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Wednesday, October 27, 2010

Answer These Questions First, Before Turning Your Hobby into a Full-Time Business?

In my travels around the country, I've met numerous individuals who worked full-time but had dreams of turning a part-time hobby into something that could allow them to quit their jobs and financially support their current lifestyle. The entrepreneurial spirit is alive and well across the U.S.
No question, no matter how good your skills or how in demand your product or service, taking the plunge into self-employment is a major decision and one that you should not take lightly.
This article will provide you with some questions to answer as well as some thoughts and ideas to consider as you make some hard decisions about your future as you consider turning your hobby into a profitable (and sustaining) business.
Do you just enjoy your hobby or are you good to enough to actually sell your products or services? Making this distinction is essential, but often challenging to your ego. Is your hobby expertise really commercially viable or simply something that gives you great pleasure in your spare time?
For example, I really enjoy designing and building my own furniture and home accessories, but I also know I am not good enough craftsman to make a living selling my designs or creations.
Do you have the aptitude and drive to run your own business? It's one thing to sell something to a neighbor or at a crafts fair, but a totally different thing to create and manage an entire business around your hobby. You'll want to create a business plan for your own benefit as well as for potential investors (if you seek additional funding).
You'll also be handling all the decisions for your start-up managing production, inventory, marketing, sales, finances, and accounting. You have to consider how much time running the business will take from your time creating the product or service you plan to sell.
Do you have personality/inclination for marketing, sales, and dealing with customers? Some of us have natural people skills that make it easy to deal with customers, but for the rest of us, taking the time and energy to sell, service, and please customers is simply too much. Remember, it's not just making the sale, but dealing with everything surrounding the sale.
If selling or dealing with customers and clients is not your thing, of course, you can enlist a partner or hire a salesperson to do those customer sales and management tasks assuming your business will make enough money to support the additional personnel.
Is there a big and strong enough market for your product or service? I met a wonderful craftsman in Washington who makes unique water sprinklers from copper piping. He most certainly has the skill to design and create beautiful sprinklers, but because he does not want to sell his stuff online, he faces a very limited local market for his products.
How big is your market? How do you intend to obtain customers? Locally? Online? Selling through a third-party? It is extremely important to define your customer and then determine how many customers might seek out your product or service.
How much competition will you face? No matter how special you think your product or service, you will face competition whether from other hobbyists or other businesses. It's important to take a hard look at how many, how big, and how powerful the competition will be for your product or service.
Once you've identified your competition, the next step is determining how you will beat them in order to get customers to buy your product or service.
What makes your product or service unique? In reality, truly unique products or services don't exist because customers always have other choices. That said, you must identify distinctive elements of your product or service elements that your customers value and identify the best and most compelling method to communicate those features.
Even if your prices are higher than those of your competitors, if you can offer a truly distinctive (and in-demand) feature, you should be able to carve out a niche in the market.
How will you make the sale? Some key decisions about your potential new business concern how you handle customer transactions. Do you plan to only to make cash-based transactions, or will you accept credit cards? Obviously, accepting only cash (or check) for purchases is much easier, but not offering credit will often limit the number of people willing to buy your product or service. Accepting credit cards will also increase both your costs and aggravations, but may be something you have to do to make the sale.
If you sell through third parties, you can typically use their transaction methods (though still with an added cost).
Do you have enough money in reserve to cover start up costs and slow sales periods? The idea of having your own business and reporting to no one but yourself is a dream for so many, but unless you have the financial resources to do so, it may have to remain a dream for now.
On the other hand, if you have a source of funds whether from semi-retirement, savings, partner support, or financial backers you are one step closer to being able to realize your dream.
Have you considered the impact of losing healthcare coverage, life insurance, and other benefits? One of the major hurdles that is simply too high for some would-be entrepreneurs is replacing the benefits they currently receive from their employers. Healthcare costs for individuals and small businesses are not competitive and you may be forced to keep your full-time job or risk not having insurance.
You can mostly ignore this question if your spouse/partner's employer benefits cover your needs.
Final Thoughts
Converting your hobby into a full-time business is a dream for many people, but before quitting your job, remember that the grass is not always greener on the other side. As one small business owner recently lamented, "I love owning my own business, and I hate owning my own business."

By thoroughly and honestly answering the questions in this article, you should be on your way to making a decision whether you can turn your hobby into a business.

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