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How to turn your hobby into a successful business
Thursday March 31, 6:00 am ET
Jenny McCune
From hobby to business sounds like a dream come true: Do what you love and get paid for it. The recreational skier becomes an instructor. The quilt maker quits her day job to sell hand-stitched coverlets. The gourmet turns food caterer.
But that dream can become a nightmare if you're not careful. Before you quit your day job, check out these six steps to help turn your hobby into a career:
Step 1: Research your market
Step 2: Create a business plan
Step 3: Take stock of your business sense
Step 4: Be realistic about how it will affect your life
Step 5: Decide how committed you want to be
Step 6: Find an innovative business angle
Step 1: Research your business idea.
You have to determine whether you can make money by turning your hobby into a business. Start by answering these questions:
Will someone pay me for my product or service?
If so, will a buyer pay enough so I can make a profit?
Will enough people buy my product or service so that I can make a living?
Is there an economical way to distribute and sell my product or service?
To answer those questions, do market research. Use sources such as your public library and the Internet. Quiz fellow hobbyists about your idea. If you have the funds, hire a consultant. Talk to would-be mentors or take a course to help determine if this is the right move for you.
In the case of fine-food lover Mary McCarthy, founder and CEO of Tutta California, a producer of California-produced olive oil and cabernet wine vinegar, she took a course in sensory evaluation of olive oil at a local university. In addition to learning about her topic, she also quizzed her professor about her business idea. Based on those discussions as well as many industry players, McCarthy found that small boutique players dominate the U.S. domestic olive oil industry. There was plenty of room for her company to become the first national producer of olive oil in the United States.
Step 2: Create a business plan.
A good way to get a sense of whether you have a money-making business proposition on your hands is to draw up a business plan and financial forecasts for the next five years, says Bob Klein, a Newport Beach, Calif., certified public accountant and certified financial planner. There are books on the subject or hire a business consultant to advise you.
Here is what your number crunching should tell you:
What sort of capital do I need to start the business?
When can I expect to make a profit?
How much income can I expect within a year, two years and up to five years down the road?
"You have to figure out how much you'll be spending to produce this hobby or item or whatever, what you can sell it for, and how much time is involved," sums up Janet Attard, found of the Business Know-How Small Business Resource Center on the Internet.
Don't do you homework and you could find yourself losing rather than making money. Stephen Fairley, for example, found that Entrepreneur magazine rated personal coaching as one of the fastest growing forms of self-employment. That sounded promising, but in researching his own book, "Getting Started in Personal and Executive Coaching," Fairley learned that 73 percent of all coaches make less than $10,000 in their first year and that 53 percent of all coaches make less than $20,000 a year.
That didn't dissuade Fairley from coaching, but it did show him that anybody going into coaching had to find a way to make more money than the average coach. Fairley's method for boosting his profits: coaching coaches and writing books.
Step 3: Take stock of your business sense.
In addition to doing strict statistical research, you also need to look inward and take stock of your own abilities:
Do you have what it takes to run a business?
Can you have your business and the lifestyle you want?
Will you still love your hobby when it's a business?
"Many times we love to do something, but that doesn't mean we love the process we have to go through to enable us to do that thing and make money," says Leslie Ungar, executive coach and founder of Electric Impulse Inc./Igniting Careers in Akron, Ohio.
For example, you may love practicing yoga and have the skills to be a great yoga teacher, but if you don't like selling -- placing advertisements, convincing people to take your classes, glad-handing at trade shows -- then yoga should probably remain your hobby.
"You may love your hobby, but ask yourself if you will love the marketing you will need to do to enable you to 'do' your hobby?" Ungar asks.
Ungar also reminds would-be entrepreneurs that when a hobby becomes a business, the approach to the activity changes. "Will it still be a passion when you have to work at it?" she asks.
