How do you know if your hobby or Etsy side business can be turned into a lucrative business? Let’s share some Advice for Turning Your Hobby into a New Career.
The new year is a time when many people dream of turning their hobby into a new career. While some may decide to become hobbypreneurs due to personal circumstances, such as redundancy or career break, others may simply find the freedom and flexibility afforded by being their own boss an extremely attractive proposition.
Whatever a person’s reasons for starting a new business, having a clear idea of what they want their business to achieve and establishing a good financial system from the start is critical to success.
Many people who make the decision to turn their Etsy side business into a lucrative business have a significant advantage; they already know they love their job. While an element of passion is important, hobbyist entrepreneurs also have some important considerations to keep in mind.
It’s critical to start the process by asking what exactly they want the company to achieve and it will influence other important decisions later on. It is usually about whether the goal is to create a business empire with a focus on maximising profits or whether the individual simply wants to improve their work-life balance by being their own boss.
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Business Structure
Once the person has defined a clear goal and direction for their start-up, the next step is to decide on the best business structure.
For those who see their business as an extension of their hobby rather than a money-making opportunity, with a lower risk involvement, lower turnover, and lower profit margin, remaining a sole proprietor may be the most sensible option.
On the other hand, if a start-up is a person’s only source of income and making a profit is the main goal, then getting started is probably the safest route.
A good way to look at it is: when you’re thinking about turning your hobby into a new career is that if a business tends to operate through family and friends, it’s probably best to continue as a sole trader.
When a person is promoting and selling their goods or services to the outside world, it is often worth considering incorporation.
While setting up a company is often the more complex option, it has the advantage of providing a level of protection if things don’t go according to plan.
Budgeting and establishing the correct financial processes can also play a crucial role in the success or failure of a new start-up.
A simple starting point could be to take a sheet of paper and simply write down the cost that the person needs to calculate to break even and decide if customers will be happy to pay that rate.
Determine the Pricing Structure
For example, a bakery owner must consider factors such as the cost of ingredients, energy, packaging, and distribution, and may need to consider elements such as advertising, website, and e-commerce costs.
These areas will help dictate a unit price, which in turn will allow for profit calculation and a reasonable selling price.
To ensure that a business stays on track as it invests in its advancement and development, it is also wise to write a timeline of specific business goals and the actions required to achieve them, as well as to keep an accurate record of income and expenses.
For sole proprietorships, maintaining an Excel spreadsheet is probably an effective and inexpensive way to do it, while top-selling start-ups may consider investing in a more complex cloud computing system.
It is important to know the tax thresholds that the company and the employer can fall into. For example, if people suddenly become subject to VAT, earnings are effectively reduced by 20 percent and failure to register can result in heavy penalties.
Setting up a Separate Business Bank Account
Another important part of maintaining good financial processes is creating a separate bank account, which helps clearly differentiate between business and personal costs and income.
While there is sometimes a temptation to invest in personal funds in the first few days of starting a business, it can create complications when trying to make a profit and determine business cash flow.
Another common pitfall when founding a start-up is going “all in” too early rather than starting small and easy and building later.
Rather than selling a diverse range of products to start with, focusing on a smaller number can often help keep material costs down and prevent a business from failing before it even starts.
Also, in the early days of starting a business, keep in mind that additional hires will directly affect earnings and cash flow.
However, instead of employing employees with fixed employment contracts, it is a good way to keep personnel costs under control by hiring flexible employees and deploying them as needed.
Hobby to Job
The Australian Facebook group ‘Mums the Word’ made headlines when its founder controversially asked members for a one-time retrospective membership fee of $10, claiming that the hobby has become a 24-hour, 7-day-a-week job.
The story is a reminder that hobbyists should establish a solid scale plan early on and prepare for all kinds of scenarios. Springing the cost on someone for something that is free to join is unfair and can lose you members and potential customers.
Asking “what if” in relation to a variety of potential situations can help business owners respond quickly and effectively to unforeseen circumstances, such as a bulk order or request for a significant discount.
There is no question that deciding to go ahead and do it alone requires some mindset, but with careful planning, the decision to turn a personal passion into a business can bring significant benefits.
By thinking carefully about their key business goals and approaching financial processes in an organised and honest way, hobbyists can make healthy profits while enjoying their work at the same time.
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