How do you know when your hobby is now a fully-fledged business?
The road to carving a career is a successful one if the passion behind it grows naturally, This is where flipping a hobby into a career can seem like a good idea, but how do you know when it’s the prime time to nurture your hobby into a way of life?
Turning your hobby into a long term business plan is a life changing step as it can affect the way you live your life, and if successful, commercialise your hobby and convert your passion into a profitable career.
If you jump in head deep without taking the correct precautions, you could be taking the wrong step, which could have a knock-on effect on your confidence, potentially diminishing the passion for your hobby.
If it’s the leap you want to take, the risk is inevitable, but you can take steps to minimise the number of hurdles along the way by carrying out the appropriate due diligence.
Passion to profit
The first step is to measure your chances of success which can be measured against the following milestones:
- Is your business model profitable? As a hobby, you may be able to measure how much customers would desire to pay by receiving feedback from impartial customers. Carrying out industry research can indicate towards the general success of a business idea, but there are numerous aspects which can mitigate this.
Operational efficiency can affect the financial performance of the business. If the running costs are low, more funds will be available to reinvest into the business. Aspects such as brand identity, ownership and marketing exposure can also influence the future of the business.
The incorporation of the business, timed against the state of the economy is also of importance as this can influence consumer behaviour, for example, Brexit negotiations. Seasonal changes, national holidays and religious events will also influence the way you connect with your client base.
- What’s the client return rate? It’s a gratifying feeling to have a customer return as this shows that your product or service has had a positive effect. As your business is on their mind, remarketing tools can be effective such as email, social media or Google remarketing.
If there’s a consistent demand for your service, this means that there’s a viable customer base for your business. It’s the first checkbox ticked to transforming your hobby into a fully-fledged business.
- Is it time to build a team? If you reach capacity due to increasing workload, it may be time to form a team to help grow the business. The key here is to identify the consistency of incoming work as you may require a temporary worker, rather than employing a full-time member of staff. As you’ll be entering unchartered waters, as a new born business, this step should be taken once a consistent cash flow has been established.
- Do you represent authority? If your hobby is turning heads and symbolises an authoritative brand, you may have the standing to turn your hobby into a career. If you’re already on the way to disrupting the consumer flow of your competitors, this is a clear sign of your hobby turning into a fully-fledged business.
If the above pointers measure up against you, it’s time to prepare for the change to ensure that profits are not short lived and the success is long term.
If you’re expecting to take on a large volume of orders, consider upscaling your equipment to meet the demand and take careful consideration of the costs. As your personal identity will now become a commercial brand, it’s time to paint your online marketplace with your branding, including social media.
Financial considerations for your business
If your hobby takes a commercially successful turn, ensure that you’re operating in the most tax efficient way in order to maximise profits and take home pay. Whether this is through a Limited Company or an alternative operating structure, there are legal intricacies which need to be fulfilled before trading as a business. An accountant can help determine your financial obligations, including the formation of your new business in accordance to legal guidelines.
At Handpicked Accountants, we have formed relationships with accountants across the country specialising in small business and contractor accounting. They will be able to advise you on the best operating structure, including take home pay calculations. Get in contact with a member of the team and we’ll put you in touch with a trusted accountant near you.
