You love your hobby, and you’re good at it. Family and friends tell you your stuff could sell easily, and you get excited to start a business.
Before you do, pause and ask yourself these questions.
1. Am I ready to put customer needs first?
Your family and friends have convinced you your hobby could be a small business or at least a paying side hustle. That’s great. But turning a hobby into a viable business requires people beyond your circle who need what you produce.
Find out who else would buy your product. Ask beyond your close-knit circle. You could do a poll on Facebook and ask your friends to share it with their friends to get more responses. You can ask your acquaintances what they think. Include questions about what price they would be willing to pay.
If people say they would buy your item or service (at a price that covers cost plus profit), the next thing to consider is are you willing to turn your hobby into your career/job?
Is this something you can see yourself doing every day? Will you be able to meet deadlines and demand?
2. Do I really have the time?
This one takes consideration beyond just having a couple of hours a day to spend on your business. How you plan to do business will determine the time you need to commit.
For instance, if you are selling online, you need to use social media to get people to your online store. That means you will need to post once a day to build a following. It takes time to take photos of your products, write high-quality descriptions with keywords, and plan your posts.
Unless you become an overnight online sensation, expect to commit time to gradually growing your business to have regular customers.
Next, you will need to consider the time to package and ship the product. Trips to the post office or UPS add up, time-wise.
The alternative is to make products and place them in a store or at a booth in a consignment shop, marketplace, or farmers market. In which case, you don’t have to do as much to drive traffic, lessening your time commitment.
The tradeoff is that you will pay for the space or services. Each spot may have different pricing structures. Some charge 20% of the sale, and some charge a monthly fee that you pay whether you have any sales or not.
Bottom line, be realistic about the time it will take to manage this as a business. Think about marketing, making, bookkeeping, and customer service.
3. Do I have the funds to support business activities?
Most people who turn a hobby into a business have the tools and equipment they need. However, a business will have other expenses.
You will require more supplies to make more of what you make. The costs of licenses and fees for starting a business in Arkansas can range from $50-$350, depending on some of the organizational choices you make. You may need to create a website or use an online platform, which has a cost to it.
If you can launch the business out of your own funds, then you start by not owing anyone. If you get a business loan or take on an investor, then you need to be sure you can sell enough to pay the loan or help the investor gain profit.
Typically, it can be difficult for startup businesses to get funding in the first year. To apply for a business loan, you will need a solid business plan. I highly recommend asking ASBTDC for assistance learning how to put together a high-quality business plan.
In addition to the business plan, be prepared to talk with a lender about your credit score, required collateral, and your budget.
Most lenders want you to come to the table with 10-20% of the project cost in cash. They also want collateral to back the loan and expect a credit score on the high side of the “good” range.
Some people apply for grants to get their business started, but this is the slow, hard way to go about funding for a small business. Most grants are reserved for non-profits, advanced technology or medical applications or educational purposes. It is rare to get a grant for a for-profit small business startup.
4. Am I prepared to start and run a business?
Prepare to start your business ahead of starting your business!
I recommend meeting with a business consultant at ASBTDC to be sure you are prepared. Your consultant can walk you through all the things to consider before opening the business. We can help you:
- Set realistic goals
- Get to know who your ideal customer is and the best way to get in touch with them
- Plan your finances and budget
- Think about the operational decisions for your business.
Before opening, you also need to consider business insurance, how and when customers will pay you, what your hours of operation will be, and how you will do bookkeeping for your business.
Your Next Move
Now that you have taken the quiz, are you ready to move forward?
You may feel nervous or excited to start a business. Either way, changing your mindset from hobbyist to business owner is challenging.
Be prepared to learn more about pricing, wholesale purchasing your supplies, profit margins, profit and loss, and more. Your new habit will become one of asking yourself, “Is this activity wasting time or leading to making a profit?”
The Arkansas Small Business and Technology Development Center is here to help, with no-cost consulting and resources. To get started, sign up now.