Do You Have a Small Business…or a Big Hobby?

People start businesses for all kinds of reasons. Some do it out of boredom, some do it in hopes of growing their personal wealth, and some do it because they don’t know anything else.

But in the modern era, far too many do it as an extension of their personal hobbies.

You know what we’re talking about.

A thousand breweries and soap makers for every town with any degree of hipster credibility. Are these people running businesses or monetizing their hobbies?

Research says they might be doing both. Micro-breweries have a remarkable ability to stay afloat, with not even a quarter of them shutting down within the first year, but once they attempt to go beyond the “micro” phrase, things might become more difficult.

That difficulty won’t be eased any if an entrepreneur lacks a solid plan from the beginning. It makes no sense to get into an industry you don’t love, but that doesn’t mean you should approach a “craft” business any differently than you would another kind of business.

Soap makers may one day face regulations that ensure they have to be serious about their business. At present, there’s probably no telling just how many thousands of independent soap manufacturers exist, or how many are financially solvent or will be in business five years from now. An industry blog warns would-be soap-preneurs:

“One of the most common mistakes soapmakers make when they start a soap business is creating a product line around the products they like the most.”

Does It Matter If You Like Your Products? Depends On If You Want To Make Money

We can modify and expand that statement.

One of the most common mistakes entrepreneurs make when they start a business is creating a product line around the products they like the most.

Among other mistakes, only selling things that you like is a sure way to limit your potential revenues. Customer feedback is paramount, and it comes down to whether you want to sell a lot of products or just products that you enjoy being around.

Let’s look at another industry: hospitality.

Restaurants already have an unattractive failure rate. The US has a wider variety of eateries than some countries have people, with over 650,000 as of last year. As a whole, services businesses tend to fail almost 20% of the time.

Therefore, if you’re going to open a restaurant, you have to take everything into account.

Let’s say you happen to be a vegan, or worse, a “Bitcoin carnivore.”

To be true to the former, you can’t serve any animal products, which will necessarily increase your supply costs.

To be true to the latter, you can’t accept regular US dollars and you can’t serve vegetable products, which are easier and cheaper to store.

In either case, you’ve already limited one crucial aspect of any business: location. Neither of these types of restaurants will thrive in a rural area, or even cities beneath a certain size. To do business in a larger place like New York City, your start-up costs and your monthly bills will be higher. Therefore, your per-plate cost will be higher.

In both cases, you necessarily rely on a niche customer base. And in both cases, your odds of failure are unnecessarily high.

For every rule, there’s an exception. There are highly successful butcher/deli businesses as well as there are highly successful vegan eateries. There are also stories of abject failure.

Given that vegansim takes over every part of one’s life, it may be unavoidable that certain business decisions will be made in service of ideals. The lifestyle choice is popular enough that an entire class of investors and businessmen known as the “Vegan mafia” exists to ensure that veganism thrives in the current century.

But is that the point of your business? Every day you’ll be serving people that have no interest in the plight of animals. They might just like your pudding.

Such is the fine line you’ll walk as an entrepreneur. How much should your personality enter into your business?

As a rule, the less, the better. Other people have different tastes, different interests. If you just want like-minded people to give you money, a non-profit might be in your interest.

Still, You Must Enjoy Your Line of Work

Does this mean you shouldn’t enjoy what you do? Absolutely not. In fact, one might argue that you must enjoy the work you do, especially as an entrepreneur, if you’re going to thrive.

Niche businesses can be wildly successful thanks to the advent of the interconnected economy. If you make and sell soap, you can now easily compete with other makers – and major corporations – around the world, with relative ease.

But the most successful businesses in the world cater to large swaths of the population. You can find anything on Amazon, including a lot of “niche” products you can’t find elsewhere. As a result, Amazon is one of the top three most valuable companies in the world on a consistent basis.

This data shouldn’t push you to try and found a valid Amazon competitor. That is certainly not the realm of the small business, even if Amazon started as a small business selling books. But the lesson is still important: to capture the most business, cast the widest possible net.

So if you want to make soap, make every kind of soap you can afford to make, at least at first. Do research to see what the most popular ingredients are. Have a clear, written strategy and a myriad of other planning documents to help you remember why you started your business in the first place. Keep track of the most popular items. If possible, attend events and give out free samples – waiting for new customers to approach you as opposed to actively garner them is a common mistake among new entrepreneurs.

How can you apply these lessons to your chosen industry? Simple. Remove the soap. Whatever product or service you want to offer, free samples are a great way to give potential customers and clients a risk-free chance to try you out.

It can also cost a lot, especially in services.

While it’s a good way to get people to try something new, as a marketing tactic it’s hit or miss. It will be particularly hard to gain new customers in an “accessory” or non-essential goods business.

