Researched by Elizabeth H. Cottrell

The dream of being paid for having fun

The entrepreneurial ideal, on paper, would be to take something you absolutely love to do—such as something you already do now for fun and no pay—and figure out how to turn it into a business. This idea is particularly alluring when you are something like a crafter, artist, amateur furniture maker or collector with the fruits of your labor accumulating in your basement or workshop and just calling out to you, “Sell me and help defray some of the cost of your hobby!” Many have been given a false sense of security about the prospects for turning their hobby into a business by well-meaning friends and relatives who were quick to compliment or praise them for their efforts.

Facing Reality

“Your friends and family may ooh and ahh over whatever it is you're doing, but when it gets down to the bottom line, will they get out their checkbooks and pay you to do more?” asks Jacqueline Lynn, writing for Entrepreneur.com. Before you decide to start a business with your hobby, you need to do the same due diligence and market research you’d do to check out any other business idea. Of course you need to do a business plan, and it should include asking yourself these questions:

• Is there a real desire or need for what I want to do or produce?
  
• Is the demand sustainable and long term?
  
• Is there expansion potential?
  
• What is a realistic expectation for: start-up costs, overhead, and income?
  
• How can I be unique and make myself stand out from the competition?
  
• Will I ruin my enjoyment of this by turning it into a business?
  
• Am I committed enough to see this through?
  
• Do I have the self-discipline to be in business for myself?
  
• Am I able to make decisions about my business?
  
• Can I secure the financing to get my business off the ground?
  
• Do I like to sell (myself, my product/service)?

What Hobbies Would Make Good Businesses?

This depends on you, your personality, your knowledge, your hobby, where you are located, and the market demand where you want to do business, so we can’t answer this question. The Internet has opened up a world or potential customers to anyone with access to it, however, so your options are infinitely greater than they were even ten years ago. J.D. Roth of Get Rich Slowly is a staunch believer in anyone’s ability to make at least a sideline income from their hobby. You’re more likely to keep on enjoying it if you don’t go into it full time. He suggests being creative and using a very broad definition of “hobby:”

Roth turned his own love of writing and struggle with debt into a self-improvement project to educate himself about personal finance. He became passionate about it and created the Get Rich Slowly website. When he wrote the article cited below in 2007, he was making over $1,000 a month from it. He feels that being passionate about a hobby important to being successful at turning it into a money-maker.

A friend of Roth’s who loves to cook turned her hobby into a custom catering business for a few wealthy clients for whom she plans and prepares week-long menus.

Some people who like to travel have been able to subsidize their travel by writing travel articles, illustrated with their own photographs, and occasionally getting trips paid for.

Consider charging others to teach them how to do your hobby, especially if you are really good at it. This can be anything from cake decorating to bird watching, from gardening to plant identification. People are hungry for knowledge, and they’re willing to pay for. A small group could generate a good hourly return for your time.

Other ways we found that people were earning money from hobbies included:

• Mystery shopping
  
• Belly dancing
  
• One-of-a-kind buttons
  
• Blank sketchbooks and journals from old library books
  
• Sewing
  
• Drawing/illustrating – sketches of people’s homes or pets, made into notecards or framed pictures
  
• Specialty cooking
  
• Making high precision gun sites
  
• Making leather handbags and accessories
  
• Making historical reenactment costumes and accessories
  
• Making specialty/customized products for horses
  
• Making specialty/customized products for dogs or cats
  
• Making customized pictures as baby gifts that incorporated the baby’s name
  
• Washing and drying horse blankets
  
• Exercising other people’s horses
  
• Walking other people’s pets
  
• Specialized photography: pets, children, horses
  
• Teaching computer lessons to elderly

Start-Up Suggestions

Many who have been successful at turning their hobby into a business didn’t really start out to do that. They just got to be very good at what they were doing and then circumstances changed that either forced—or allowed—them to take the plunge. Whenever possible, start out on a small scale to test the waters. MaryBeth Reeves of launched ScrapBookMamma after years of making fabulous scrapbook creations for friends and family. She did it part time for some extra spending money until she was laid off, and that gave her the impetus to ramp things up.

Be careful not to force things too much, or else you run the risk of taking all the fun out of what you currently love to do. While you want to be serious about you endeavor, you may not ever want to pursue it more than part time.

Etsy.com is a good place to buy or sell anything handmade. Registration is free. Listing is only $.20 for each item listed, and there is a 3.5% sales fee (does not include shipping).

Lulu.com is a good place to sell ebooks or other similar infoproducts that you have created. There’s no charge for set-up, no paper, no printing, and they offer a storefront so you don’t have to worry about credit cards, downloading or anything else. You can even set your own price. Lulu keeps a percentage fee before putting the rest in your account. Publishing packages are available for other types of books and published products.

Treat it Like a Business

If you want to be taken seriously, you must treat your business in a professional manner. This is important not only for your reputation, but also because the Internal Revenue Service will not let you deduct your hobby expenses as business expenses if they think you’re not really trying to make money. Here are some suggestions:

• Get business cards with your business name and contact information.
  
• Open a separate checking account for your business.
  
• Get a separate credit card for your business.
  
• Keep excellent records and document all your business expenditures and their purpose.
  
• Join your local chamber of commerce or other appropriate professional organization.

Tax Considerations

Here’s an excellent video that covers a lot of the important tax considerations for hobbies versus businesses: http://www.tax.gov/sbv_hobby/. It covers what expenses and losses can be deducted in both situations and when the IRS considers your endeavor a hobby and when it considers it a business. Unless you can show that you are actually running a business, the IRS will not let you deduct losses or any expenses other than those offset by income. There are, in fact, penalties, for doing so.

It is not true that you have to be profitable for the IRS to consider that you are a business, but you do have to provide evidence that it is your intention to make a profit and that you are making a good faith effort to do so. For other small business issues as they related to the U.S. Internal Revenue Service, visit http://www.irs.gov/smallbiz.

Making Money versus Saving Money

Here’s an interesting thought to end on. There are certain hobbies that require skills, knowledge, and tools that can save you a lot of money if they keep you from hiring other professionals to come to your house to provide service or make repairs. If you can repair your own furniture, screens, or glass; if you can do minor or major carpentry; if you can do wiring or electrical repairs; if you can fix engines or motors…simply figure out what you’d have to pay someone to come to your home to do these things or even to take something to be repaired. You might be surprised how much this could save you in a year’s time. Think of it as a raise that you don’t have to declare on your income tax return!

Elizabeth H. Cottrell is a home-based entrepreneur, freelance technical writer, and owner of Riverwood Technologies, a desktop publishing company in Maurertown, Virginia. She is currently a staff writer and editor for International Association of Home Business Enterpreneurs (IAHBE)