Let’s face it — sometimes you can get tired of working for someone else or even running a business you’ve built up over many years. If you’re engaged in an unrelated but more enjoyable sideline activity, it may be tempting to turn that into a profitable venture. However, this hobby could consume so much of your time that you couldn’t do justice to your current job or business. So the question is: how to turn your hobby into a business and ensure it is successful?
If you’re facing this dilemma, you’re not alone. Turning a hobby into a business is the American way. Remember the bicycle shop owners, the Wright brothers? Or tech tinkerers Steve Jobs and Bill Gates? A lot of thriving florist shops were probably started by avid gardeners who gave up working in an urban office tower.
Often, folks who make the leap by starting a small business land on their feet and live happily ever after. Other times, they might break a leg and forever regret taking the plunge. How can you improve your chances of success? By running through a checklist, then giving it a reality check by sharing the results with people who can offer an objective perspective.
There are three questions to consider when you’re contemplating how to turn your hobby into a business: lifestyle and personality, business acumen and financial standing.
1. Lifestyle and Personality
Take a look at the following lifestyle and personality questions. The more “yeses” you get, the better.
- Are you willing to work nights and weekends on a regular basis?
- Are your family members on board?
- Are you comfortable with uncertainty, such as whether your business will succeed?
- Do you have the perseverance to stick with what you start when the going gets tough?
2. Business Acumen
Business acumen and related management skills are also important when starting a small business. If you haven’t already run a company, it might not be obvious to you whether you have business smarts or not. However, here are several indicators of having the right instincts that can play out in routine work and interpersonal situations. Again, you’re looking for a “yes” response to these questions.
- Are you comfortable asking people to give you money in exchange for something you’ve given them?
- Are you good at recognizing unfilled needs and gauging demand for a product or service?
- Are you good at knowing when to delegate tasks, and how you can entrust people with responsibility?
- Can you instill confidence in others, and get people to follow your leadership?
Another test of your business acumen is to see how you do at writing a business plan for the new venture. The Small Business Administration offers guidance on how to do so.
3. Financial Standing
The third set of questions pertains to finances. Even if you’re considering turning a hobby into a business simply out of passion, you’ll still need to have some financial resources, know (or learn) how to address a business’s financial needs and manage money prudently. It’s also important to understand the difference between small business loans and equipment leasing when the need to seek funding arises. Relevant questions to ask yourself are:
- Do you have a sufficient financial reserve to cover a large portion of a new business’s initial expenses? (There are ways to secure some funding to launch a new business, but in the very early stages you’ll likely need to put a significant amount of your own funds on the line.)
- Will you be able to provide “volunteer” labor for your new business, or pay yourself very little, until the business is pulling in enough money to be more generous to yourself?
- Have you built a solid personal track record in repaying loans?
- Do you know how to make and stick to a budget, along with the basics of financial accounting?
You don’t need a perfect score to give yourself the green light to proceed on turning a sideline activity into a business. Some deficiencies can be offset by a business partner who has those strengths. If you decide to move forward, enjoy the ride!