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Last Updated on January 20, 2024 by Work In My Pajamas
While there is nothing better than making money doing what you love, there are several differences between a hobby and a business. Understanding these differences can help you turn something that you do for fun into something that you do with the expectation of making a profit.
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Develop a Business Plan
The first step in the process is to develop a business plan. It will tell you who your customers are, what you will sell to make money and how much you expect to make. It can also give you insight into projected cash flow and other issues that you may encounter.
Commit to a Regular Schedule
As your goal is to make money, you need to treat your hobby like a full-time job. This means getting up in the morning, choosing a particular area in the house to work at each day and otherwise following a standard routine. Make sure that when you are working, everyone in your family or social circle understands that you are working and unable to chat or catch an afternoon movie.
Make Sure to Earn a Profit
The IRS is unlikely to agree that your hobby is a business unless it makes a profit in three out of its first five years. Therefore, aim to finish in the black even if it means foregoing deductions to ensure that you get treated like a business. Doing so will also give yourself the confidence that you can succeed. When you do make a profit, don’t forget to declare it on your tax returns.
Fund Your Company
No company can exist without enough capital. At first, you may get money from friends or family. Other options include liquidating a 401k or turning to crowdfunding sites to launch a fundraiser. Business loans may also be available from banks or venture capitalists interested in helping your venture succeed. You can also find a same day business loan from online resources.
However, be wary that in many cases the process for securing business loans could be very lengthy and stressful. If you need money fast, you’ll want to do your research and find companies that offer business loans with quick pre-approval.
Have an Exit Strategy
You may decide to run your company for the rest of your life and let it dissolve upon your death. However, if this is not the case, determine ahead of time how and why you would leave your company to make it easier to train your successor or sell the company for as much as possible.
When you do what you love, it rarely feels like work. Therefore, your best business idea may be to turn your hobby into an actually company. If you treat it like a traditional job, there is no reason why you can’t be successful in your endeavor.