A bike-frame manufacturer learned such a lesson. All went well until he decided to open a bicycle store. While he loved designing and crafting bike frames, he hated managing people at the store and dealing with retail customers. Two years after the store opened, the entrepreneur closed the doors to again focus strictly on manufacturing. "I've never seen him happier," says a friend.
Step 4: Be realistic about how it will affect your life.
You also have to consider what impact your entrepreneurial venture will have on your family. Keep in mind that to turn a hobby into a business requires a lot of work, including late nights and weekends.
"You have to do a lot of soul searching before you go ahead," says Klein, who also is president of Designing Your Financial Future. "What effect will having a business have on your family and your long-term financial goals? Does it really make sense?"
If you have small children who require a lot of care and attention, you might want to reconsider plans to become an entrepreneur. But if your children are grown and you're close to retirement, now may be the perfect time to start your own business.
Similarly, if your spouse has a steady job it may makes sense for you to dabble with turning your hobby into a business. But if you're the family's sole wage earner, taking the entrepreneurial route could be a road to disaster.
Step 5: Decide how committed you want to be.
The answers you arrive at in Step 4 will in large part determine whether you turn your hobby into a full-time business or make it a part-time venture. Either choice has pros and cons.
The advantage of going full-throttle is that you've got a powerful incentive to succeed and you'll be able to devote the time necessary to allow your venture to grow. A part-time venture, by contrast, may never really succeed because you're not allocating enough time and resources to it, says CPA Klein.
The disadvantage of chucking it all for a new business is that you have no parachute. If your business dream takes flight, fine. If it crashes, you're going down with it.
Starting off slow by keeping your job and starting a business part-time can help reduce the amount of capital necessary. Your exposure is also less; if your business fails, you still have steady income from your other job.
Step 6: Find an innovative business angle.
Once you get (or give yourself) the green light to turn your hobby into a business, you have to figure out the twist that will turn recreation into income.
"Just because a hobby is fun doesn't mean they'll pay you to do it," says Chris Cameron, a train collector who turned his passion into a business. "One obvious thing I could have done was buy a bunch of trains and sell them. Not a good idea. You collect what you love and sell what you hate."
So instead merely selling model trains, Cameron found an unmet need. Hobbyists want to know how much train sets and their parts are selling for; pricing can fluctuate widely and it was nearly impossible for people to keep track on their own. Cameron, who knows something about software programming, found a partner and they designed a program that tracks pricing in the model train market.
Ways to transform a hobby into a profitable business include:
Solve a problem. Amateur guitar players have to learn chords and scales. Chords are relatively easy to learn. Scales require fingering, a difficult and time-consuming skill to master. So Rusty Shaffer, guitar player and inventor, created a computer-powered guitar that fingers the instrument for learning players. He now sells his invention through his business, Optek Music Systems of New Hampshire.
Teach others. Almost any hobby, from mahjong to martial arts, can be taught in classes for which can charge.
Sell the raw materials. Suzanne Colon and Cameron Hildreth love knitting. Lucky for them, it's a hobby that's been gaining in popularity. (Last year, reports the Washington Post, Americans spent an estimated $450 million on yarn and other knitting essentials up from $400 million from five years ago.) So Colon and Hildreth opened Stix, a Bozeman, Mont., store where other knitters and crocheters gather to exchange tips, take classes or buy fine yarns. Although Stix is an actual retail location, don't overlook the possibility of selling your hobby's essential materials via an Internet shop.
Expand into related services. Charlotte Reed owns Two Dogs & A Goat Inc., a pet care service in Manhattan and Hampton, Long Island. If Reed operated solely as an individual dog walker, she probably wouldn't be making enough money to suit her. But her pet-care empire offers dog walking, exercise programs, grooming, training and sitting services for dogs, cats, birds, fish and other small animals.
Train enthusiast Cameron compares a successful hobby-based business to a military operation. "It's like the Marines," he says. "They improve, adapt and overcome. You have to do the same with your hobby-turned-business."
