From knitting to writing, most everyone has a hobby that they love. Through practice and research, you can eventually become very skilled at a hobby, sometimes even to a professional level. We often see people wondering at this point, “Could I be doing this for a living?” It can be so tempting to quit our jobs and follow a passion through self-employment. However, before you go ahead and do this, ask yourself: can my hobby become a successful business?
There are thousands of examples of people turning their hobbies into businesses, but not all of them work out. What every potential business owner must understand is that there is one major difference between a hobby and a business, and that is mindset. In order to transition a hobby into a successful business, you need to start actually thinking of it as a business.
The first thing you will need to do is determine your marketing mix, or the four P’s of marketing: Product, Price, Promotion, Place. This is an essential step to understanding the market you will be operating in. Many individuals who turn their hobby into a business forget that it’s not about what you like and are interested in, it’s about what your customers like and are interested in. As you identify your marketing mix, you will answer what your business idea is, why it creates value, who your competitors are, what a fair price for your product or service is, how you are going to build awareness, and where and how you are going to sell it.
Next, you must evaluate your costs. Since hobbies are done purely for enjoyment, most pay little attention to what they actually cost. However, as a business, you need to pay close attention to this critical component. As you walk through what your expenses are, don’t just focus on the face value dollar amount. Look into how long it takes you to make each unit and how many units you are making at a time. These factors will help you determine your true cost to make and deliver your products or services.
Once you have identified your expenses and set a competitive price based on your target market, you can determine your breakeven. This is the minimum number of units you must sell before you actually generate a profit. Due to your revenue/cost equation, you may find that your breakeven point is higher than what you can realistically achieve. In this case, you will need to determine if your price is too low or if there are ways to lower expenses.
As a final step, consider how well you yourself can manage a business as opposed to a hobby. Running a business can be stressful and honestly, sometimes can take the enjoyment out of a hobby. Before you make this commitment, be sure you understand what is required and if it’s the right career path for you.