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Taking Your Hobby Business to the Next Level

written by: •edited by: Linda Richter•updated: 11/8/2011

While there are perks in turning your hobby into a business, it's not a surefire way to success. Much like thinking a vacation spot would be the perfect place to live, the reality is often different. To achieve any degree of success, you have to throw that "hobby" label out - it's time to work!

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    Should You Make the Move?

    vineyard Let's presume that you have done your hobby for time enough to know it inside and out, and that it's something you enjoy all of the time--if you don't have these two elements then there's just no foundation. But, how do you know if you are good enough to make a business out of it? Before we even get into the nitty gritty of business plans and taxes, is it really something that is right for you?

    Think about your hobby and the reactions it brings from others. Are they interested? Do they sample your wares with delight, or even ask you to make something for them? Obviously, this depends hugely on your hobby: If we are talking the crafts genre, then that's easy to work out; but if you love football and want to be a coach then that's a bit different. Do people ask your advice? Have you any outstanding achievements or press recognition of what you've done? In other words, is the marketplace interested in you?

    You need to determine if you are just an enthusiastic amateur where only your family praises you, or do you have something extra that makes others take notice, too? It's important to have a supportive family around you in business, but of course they aren't always the most honest, so you need to consider how you and your products/talent will be received by the wider world. It's not easy to face up to your own cons list, but it's important to think about it now, rather than later when you've signed up for a huge bank loan and a lease on premises.

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    Market Research Is a Must

    Market research is not just good sense, it's crucial when putting together a business plan if you are looking for investment.

    cupcakes If you know your hobby well then you'll have an idea about the current market, which puts you in a strong position. However, it's time to ditch that crocheted hobby hat again and put on your business bowler hat and look at things differently. Is there a gap in the market? What will be your unique selling point? It's important to remember that you won't be the only one looking to turn his hobby into a business, and perhaps the market is saturated with similar products or services.

    If you are going down the popular online route then a few hours of thorough research will give you a good idea if there is room for you in the market. If you are inundated with search results of people all offering the same thing at ridiculously low prices you'd find hard to compete with, then do you want to compete in that area? It doesn't mean doors are closed, but you'll need to think about a unique twist on an idea to make you stand out from the crowd, which isn't easy.

    If you are going down the route of a physical presence in your local area then this is easier to conclude--however, it's also likely to mean a bigger outlay if you are going to lease brick-and-mortar premises. While there may be room in the online market for another business of your type, this is less likely to be true of a physical marketplace--how many cupcake and muffin shops does one street need? Perhaps it's better to widen your search to another nearby town and examine the competition there.

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    eBay, Etsy, Mobile or High Street?

    There are a number of ways to set up your business in the beginning, several of which require little to no outlay and can still allow you to continue with your current job. This isn't for everyone, as it very much depends on your hobby, but using online stores like Etsy and eBay are a good way to test the water and allow you to make necessary changes quickly. The advantages here are that you don't have to worry about getting found by search engines, or face up to the realities of setting up your own webpage or shopping basket procedures. These sites are also great places for seeing what the competition is up to as well -- remember, though, that this can work both ways so if you have something really unique this may not be for you.hobbygardener 

    Some hobbies might also allow for you to cut down on large financial outlays by being a mobile operator. If your passion is gardening, then being the mobile gardener is a great way to start a business. It's even possible to go on after that if you want to expand into cultivating your own orchids, for example; you then have a great customer base. Anything in the beauty market or health area is usually well received when you offer a service to visit people in their own homes--indeed, some have even made a success of this approach when selling cakes or mobile lunches and snacks if you pick the right area. Craft parties can be a popular way to either launch or to operate your business, whereby you offer the host/hostess a commission on any sales made when selling your wares from their home. Pampering evenings are also popular if you are in the health and beauty market, and they can even be extended to tweens and teens with princess parties.

    Going straight for physical premises is always a scary step, and it's not highly recommended for most hobby-to-business operations. In some cases this is obviously unavoidable, but it certainly means a lot more emphasis on your business plan and the requirement for some investment behind you.

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    The Boring (But Necessary) Details

    money Depending on your hobby, you'll need to make sure that you are insured and licensed to carry out your business. For a food business this means attaining the correct hygiene certification; as a mobile masseuse you obviously need to have the correct training and liability insurance in place. It's hugely important that you check the legal requirements of your chosen business before you begin as overlooking something can add to the financial outlay as well as the time it will take to get your business launched.

    Whether your business is seen as a hobby or as a business by the IRS also has implications on your tax deductions. If you are still keeping some of your hobby for yourself as enjoyment, then you need to be really careful about the records you keep in distinguishing the two. There is a helpful IRS fact sheet on this area, a link to which you'll find in the references section below. Even if you still carry out some hobby activities, if someone else were to see a finished product the IRS might view it as a form of promotion for your business, so you have to give this due consideration. If there is a perception in any way that you could make a profit either now or in the future, then it will be seen very much in the business category.

    So there we are, a roundup of considerations you need to make before starting a business from your hobby. It's not easy, but if it were easy then everyone would be doing it. And, if you find from your market research that seemingly everyone is doing it, then I think you've found your answer! Turning your hobby into a business isn't always a good idea and it's better to be honest with yourself from the beginning. Good luck to those of you who make the jump--let us know how you get on.