How can you make money from your hobby?
You will learn
- How you can find out if there's a market for your business
- What legalities and paperwork you need to complete
- How to price your products or services
In this article, we’re going to help you understand some of the practical steps you’d need to take in order to get yourself set up in business.
Finding your market
It’s not a good idea to jump into a business if you don’t know that there’s a market willing to spend money on your product or service. You’ll need to spend some time focusing on who your target market is going to be. It’s all well and good selling a few things to your friends and family, but now you’re thinking with a business mind-set, you need to expand and reach a lot more people. When you’re considering who will want your product or service, you need to think about what problem you’re solving. Once you know that, you can look for the people who have that problem build your target market around them.
That’s not necessarily enough to make a great business though, you need to get out there and test your product. Gather together a group of your intended customers and offer them a sample of what you do best. You can then get their feedback on the quality of what you have to offer and gain a better idea of whether your business will work or whether it’s better to keep your hobby as something for pleasure.
Writing a business plan
Once you know you’ve got a viable market, you’ll need to sit down and write a business plan to help you understand exactly what you want from your business and give an idea of how you’re going to achieve success. Writing your business plan can be a great way of highlighting in your own mind where your strengths are and where there are gaps in your knowledge and experience too, so you can see where you might need help and where you can go it alone.
In your business plan, you should include things like: a business overview, your business objectives and goals, what products and services you’ll provide, who you might work with or employ to help you, where your market is, where you’ll work from, and how you’re going to finance yourself while you’re starting out.
Deciding on a business structure
Knowing what type of business you’re going to run is very important, especially in the early stages. You’ll need to figure out if you can go it alone as a sole trader and if being self-employed is the right move for you, or whether you’ll need a business model that will involve people who might have more business experience than yourself that you can benefit from. You could start a partnership and share the ownership of your new business, or a limited liability partnership which avoids the personal liability for any debts that might stack up.
Learning the law
When you go into business, there are a lot of legal considerations that you have to keep in mind. There are product and service standards that you’ll need to comply with and you’ll need to make sure you register your business and pay the right taxes.
You’ll also need to take some time to understand and set out what the terms and conditions are for your business as failure to do so can have a negative impact on your cash flow. In your terms and conditions, consider:
- A clear definition of what products or services you’ll provide
- What your payment terms are
- If you’ll offer guarantees or warrantees
- Timelines for delivery and queries
- Specifying what happens if either party doesn’t deliver
- Which laws will govern your business contracts (especially if you’re going international with your business)
HMRC have a lot of support available to help you keep your business compliant and we’ve got a handy guide to regulations that you can download for free to give you an idea of how to stay legal with your business.
Finding your workspace
You’ll need to make sure that you’ve got the space you need to be able to run your business. If you want to make a business out of selling cakes, it’s unlikely that your home kitchen will have enough space to handle your business cooking as well as your day-to-day. You’ll need to consider your space and decide whether you can continue working from home or whether you’ll need to rent some space to be able to work efficiently.
Knowing how to price
Many people often struggle with knowing how to price their product or service when they first start out. Price too high and nobody will buy from you, too low and you won’t cover your expenditure and customers might think you’re of a lesser standard. Get familiar with the market you want to get into, research what other businesses are charging and match your prices with theirs.
Spreading the word
Now that you know what you want from your business and have conducted your market research and know you have a viable business, it’s time to attract your first customers. For this, you’ll need to choose what marketing techniques are going to be best for your business. Are you going to advertise on social media or is it better to go door-to-door and gather interest that way? You’ll also want to think about what your advertising budget is going to be, as that will have a big impact on what marketing methods you use.