Following on from our overview of how to monetize your hobby, let’s look in more depth at the first step in how to turn your hobby into a business: the Business Plan.
So, you’ve decided to start your own business! Yippee! You’ve weighed the risks and decided this fits your flexible life goals, will provide a challenge and ultimately – financially rewarding.
Turn your hobby into a business: overview
How many times have you heard the phrase “work with what you love and you won’t have to work a day”? Taking charge of your professional life can have many advantages, as you will have more time to devote to yourself and your loved ones. In addition, it also gives the opportunity to see that life goes far beyond a stressful office, even if it sometimes means having a lower income in the beginning .
Turning your hobby into a business can be quite profitable, but it’s important to be careful. You need to study and plan when taking an undertaking to reduce risks, not lose money or leave a stable job for nothing. Find out how to implement your idea the right way to avoid taking risks.
Analyze the risks
The first thing to do is to understand all the challenges you will face at the beginning of the project. It is important to have alternative plans to support you in case of problems that may arise. A good example of this is calculating how much will be invested in the business and how much will be saved so as not to be helpless if things go wrong.
It is also very important to analyze if you are prepared to work with your hobby, as once it becomes your source of income it will be an integral part of your life and you will need to dedicate yourself deeply to it. Make a list of the pros and cons of starting your own business and leaving your current job to see if it’s worth leaving a steady salary and taking a risk in the market.
Research the market
Assess the size of the market, what is the acceptance of your product and if there is any type of sales seasonality. For example, if your hobby is working with candy, there is a peak in sales around Easter and Christmas.
Observe the target audience for your product or service and the possible competition you will encounter. If possible, survey potential customers to understand how your audience works and how you can win them over. With this, you find a sales price positioning according to the characteristics of your product and its differentials.
Check the profitability potential
Once you have done a market analysis and established values for your product, make a profitability analysis of your hobby to plan your future financially.
Conduct a study to find out how much you must sell to reach your monthly income goal . It is important to consider the best and worst scenarios in this analysis, because you need to know how much you will be able to earn in case your sales are not maximized in a period.
Structure your business plan (see detailed section below)
After market studies and risk analysis, the ideal is that you put together a plan to prepare yourself financially and start your business. Also, always keep in mind that getting started can be difficult and bring in less income than your current job.
The business plan should be simple: make a five-year plan and see how much you will need to spend to invest. Take the risks , believe that your hobby will work and don’t be discouraged by the difficulties.
Find experienced mentors
Knowing stories of people who dropped everything to follow their passion may be the best way to understand that not everything will be a flower on your journey. You can learn many things watching the trajectories, difficulties and achievements of those who turned their hobby into a business. This knowledge can guide you through the difficult moments of your decision.
Also, always be willing to listen to the opinions of those around you, especially if they understand the current economic situation. But absorb only useful information, as often, due to worry and fear, it can end up influencing you in a negative way.
Use social media
The internet is a very powerful tool when selling your products and comes with the advantage of, in most cases, having a low investment cost. So enjoy! Set up a Facebook page, an Instagram account and a Twitter account. Post photos of everything you produce, with descriptive information and, if possible, your values. Intersperse with other interesting facts and information for your audience, so your profile does not get tiring. Also, ask your friends to share your posts so your business can gain reach and visibility from others.
Also keep in your accounts all the information possible for people to contact you, such as phone, cell phone, WhatsApp, email and links to other social networks.
Have a sales channel
In addition to social networks, if you sell a product, the ideal is to have a virtual store to better disseminate your business. An e-commerce gives an impression of quality and trust.
Also define how deliveries will be made. You can use the services of carriers, postal service, couriers (if the final destination is close) or picking up the product at your place of work. Offer alternatives to customers, as this helps in loyalty.
Learn about business management
It is essential to seek a knowledge base in business management. Studying in this area will give you the basis to correctly manage your time and your business investment. There are undergraduate courses for this learning, but if this option is not viable, the option is to be self-taught. Immerse yourself in texts and video lessons to learn the best management habits.
It is important to analyze all the risks and difficulties that will be faced during the process of starting your own business, even if the investment is in your passion. Think through all the possibilities and be prepared to activate alternative plans in case something goes wrong.
However, always believe in the potential of your product or service and don’t be discouraged in the initial phase, when the project is still not giving the expected return. Remember that even if a business is less profitable, it can be more beneficial if it brings more quality of life and more time for you and your family.
The business plan to turn your hobby into a business
Whether you’re starting from scratch to turn your hobby into a business or buying a business or franchise, a lot of thought and planning needs to go into it before you can hope to make it successful. One very necessary tool that can help you cover your bases before you take the plunge and leave that reliable bi-weekly pay check, is a business plan.
So have you got a business plan in place?
Remember that a solid plan helps you start off strong to turn your hobby into a business and ensures you stay that way, and is one of the first things you should do. You may think it’s a total waste of time, but I can assure you, if done properly will make you consider things you had never thought of.
Technically, a business plan is a written statement of business goals, the reasons why they are attainable, and the plan for reaching those goals. Practically, if you are wanting to start your own business, it is very important to go through the business plan process. It will help strengthen your new business idea, expose any weak links or show you how it just will not work. All of these things are very important to know “before” you start your business–not after you are committed.
There is heaps of help on this but remember a business plan is written for different reasons – so think about whom you are writing for (equity lender, debt lender or planning tool for the business), and make sure you get the message across. Work out your objectives and strategies to turn your hobby into a business first, before you tackle the business plan. Your objectives should be specific, concrete and measurable. Your strategies should provide insight into how you will achieve the objectives.
The business plan should include qualitative and quantitative elements, and should be realistic when making projections. Let’s be honest – we all want to be bigger than Ben Herr, but … we also have so many hours in a day, and juggling many responsibilities already. Underestimate your revenues and overestimate your expenses to turn your hobby into a business!
If the numbers in your estimates show you that realistically there is no chance of a profit at a competitive price that people are willing to pay then you need to re-think the concept. At a minimum include cash flow forecasts for the next 36 months, and you should definitely include break even cost analysis and a comparison to industry benchmarks and ratios to ensure your assumptions are correct. A solid marketing strategy in the business plan is critical – who is your target market, how many competitors, market trends, seasonal fluctuations (think swimming pool company or a lawn moving business)
Some tips to write a good business planto turn your hobby into a business
- Arrange it logically with a table of contents, an executive summary and the chapters in a meaningful order
- Keep it the clear and concise and professional looking (use infographics, graphs, photos etc) ideally no more than 15 to 30 pages with attachments. Remember the age old adage KISS!
- Describe the objectives and strategies to achieve the vision and what the expected achievements will be for the next 3 to 7 years.
- Prove the marketability of its products or services using verifiable data – (ie) who is your market, and explain how your products or services will benefit your target market (ie) what gap in the market do you fill, or how do you do it better than the rest? What is your value add?. Financially justify how it will sell its products or services.
- In the case of product(s), explain product development, manufacturing processes and associated costs.
- The people behind the business need to be shown to have the necessary managing experience and complimentary business skills.
- Create believable financial projections with key data explained and well documented.
- Be able to orally present this business plan in an easily and concisely explainable, well-orchestrated manner.
Once complete, the business plan is something you should refer to often and update and change frequently to meet the changing environment of your business.
Conclusion
Remember, business plans are not just for start-up ventures to turn your hobby into a business. They can also be very useful to existing companies that are expanding, needing additional funding or adding a new product line. Happy planning!