James and Megan are continuing their series about how to start a business. On the last show they discussed how to build a business around what you’re currently doing as a job. Today they explore another option.

Today’s Kryptonite: From Hobby to Business!

Why should you turn your hobby into a business?:

• You already have the skills and enjoy the work.
• You may already have finished goods available for sale.
• With a little research you can understand the market more quickly than entering into something new.
• There’s a low risk of violating a non-compete or dealing with other conflicts of interest.
• Examples:
  • Alexandra Tucci (AET Lettering Shop)
  • Eric Haselhorst (Rockin H Farm Toys)
• MLM opportunities may or may not fit what we’re talking about.
  • If you like hosting parties at your house for your for your friends and family, have fun.
  • But if you want to be an MLM rockstar, it’s lots of work and a real business.
  • Use this information and our other shows as applicable.

What are the pitfalls I need to avoid?:

• The number one pitfall people fall into is not treating their new business like a business.
• Not charging enough
• Just working hobby hours
• Doing work for free for family and friends
• Is there enough of a market to support your definition of success?
• How well do you understand that industry? Just because you can do something or have an interest, it doesn’t mean you know the industry well enough to turn it into a profitable business.
• If it’s really a hobby there is passion for it…don’t just jump into something.
• Will going full-time take all of the fun and enjoyment out of your hobby? Would part-time?

How do I set myself up for success?:

• Ground yourself and gain true perspective. Don’t do this on a whim. Think it through and be intentional.
• Run your new business as a business:
  • Finances
  • Inventory
  • Marketing and Branding
  • Systems/Processes
• Benchmark pricing in the marketplace and decide where to position yourself
• Understand the legal requirements (licensing, taxes, etc.)
• Develop your plan and execute

Action Steps:

1. Develop a basic business plan (if this takes the fun out of your hobby, it probably isn’t a business for you).
2. Develop a financial plan (can you make a profit and is there a viable market?).
3. Run it like a business (get your licenses, set up your systems and processes).
4. Execute your plan!

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