Working from home. It sounds great, doesn’t it? Doing something you really enjoy and earning money as you turn your hobby into a business.
The idea of starting up a business venture is certainly attractive to many, especially if it means they could eventually leave their day job. Generating an income while enjoying yourself is certainly a bonus.
In his book, “The Kitchen Table Entrepreneur,” Paul Power shares insights about converting a hobby into cash flow, stressing that the best way to begin is by starting small.
Many talented folks have dabbled in artistic endeavors such as photography, painting and pottery. Others may have a gift for music, gardening, home decor, crafting or quilting. The big question is, how might these interests and hobbies be turned into steady income? Don’t limit yourself to thinking of just selling products. While this could certainly be lucrative for some, teaching, training and conducting workshops would also be a great means to grow a business. Perhaps publishing a how-to book would be a good idea.
Power explains five basic ways to turn your hobby into a business. First, he suggests finding something you love. If you’re truly excited about a particular hobby, then you will likely find a passion and energy to keep motivated even when things seem a bit hectic. Next, consider self motivation and self reliance, Power writes.
As you consider your business opportunities, Power suggests looking for opportunity in everything. Often, hobbyists will limit their thinking to a fixed set of business opportunities and miss the big picture.
Power also recommends setting written goals. This practice can help maintain personal accountability to move forward with plans and timelines, keeping the entrepreneur’s eyes on the prize.
Finally, Power reminds that would-be entrepreneurs should not take rejection personally. It may often feel like there are many closed doors when starting up a business. Entrepreneurs need to keep a positive outlook and not be hurt by rejection or criticism. Negative feedback can be used to redefine or clarify how best to approach the business.
We have a few additional ideas worth considering. Starting small is smart, so don’t quit your day job quite yet. Understand that to grow any business, even if you’re quite talented and gifted, requires building something from the ground up. Be sure to register your business with the state (visit www.dol.wa.gov for more details), and also determine if you will be responsible for collecting and paying sales taxes.
Another important consideration is how the IRS will treat such a move. Hobbyists often will report losses as a result of their pseudo-business, generating losses that reduce taxable income. The IRS has rules (specifically, IRC Section 183) that limit losses to be used in offsetting profits for an individual. IRS Publication 535 is an excellent resource to help entrepreneurs learn about the tax rules related to claiming business expenses. In short, don’t turn your hobby into a business simply to avoid paying legitimate income taxes.
One local entrepreneur who turned his hobby into a business is Phil Ljunghammar, a photographer who has spent 36 years of his professional life in the printing business, specializing in prepress and plate making.
“My photography really started to take off when digital technology for cameras finally caught up with the software that I’d been working with in prepress,” he said.
Ljunghammar’s professional experience in design, layout and preparation for print work gave him a tremendous amount of expertise and competitive advantage with the emerging high-tech cameras. He purchased his first digital camera in 2004 and his first digital SLR in 2006. By 2009 he realized that his hobby was starting to generate a following, so he registered his business, developed a business website and began working from home.
Specializing in sports photography, along with weddings and special events, Ljunghammar is generating a respectable income while building his new business. And he’s still holding on to his day job. While not quite ready to retire, he sees this as a great opportunity to keep generating income well into the future.
Keep your business simple at the start. This will minimize your risk exposure and allow for easier course corrections. It’s the best way to develop and build a sustainable infrastructure. Most importantly, don’t let the new business venture rob you of the joy you experience from your hobby. According to Power, “Money and financial rewards should always take second place to the primary goal of working at something you really enjoy doing.”
Pat Sisneros is the vice president of college services at Everett Community College. Juergen Kneifel is an associate faculty in the EvCC Entrepreneurship program. Send comments to entrepreneurship@everettcc.edu.
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