When Does a Hobby Become a Business?

While checking out some of the industry groups and lists I participate in, I found this question posed by Ellen:

When do/did you start seeing a (your) hobby business as a ‘real’ business, and is that different from us shop-owners and the rest of the world?

An interesting question to ponder when starting out in a crafting  or product venue that you would like to take to the next level.  There were several answers that I would like to share here:

 You will feel the charge of energy; your friends will see that change in you. They will know you are serious and you mean business!! If they get in your way, step around them! –Vicki

WOW!  Great answer!  Can this charge of energy also be inspiration, drive or direction?  Do you feel the “charge of energy” in your business?When does a Hobby Become a Business?

…I have also come to learn that transferring a “hobby” to “business” really starts with attitude. Not to diminish all the other hard facts about selling and making money – we all would like to make money. But when our attitude changes from hobby-ist to business person others will see the difference as well. Your decisions will be different and the energy builds from that change. I believe that “WE” have to believe it first before others will believe it. Sometimes that is the hardest part. – Sandie

Another great answer!  Attitude seems to be a big part of everything we do!  What is your attitude about your business?

Both the above answers deal with the internal feelings around your hobby turning to business.  But how about the external circumstances?

When does a hobby become a business? When the following happens:

  • You make money or a profit on what you are producing.  In other words, you know your costs and are pricing your products appropriately to earn a profit.
  • You produce items that your customer want at retail fairs etc. rather than making only what you like.  You HAVE to make what is in demand!  I managed a Woodcraft consignment store in the 90’s and it would frustrate when I found a product that really sold only to have the producer tell me they didn’t want to make any more of those because they did not like them!
  • You start looking at your costs to see what is making you money and cutting what is not.  Culling poor sellers to focus on good selling items is a skill any business person needs to learn and implement!
  • You begin to view marketing your products as an critical component in your business. What, you say, I am a craftsman!  Well, maybe so, but if you are not a marketer, you will either need to learn to be one or hire someone to do that for you.  Without a website, Facebook Fan Page, brochures and flyers, business cards …. you are just a hobbyist!

In conclusion, Hillary added the following comments:

After you have gone through the steps Sandy outlined:

* determine your business identity (sole proprietorship, LLC, etc)
* register your business according to local and state law (and federal if choosing to incorporate)
* open a business checking account
* apply and receive a state resale certificate, if applicable
* file appropriate income tax returns

There may be a few more minor details depending on where you are. Basically, when you do the “legal” stuff, you become a business and not just a hobby.

So where is your business going?  Or are you just a hobbyist trying to be a business?

Source:  Arts & Craft Community on LinkedIn

If you are on LinkedIn, join my group:  Selling Wholesale to Gift Shops

4 comments for “When Does a Hobby Become a Business?

  1. May 2, 2012 at 8:11 am

    *blush* You just made my day! You’ve honored me and I thank you Sandy!

  2. May 2, 2012 at 8:58 am

    Well Hilary, you honored all of us with your good advice! I just spread in around!!

    Sandy

  3. May 16, 2012 at 9:47 am

    Thanks Hilary and Sandy,

    This gives me even more drive to get enough inventory made to really get going.

    Sharon

  4. May 16, 2012 at 10:19 am

    Wonderful Sharon! I am happy to see that the post was helpful to you!

    Sandy

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