plan outlines the key elements of how you'll turn a profit, including:
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The last point is one that many first-time business owners ignore at their own financial peril. It's crucial to know the differences between a sole proprietorship and LLC and consider which offers the most advantages for your business, including legal liability and taxes. It may be helpful to seek advice from companies which provide the best LLC services to make sure that the process goes smoothly.
4. Will You Need Additional Capital To Make the Leap?
Moving from the level of hobbyist to professional can require some investment in tools, materials, and other essential business expenses. It's important to assess these costs and make a plan for securing financing that meets your business's financial needs.
Loan programs from the SBA are an excellent place to start if your business needs financial capital. In addition, talk to the bank or credit union that you already use to find out what kind of business loan programs they offer. Before you contact a bank, though, learn about personal and business loans and determine which type of financing is most appropriate for your business.
Other financings might come from using a credit card or getting personal loans from family and friends. The latter can be a particularly attractive way to go if it allows you to get a loan for lower or no interest, but remember that it can potentially introduce complications into your personal relationships.
5. How Will You Market Your Products and Services?
Unless your product or service is truly unique, there will be many businesses out there trying to sell something that's at least nominally similar. That's why you need to invest in marketing and promotion to ensure that people can find your business and that you stand out from the crowd.
When it comes to advertising, social media platforms like Instagram and Facebook are great ways for creators to promote themselves. It's easy to get started with a small investment, and most social ad platforms offer fairly robust tools both for targeting your ads and for evaluating their ROI. Track your social growth using a wall growth chart so you can see how long it takes to reach your goal.
But remember that marketing doesn't just mean advertising. It also means researching the target demographics for your business and the best tools and strategies for reaching them. You should spend some time analyzing your market segmentation and fine-tuning your communication strategies before you start spending money on advertisements.
WRITTEN BY
Clara Rose