14/01/2021
Is it a Hobby or a Business?
Often, you've heard or received advice saying you should find something you are passionate about "and you won't work another day in your life." (I once lived in this light) But if you follow that advice, are you living your hobby or running a business? not every business is run full-time, or for-profit. And not every hobby allows you to make money but when you start making money from a side hustle, it can become difficult to separate what was originally a hobby from the makings of an actual business.
Q: What Is Considered to Be A Hobby?
A hobby can be said to be something that can probably go away without drastically impacting your lifestyle or income. You could be working full-time on it-it could even be paying your bills and it still might be a hobby and not a business.
And if what you have is a hobby, it's perfectly OK to be where you are now. Things evolve. You can be passionate about a hobby now and turn it into a business later, and you'll have fun doing something every day that will support you and your family.
Next Q: What's Considered to Be A Business?
A business is something that requires more skin in the game. You may have put your savings, sold your inheritance, or borrowed money from a bank, friend or family member into it. You have a vested interest in making sure it works. But if you go treating it like a hobby, you're only increasing your level of risk.
How to Turn A Hobby into A Business
If you have been investing in your hobby to make a profit or grow your footprint, it's time to decide if you want to turn it into an official business.
But without a firm plan in place, or a roadmap for where you hope to take it can quickly cause your investments a big loss.
But if you do find yourself spending more and more time on that money-making hobby, here’s how to convert it into a small business.
1. SET GOALS
If you’ve likely been working on this hobby for a while and know what you want from it, it’s time to turn those ideas, desires, and wants into actionable goals. Before then it is necessary you ask yourself these questions:
• What do you hope to accomplish?
• What does success look like?
• Who is involved?
• What resources do you need?
Are you wanting to make enough to quit your job? Looking to pursue a passion project? Do you want to run a business with friends and family?
Answering the above questions will help to kickstart the critical thinking necessary to get your business off the ground. And they serve as the first step in developing SMART Goals, which can help ensure that you actually develop strategic steps to make your fledgling business a success.
2. CREATE A LEAN BUSINESS PLAN
Establishing goals also opens the door to develop a Lean Business Plan (a lean business plan is a streamlined core plan for running a business, not a document or detailed plan, full of descriptions, to be presented to investors or lenders. The aim of a lean business plan is to optimize management). Writing a Lean Plan is the perfect process for those turning a hobby into an actual business. It’s quick and easy to complete, flexible, and doesn’t require you to develop every section of a traditional business plan if you don’t need it.
Since you already have a product or service offering, the Lean Plan helps you outline how that will function as a business. It forces you to consolidate it into a business identity while considering the market you’re entering, potential competitors, and what expenses, revenue streams, and milestones you need to hit.
You’re early on in your business career so don’t worry about getting it all perfectly from the start. The beauty of a Lean Plan is that it’s meant to start as a brief outline of what you expect. You can always come back later to refine and adapt it.
Here’s what a lean business plan includes.
(Aside: the principles apply to every business plan. Fight the fallacy of the formal plan. Start lean. Make it formal only when needed.)
1. STRATEGY
Who you are, what you do, and for whom you do it. Ideally, the smaller your business, the more focused. Maybe you keep it in your head, always — and lots of us do that — but maybe you write it down. Simple bullet points. Just reminders.
Planning outside of strategy is a waste of time.
I like IMO: Identity, who you are; Market, whom you reach; and Offering, your product or service (what you sell).
But don’t sweat IMO or any strategic framework too much. Strategy is focus. It’s as much what you’re not doing, whom you’re not reaching, as what you are doing and whom you reach.
2. TACTICS
Strategy without tactics is just puffery. Keep your strategy in mind — your focus, what you are and aren’t doing, for whom — as you develop specific action plans filled with tactics that make strategy matter. This is all about ex*****on.
Marketing tactics: Target market, differentiators, positioning, messaging, pricing, channels, online presence, engagement, content, sales structure, and all the old-fashioned marketing mix stuff like advertising, public relations, special promotions, and so forth.
Offering (product or service) tactics: launch dates, feature sets, packaging, product lines and options, apps, menu items, Stock Keeping Units (SKUs), services, website, technology, vendors, delivery options, and so forth.
Financial (and admin and infrastructure) tactics: Funding and financing, hiring and recruiting, training, policy, and so forth.
And don’t think of all this as a document. At least, not yet. Early on, it’s a matter of form following function; you keep it in bullet points, maybe orderly sections, but none of these plans are independent of all the others.
Do think about strategic alignment. What you do with your tactics should flow from your strategy.
And what this means, specifically, is that you think all these factors through, and set down some plans, in writing but not fancy text, just bullets, so you can get back to them at least once a month to see how you’re doing. It might even be a bit like the classic business plan, covering topics like pricing and distribution — except that you do it for yourself. Keep it just big enough to run the business.
To be continued…
