The way you set up and manage your business can have a greater impact on whether you succeed than the merits of the business idea itself. The businessman who takes a mediocre idea and implements it effectively will succeed far more often than the creative genius that doesn’t know the difference between a 1099 form and a payroll tax. The late Steve Jobs exemplifies what it takes to succeed perfectly; he took a hobby he was working on out of his parents’ garage and turned it into one of the most profitable businesses in history: Apple.
The first step for many is to make a profitable hobby out of what they love. If you’ve done this already, congratulations! You are on your way to turning your passion into a business. Before you quit your day job, there are some questions you need to ask yourself to determine if your hobby is truly ready to become a business and transition into a full-time endeavor.
Can It Really Be A Viable Business
The first question you must ask yourself is whether or not your hobby has the capability of sustaining you and your family. The IRS has a list of categories to help you determine the legal status of your business. It’s one thing to make side income from a hobby, but ask yourself “could I survive and maintain an acceptable quality of life using only the profit from this business?” With a hobby, a month in which you make no profit is offset by your regular income. When the hobby is your full-time business, you must have enough money set aside to handle
a bad month or three.
You should have a minimum six to 12 months of living expenses set aside in addition to enough money to operate your business for that same length of time before making it a full-time business. You want to be able to focus on making the company grow, not worrying about the rent payment or how you’re going to buy groceries that week. Until you’re at that point, keep the hobby as a part-time venture and use the money to build the nest egg you need to take the big leap. CNN has some additional tips, such as speaking to actual business owners to get a realistic estimate of startup costs to help prepare you for making your business a full-time venture.
Structure For Success
Should you operate as a sole proprietor or form an LLC or corporation? Should you bring on partners or investors, or fund startup costs with savings? These are all questions you must know the answer to before starting your business. It is not enough to have knowledge and passion for your craft; you must be a savvy business owner as well. The U.S. Small Business Administration has a number of resources that can be critical to the success of your business, including:
- How to write a business plan
- How to register your business and obtain licenses
- How to hire employees
- Countless other tips and tricks
These resources are there to help you succeed. Use them!
Depending on the type of business you run, you might need capital to take you to the next level. American Express cash back credit cards are a great way to get the early financing you need while providing the benefit of cash back on your expenses. Do your homework, and find out what solutions work best for your unique business.