People have to eat and drink, but they don’t have to do either in your restaurant. People also need to bathe, but there’s nothing stopping them from buying the cheap soap at Walmart.

As a transcriptionist, I founded my own firm in 2011. I offered 1-minute free samples and guaranteed the work. Within a few months, I went from a client list that filled one page to a client list that filled an entire book.

You might be surprised to learn that my success had little to do with the free samples.

After surveying some of my top clients – many of whom were spending upwards of $1,000 per week with me – I found that getting them on-board was primarily the result of word-of-mouth recommendations, and keeping them around was the result of my 100% accuracy guarantee.

Expensive Hobbies Don’t Get Less Traction Than Small Businesses

If you’re funding an expensive hobby instead of running a business, you’ll quickly find that word of mouth marketing won’t take you very far. The types of people who will feel welcome will be limited to the types of people who could become your friends, which will limit the type of people who will ultimately accept a recommendation and try your product out.

Another pitfall of many new entrepreneurs is a failure to follow-up. Is there any reason you shouldn’t have an e-mail mailing list, or even SMS marketing ability? Square and other neo-point-of-sale companies offer such capabilities by default. Have you studied the art of writing an occasional newsletter, reminding customers that you exist, or effectively hired a content writer to do so for you? In general, what does your marketing strategy look like?

It’s possible to fund your hobby through a “boutique” business. You see this a lot in music and publishing. If your goal is simply to have some fun and make a little money doing it, there’s nothing wrong with that.

But the problem you’ll encounter is that you might one day change your mind. When you do so, you’ll find that your processes aren’t ready to do real business. Converting from a “boutique” shop to an actual enterprise is probably more difficult than creating a new enterprise from scratch.

Can Your Business Function Without You?

If your business relies too much on you (instead of well-trained and trusted employees), expansion will be a nightmare. As Shopify’s Mark Hayes says:

“I don’t want you to be the “Hi, can I help you?” kind of person. You’re going to find out that buying is a full-time job. Being in the background, doing the paperwork, doing all the other administrative things really takes up your time. You cannot open up other stores if you don’t set operational procedures in place.”

A real business always plans on expanding. If all you’ve ever wanted was one location, and that location happens to be a bar, microbrewery, soap shop, or boutique wine store, then you’re probably looking to be a professional hobbyist. For the purposes of this article, all I can say is good luck.

Now let’s suppose you’ve written your business plan.

You’re ready to open your first location, in a place that makes perfect sense for your industry.

You’ve got the funding for it. You’re getting started.

This is when the typical entrepreneurial mantras come into place.

The Difference Between An Entrepreneur and a Hobbyist

In many ways, hobbies and business ideas can seem to be the same thing. Especially for the motivated entrepreneur, who will see a profit opportunity in virtually everything he does.

What separates a hobbyist from an entrepreneur is a multitude of character differences, primarily surrounding the “seriousness” with which they approach the industry.

An entrepreneur will often risk everything they own, up to and including their home, in establishing their venture. They will sleep, breathe, and eat while thinking of their new business.

A hobbyist may also take some financial risk in establishing their hobby business. The purpose of this article and articles like it is to ensure they’re fully aware of what they’re doing as they do such a thing.

An entrepreneur will do serious market research. If all of your friends have started craft breweries, how many of them can be your customers? Perhaps the thing to do in that case is open a store that sells unique brands, but it would take a more entrepreneurial view of the industry to reach that conclusion.

Five Ways To Determine Your Business Isn’t A Hobby

  • You actively seek out new customers instead of waiting for them to come to you.
  • You sell products based on their popularity and profitability, rather than your feelings toward them.
  • You have organized things in such a way that the business could potentially operate in your absence.  You have a plan that your business is following to achieve previously set growth goals.
  • Customer feedback and word-of-mouth marketing play a crucial part in your growth and your future plans.
  • You have explored ways to remain in the consumer consciousness even when they aren’t shopping in your store or on your website.

It’s Your Life

So you really love drinking rare brews and you think you’d be great at making them, or you make a killer vegan specialty, or you can butcher a deer like nobody’s business.  There’s nothing wrong with any of these things.  There’s also no rush to start a business around any of these passions. Perhaps you should consider, in any of these cases, working in the industries a bit first. Take a job in a brewpub, work in a vegan cafe, or get a job as a butcher or deli.

The experience will inform your later decisions around potentially starting a business, which you should never do without a clear plan and well-established goals.

It’s also possible to start out with a business, but have it evolve into an extremely expensive hobby. Consumers may always want coffee, beer, soap, et cetera, but over the life of your business their preferences are bound to evolve. If you fail to keep on top of these things, you could easily find yourself trapped in an expensive hobby.

Thus, as a final piece of advice: after going into business, it’s important that to keep track of trends, and do constant research.

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