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David Tattersall gives some advice on how to turn your hobby into a profitable business.
Is it too soon? Will the business be profitable? Where do I start? As with any business venture, it takes months of careful planning, strategic testing and a sharp eye to spot a gap in the market. In the process of turning your hobby into a paid reality, you may find yourself self-doubting, criticising and fighting the inward battle of answering the same questions again and again. David Tattersall of Handpicked Accountants, an accountancy matching platform, compiles a realistic guide to turning your hobby into a serious, profitable business.
The first step as with any new business is to trial the service to ensure that it delivers on its promise. In hypothetical terms, the business model may seem airtight, but putting it into practice from paper gives it the real stress test it requires to become successful. This will help identify where the service on offer needs fine-tuning and developing.
Delivering the service to prospective clients on a test basis to gauge true customer feedback is a high requirement in the early stages of business development. It’s important to note that by integrating customers into this process, you will reduce any possible hiccups later down the line.
As a determined hobbyist, your passion, skill and drive to creatively succeed are key motivators. If customers have offered payment for your end product, it may be a sign that consumers would be willing to pay your service as they see the value. A key indicator that it may be time to officially mark your hobby as a career is by keeping a close watch on your competitors. If they are able to capitalise from a similar service, dissect their business plan and take inspiration from their success story.
Customers are essentially your largest critics so it is vital to hear them out. Seeking their opinion integrates them into the launch of your business which creates a personal attachment. By carrying out industry research, you may be able to expand your service or identify a niche market to target. In an era where businesses are held accountable through the likes of Google, Facebook and Trustpilot reviews, it is best to work in a transparent manner and offer the customer a chance to communicate first hand with the owner.
If your hobby has the merit and reputation to become a profitable business, you will be required to forge working relationships with suppliers and trade partners. Whilst adapting to a more corporate way of working, you will need some experience before you are able to identify complex trading risks.
Carry out your due diligence and the relevant background checks before entering into an agreement with other businesses. Business intelligence software such as Red Flag Alert can help keep track of the bad apples from the good. It provides tools that offer a transparent view into the financial health of any business in the UK, protecting your business and helping you mitigate risk.
In order to set yourself up as an official business, you will need to decide on a business structure which suits your way of working best. Depending on the type of service on offer, working as a sole trader, limited company or through an umbrella company are all possible options. The suitability of each option will depend on whether you are providing a consultancy service or physical goods. If you are looking to start a limited company, follow a simplified checklist designed for limited company directors.
Starting a business also raises the question of financing it. You are able to access funds to help you launch a business through a traditional bank loan, but there are alternative measures, such as invoice finance, crowdfunding and angel investment which can inject money into the business.
Although there are a number of legal and financial considerations to take into account prior to beginning your business, being your own boss may be the best first step to help you begin generating a profit from your hobby.