How to Turn Your Hobby Into a Business

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Are you passionate about a particular craft or an expert on a specific topic? Are you thinking of turning your hobby into a business? You’ll be pleased to hear that personal interests make an excellent foundation for a career, as they drive and motivate you to succeed in numerous ways other than simply making a profit.

But to start a successful, lasting business, you still need to do your homework. Below, the UK’s leading company formation agent, Rapid Formations, will guide you through all the key considerations for turning your hobby into a business.

1. Try it as a side hustle

The best way to transition your hobby into a business is to try it out as a side hustle first. If you’re particularly risk-averse, this is a great way to get a taste of what the life of a business owner would be like without putting everything on the line.

Remember that having a side hustle means juggling your hobby and full-time job. This can be very time-consuming, so it could be tricky to manage if you have a demanding job or other commitments. But given that you can manage your time well, turning your hobby into a side hustle for the time being can help you determine if you’re ready to commit to being your own boss.

Tax implications

Running a side hustle means you have additional income (on top of your salary). If that income exceeds £1,000 a year, you’ll need to register for Self Assessment and file an annual tax return to HMRC.

2. Do your market research

You should conduct thorough market research before committing. This involves defining your target customer, assessing your competition, and determining which pricing strategy you should adopt. Some critical questions you should look to answer at this stage are:

• Is anyone else already doing what I’m doing?
• If so, what makes my business different? (Remember, it’s not just about the specific product or service you want to sell. Your underlying passion and knowledge will also set you apart from other companies).
• Who will want my product/service?
• How much are they willing to pay for it?

You should conduct a mixture of primary and secondary research to get a comprehensive picture of what it’s really like out there. Understanding these key elements will indicate how to enter your market effectively, capture your audiences, and influence repeat business.

3. Write a business plan

Turning a hobby into a business is incredibly exciting; you’re filled with optimism and drive to make money from doing what you love. But this excitement could make you lose sight of your commercial objectives. That’s why it’s essential to write a business plan.

Some of the key factors this document will get you to consider are how much money you’ll need to get started, how long you can survive without drawing a salary, and when you expect to profit.

And as much as you may not want to think about it, what if it doesn’t work out? You need a backup plan not just for yourself but also for future investors who will be interested in supporting your start-up.

Your business plan will combine all this information to show how viable it is to turn your hobby into a business.

4. Choose a business structure

When turning your hobby into a business, you’ll need to choose a suitable business structure. The most popular options in the UK are sole trader and limited company, both of which have pros and cons.

Sole traders, for instance, can start trading immediately. You do need to register for Self Assessment and file a tax return every year, but the administrative burden is minimal.

However, sole traders are also personally responsible for the entirety of the businesses’ finances, and they pay Income Tax on their profits, which could be as high as 45%.

Meanwhile, limited companies are separate legal entities whose owners are only financially responsible up to the nominal value of their shares in the company. Limited companies are also generally more tax efficient as they pay Corporation Tax instead, the rates of which are currently lower than Income Tax.

Although, limited companies involve a considerable amount of paperwork, such as submitting statutory filings and complying with strict directors’ duties.

Having said that, company formation agents like Rapid Formations offer a range of corporate services to help make running a compliant limited company easier. We can help you file your confirmation statement, appoint directors, issue shares, and more.

5. Secure start-up funding

Finding the money to launch and scale a business can be daunting, but you’re at an advantage when your business is your hobby, as you probably have a lot of the equipment already, so you won’t need as much funding.

For example, if you’re a photographer, you’ll have a camera and a tripod. You might even have a home studio.

You’ll likely still need some cash up front, perhaps to upgrade some tools, buy additional equipment, or secure a workspace. Here are a few ways you can find financial support:

• Apply for a loan or grant
• Start a crowdfunding campaign
• Bring an angel investor on board
• Ask friends and family
• Bring on a business partner
• Invest your own savings

6. Clarify your motivations

When a business is born out of love, it can be tricky to distinguish between love and what’s best for the organisation. As a result, your motivations could become unclear when there’s a tough decision to make (there will be plenty of these).

Let’s say you enjoy making sustainable scented candles and think each candle is worth £50. Will customers realistically pay £50 for a candle, or will the luxury price tag potentially deter them?

Your motives could blur if you become too passionate or too close to your business’s nature. So, remember to take a step back, seek external advice, and ensure your decisions are based on the right reason that promote your company’s success.

7. Keep your passion alive

Last but by no means least, remember to keep your passion for your hobby alive. After all, this is your core inspiration, and it’s what will make your brand unique. Understandably, that can be easier said than done when you lead a busy life as an entrepreneur. So, we recommend setting some basic boundaries.

For example, if you normally practice your hobby in the spare room, you might prefer to run your business from a different part of the house or a coworking space. This is a simple way to differentiate work from play, which can help you enjoy your new day job, keep your passion alive, and create a healthy work/life balance.

Ready to turn your hobby into a business?

There are certainly some potential challenges to think about if you’re considering turning your hobby into a business. However, we hope this guide has given you the confidence to take the plunge and enjoy the liberating reward of turning what you love into a career.