How Do You Turn Your Hobby into a Business?

Di Crawford Errington Author

Before you start a hobby business, discover key tips on planning, marketing, and avoiding common startup mistakes.

Previously published May 20th 2021

Do you have a passion you are thinking about turning into a paying gig? Have you always dreamed of doing what you love and making a living from it?

We have shared some steps that we believe will help you avoid some common mistakes as you set out to earn an income from your favourite pastime.

Do you have what it takes?

Unless you’ve run a business before, it’s easy to get carried away with the idea of how perfect it will be to get paid for doing what you love. Reality check: the stress of needing to earn an income from your hobby can quickly take all the pleasure out of it.

Running a successful business isn’t all hobby indulgence. Unless you can afford to hire someone to take care of the bookkeeping, marketing and sales, expect to spend a lot of hours on necessary tasks completely unrelated to your true passion.

Before you start investing in your hobby-to-business idea, have a think about whether running a business is right for you. We recommend you chat to a professional as well, as they can ask the right questions and ensure you have thought about everything you need to know.

Here we share some tips we put together to help you understand what you need to think about when starting a business. This will set you on the right track and ensure you have all the information on hand.

Do your market research

If you’ve been gifted with the entrepreneurial spirit, you’re ahead of the game. It’s definitely a plus to be able to combine business know-how with your passion.

The question is, will people pay you for your great idea. If you love to garden, for instance, who will buy your herb garden kids, custom flower arrangements, or green thumb e-books?

One of the biggest mistakes home-based solopreneurs make is not doing their market research.

In a nutshell, market research is the process of:

• identifying potential markets

• understanding what your customers most want and need

• matching up your products and services to those needs

• examining the competition and

• creating a marketing plan.

As a pro tip, focus your efforts on a niche that isn’t currently being filled to increase your chances of success. You’ll minimize the competition and cut out unprofitable possibilities by creating a must-have solution designed for a highly specific customer.

Strategic marketing ideas

If you’re just starting up, odds are you’ll be running your business on a shoestring. You’ll need to be very selective about how you spend your marketing dollars—which is why it’s so important to know exactly who your customers are off the bat. Then it’s all a matter of making it as easy as possible for those people to find you. 

A website and social media presence are essential for any small business. Consider craft fairs and trade shows, sponsoring a community event, joining a local business association, or partnering up with a compatible business as low-cost ways to get the word out.

Business Ownership versus Self Employment

There is a BIG difference between being employed, and being self employed. Have you thought about what that means for you and your situation?

Being employed means:

• guaranteed pay every payday

• your boss looks after your tax due to Inland Revenue and files the relevant returns

• your boss pays your ACC levies, kiwisaver etc on your behalf

• your boss provides training opportunities

• your boss covers your annual holidays and pays you if you are sick

Being self employed means:

• your income fluctuates and depends on how often you invoice and what your terms of trade are

• you file your own returns and pay your own tax

• you pay your own ACC levies

• you don’t get the Kiwisaver top up from your employer and you have to pay your own levies

• you cover the cost of any training

• you have to budget your money to ensure you have enough to cover your personal expenses (like rent or mortgages) when you take leave.

There are strategies that can be put in place to cover the risks of money fluctuations and cover put in place for injuries or sickness. Working with a business advisor can ensure you are on the right path to success when starting a business.

Final thoughts

If turning your hobby into a business seems right for you, test the waters for six months to a year before diving in. Running a small, no-pressure side business at first will show you whether your idea has the potential to become a sustainable full time business—before you quit your day job and invest all your savings.

Drafting a simple one page business plan before early on is a great way to help you think through and evaluate your idea, step by step, as you set goals and identify strategies to achieve them.

Business planning may seem like a lot of work for a small part time business venture, but unless you have a road map, how will you know when you’ve achieved your benchmark for success?