You love baking and your friends say you make the best cupcakes in the world. ‘You should sell this!’ they say—and your mind starts whirring. Maybe you can turn your hobby into a business. Maybe you can make loads of money doing something that you love.
But this is a major decision. A hobby is fun; a business, however, is inherently risky and will take hours of your time. You’ll also be caught up in tasks that have nothing to do with cupcakes or baking: marketing, sales, logistics. Are you ready for that? Here are some questions to help you decide whether you should mix business with pleasure.
1. Who’s my competition?
You may be good at your hobby, but so are many other people. Can you honestly say that your work reaches ‘professional’ standard? Check what your potential competitors are doing. Can you offer the same quality—consistently, and profitably? Skill is one factor, but so is speed. You’ll need to maintain a certain volume in order to build a wide customer base and meet quotas.
Plus, what’s your unique selling proposition, or the one quality that sets you apart from other competitors and gives the customers a reason to buy your product over theirs. Let’s say you like baking. Will you be offering these at a cheaper price? Decorating them in a special way? Using flavors they can’t find anywhere else?
2. Do you have an entrepreneur’s mindset?
Running a business takes its own set of skills and personality traits: being organized and methodical, self-driven and disciplined, calm and composed under pressure. You’ll also have to devote some of your time to networking, dealing with clients, negotiating with suppliers, charming investors, and (if the business grows) managing a staff. So people skills and communication skills are very important.
Of course, you can always develop these traits—if you’re willing. But the point is that you aren’t just going to ‘making stuff,’ you’ll also be running a company. It’s one thing to make beautiful candles. It’s another to deal with a rush order for 1,000 pieces that needs to be shipped to another state, and then figure out what to do when your favorite supplier tells you that he’s all out of the materials you need.
3. How big is your market, and how will you reach them?
Will you be selling to your local community? Are there enough people who will want your product? Or will you be selling through a third party, or through an online store?
Each option has its own pros and cons, and required distribution, logistics, and payment system. It’s important to think this through, and consider the time and money it will take to reach your customer, deliver the products, and collect on the sale.
4. What’s your financial risk?
Obviously, you’ll have to put up some kind of capital, but that’s not the only thing you need to look out for. Do you have a ‘safety net’ to get you through the lean months? It may take a while for the customers to come in, and even if they do, many businesses have slow sales periods.
Will you need to quit your job to run the business well? Aside from the monthly salary, what benefits will you lose (like insurance and health care)? Look at your personal budget and see how this will impact your expenses, lifestyle, and life goals. You may say, ‘I’ll try to run a business and work at the same time!’ Then ask if that’s realistic. Do you need to simplify your business model, or lower your volume, or hire somebody else to handle the business operations? Given all of that, will you still get a good revenue on the business?
All of that has an impact on profit margin and daily overhead – and part of the important considerations before starting a business. Is it worth it?
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