This is the last of a two part series on how to turn a hobby into a small business. Sometimes people with great hobby do not have the right amount of business acumen to run a business. Everyone has good ideas — it is the business of running a business that gets some people in trouble.
Here are seven questions that one should consider before diving head first into entrepreneurship.
1. How committed are you to being a business owner? Successful small business owners are fully committed to their businesses. Are you the type of person who has lots of interests? Do you have lots of unfinished hobby projects around the house? Would you be easily distracted by the next business idea that you dream up? Successful entrepreneurs are disciplined.
2. Do you have a competitive attitude? Are you willing to charge people enough to make money from your products? Many people with hobbies have been giving away their homemade goods as gifts and presents for years. You must really change your mind set to turn into a real business person. No more hook-ups, friend discounts or freebies.
3. Are you a glass half full or half empty kind of person? Your business will live or die based on your own personal optimism. Most successful entrepreneurs are optimistic people. Can you see a positive opportunity or lesson in an otherwise challenging situation? When you don’t have optimism in your business, it is very difficult to sell to anyone or motivate employees. Most of all it is difficult to run a small business; you need optimism to survive the lean times.
4. How big of a business do you want to run? When you start a business, you also need to know in the beginning how much responsibility you are really trying to take on. It is also important to always know how much money you need to make to be happy. Do you want to make enough money to pay your bills and go on a few nice vacations per year, or do you want to buy your own island? Do you want one great restaurant or a regional chain of pizza shops? Do you want your product sold in high-end boutiques or at Wal-Mart? These are all decisions to be made up front as you are starting your business.
5. Do you like to make decisions? One of the main differences between having a hobby and running a small business is making critical decisions with financial implications. In business there are many roles you will need to take on. The average business owner does 10-13 jobs starting out. Will your accountant do payroll or will you use a service? Will you hire employees or make everyone a 1099 virtual employee. Will you hire a booker to source a foreign manufacturer or run a local manufacturing operation that will great increase your cost per unit. Will you be a home-based internet business or have a retail storefront?
6. Do you have the money to start a business? Once you’ve written a marketing plan and then a business plan, you will know if there’s a market for your hobby to become a profitable small business. The next step is to start saving to finance the launch of your new business. Will you start with product or will you need to develop a few more to generate the money that you need to sustain the business. You should not quit your day job until you have sufficient money to fund your business plan and your household. In fact, there are three pools of money you should have in place before you start your business full-time.
A) You need emergency savings for your household.
B) You need enough money to go up to two years without a paycheck.
C) You need the first year of operating expenses for your business.
Start saving 20-40% of every paycheck to save the money you need to become your own boss. Often, things do not work out exactly according to your business plan. These pools of money will be your contingency plan to ensure that the business and your family financially survive your small business endeavor.
7. Do you like to sell? As an entrepreneur YOU are the chief sales officer. You must be the best sales person in your company. Not only do you sell your products–you also sell your vision for the company and most importantly you sell yourself. And you will need to sell every where you go, and make sure that those close to you know what you do. If you love selling, entrepreneurship really could be for you.
If you didn’t have strong answers to most of the questions you might need to plan a little more or consider getting a business partner to help you make your business plan a reality. The key is being honest with yourself about what skills you have and need to turn your hobby into a full-time business.
What other questions do you think a person with a hobby should ask themselves before making their entrepreneurial dreams a business reality?
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For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog www.succeedasyourownboss.com.
Melinda Emerson, known to many as “SmallBizLady,” is a Veteran Entrepreneur, Small Business Coach and Social Media Strategist who hosts #SmallBizChat weekly on Twitter for emerging entrepreneurs. #Smallbizchat is the trusted resource on Twitter to discuss everything entrepreneurs need to know about launching and running a profitable small business. Her first book Become Your Own Boss in 12 Months was released in March 2010.
Hey Melinda,
Thanks for the post, #2 really hits home. When you go from using your spare time to taking up prime time the price has to change.
My goddaughter recently turned her photography passion into a business. She’s struggling with the “I only charge x because my value = y – z, because in my mind I’m still not a professional.” She’s got to get over it or she’ll never make more than garage sale money. Your article is now in her inbox as a little kick in the pants.
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