Many people believe that it is important to find a hobbyist and work at it. HOBBY – But, do you feel like you are fulfilling your dream, or are you just working?
Do you see it as a business venture or hobby?
Some businesses are not profitable or full-time. Not every hobby can make you money. It can be difficult to distinguish what you started as a hobby and what you are making from your side hustle.
What is considered a hobby?
Your hobby can be a thing that you can easily give up without affecting your income or lifestyle. It could be something you are working full-time on, or it could even pay your bills. But it could still be a hobbyist and not a business.
It’s fine to stay where you are, even if your hobby isn’t. Things change. It’s possible to be passionate about something and make it a business later. You’ll still have fun and enjoy doing something that supports you and your family.
What is considered a business?
A business requires you to be more involved in the game. It could be that you have invested your savings, college funds, credit card debt, or borrowed money from family members or banks. It is in your best interest to make sure it works. If you treat it as a hobbyist, you are only increasing the risk.
How to make your hobby a business
You have been investing in your hobby to make money or expand your reach. Now it is time to decide whether you want to turn it into a business. You can easily lose control of your investments if you don’t have a plan or a roadmap.
You don’t have to start a business if you just want to run a side hustle and make a little money. Here’s how you can turn that money-making hobby into a small business.
1. Set goals
You have likely worked on this hobby for some time and already know what you want. It’s now time to make those thoughts, desires, or wants into concrete goals. These are the questions you need to ask:
- What are you hoping to achieve?
- What is success?
- Who are involved?
- What resources are you looking for?
Do you want to be able to quit your job and make enough money? Are you looking to start a passion project? Are you looking to start a family business?
These questions will allow you to start thinking critically about how to launch your business. These questions are the first step towards developing SMART Goals. This will help you to develop strategic steps that can make your business a success.
2. Create a Lean Business Plan
The first step in developing a Lean Business Plan is to establish goals. A Lean Plan is a great way to turn a hobbyist into a business. This plan is flexible and quick to create.
The Lean Plan is useful for defining how your product or service will work as a business. The Lean Plan helps you consolidate your product or service offering into a business identity. It also considers the market you are entering, potential competition, and what expenses, revenue streams, and milestones you will need to reach.
It’s early in your business career, so don’t be concerned about getting everything right from the beginning. A Lean Plan’s beauty is that it can be used as a starting point to outline what you want. It’s possible to modify and refine it later.
3. Reach out to existing customers
You may have an existing customer base if you’ve been selling your products or services as a hobbyist. Reaching out to people you have sold your products to gauge interest in your business may be worthwhile. This is a great way to get feedback from customers and test your idea before you launch.
It’s okay to not have customers. Before you make your official announcement, there are many other ways to test your idea. You can run ads, create a pre-order page or join forums to present your business idea. This early work can help you decide if your hobby is worth keeping or if it’s a hobby that has the potential to become a successful business.
4. Register with the state by choosing a name
Your business needs a name and an identity. You can use your children’s names or create your name. You can choose a name that suits you best. If things change, you can always add a DBA to your business name.
Next, register with your state. You can do this online. It’s easy, but it can be complicated. Before you do anything similar yourself, we recommend consulting with your tax advisor. Keep your registration up to date.
It is important to decide what type of business structure and how you will file your taxes. To determine the best structure for your business (partnerships, LLC, S-Corp, etc. ), consult a CPA or an attorney. You can find out more.
To identify your business to IRS, you will also need to apply for federal EIN. You will need to pay taxes and report your income to the IRS.
5. Make sure you have your finances in order
You need to know what money you’re spending, what money is coming in, and how much cash you have.
There are many options. There are many options. You can either track everything manually using a spreadsheet or hire an accountant.
It is a good idea to start your accounting process from the beginning. You can do your accounting by yourself, and continue to do so until you can outsource to an accountant. Make sure that you hire a modern accountant/bookkeeper who is proficient in digital presentation and can provide you with advisory services.
6. Open a bank account for your business
To keep your personal and business finances separate, you will need a business bank account. It is important to separate the costs of your business and hobby so that you can see how much it is costing you.
Also, make sure to understand the “Hobbyist Loss Rules”, so that legitimate deductions are not inadvertently disallowed. Talk to your tax advisor again.
I recommend that business credit cards be obtained. You don’t want to accumulate debt. Instead, you should charge business expenses and manage your cash flow by only paying these expenses once per month. Rewards points are another benefit to credit cards. You could earn a lot of points for your business that you can use to get cash back or airline miles. This will help to cover business expenses.
Check out this guide if you have bad credit or are unsure if you can get a loan or credit card for business.
Other startup elements to be considered
You may need to take into account the following depending on the size of your business and where it is located.
Get a sales tax license
Selling taxable products or offering taxable services in your state will require you to collect sales tax at the point of sale, file sales tax returns, and remit any funds. The state will inform you about what your business must do to file and remit sales tax returns.
If you’re an eCommerce seller, there are more sales taxes to consider. Talk to an expert or eCommerce accountant if you want to sell online.
A Business Operating Policy (BOP), insurance policy
To protect your business assets and business, you need business insurance. Small business owners invest a lot of time and money in their businesses. Don’t put your money at risk by not having the right insurance.
A Business Operating Policy (or BOP) is the minimum coverage required for any business. They cost only $500 per year, so they are not expensive. These will cover all the essentials of your business, even if you are a home-based entrepreneur. A business operating plan (BOP) should not be a problem.
Talking to a broker can help you determine whether or not you need additional insurance. You might need Errors & Omissions coverage if you provide consulting services. Cyber Liability insurance is essential for any online or eCommerce business. It covers a variety of cyber threats.
You can now go from hobbyist to entrepreneur at any moment
You now know the basics of what makes your business a success. Although there are many things you can do to make your business a success, these basics will suffice.
You can start to build a structure plan to grow your company by revisiting your Lean Plan. Keep in mind, however, that even if you are missing a hobby you love, it is possible to pull back on your business or pivot.
Disclaimer. The opinions and views expressed in this article are the authors Shalom Lamm.
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