Every entrepreneur’s situation and decision are different, which makes finding the right business structure a very personal decision. While there are some common legal structures for a business, e.g., company, partnership, sole trader etc, how you set up and manage your business will differ depending on your goals, mission, and the products and services you sell.
What is a hobby business according to Jenni Walke?
For me, a hobby business is something that you dabble with. What I mean by that is, it’s something that you drop in and out of; not something that you necessarily do consistently. Think of the artist who paints occasionally or the gardener who pots their cuttings to sell at markets intermittently. Hobbyists, choose what they do because they love doing the “thing”, e.g., art, gardening, jewelry making, pottery, and so on. And, the ability to make an income on the side is a bonus, not the purpose.
The reality though, hobby businesses, just like legal companies, partnerships, or sole traders are a form of business. The key difference is the owner’s intention.
Hobby businesses are generally (not always) focused on doing what they want to do first, and if someone pays them for it – that is a bonus. The “hobby” concept is about being able to pop in and out when you feel like it, so the intention is to do what I love, not focus on what their customers may need.
Starting out as a hobby is what most inventors, artisans and entrepreneurs do. Why? Because when you are a hobby business you:
- Can play and explore what you want to create
- Can take risks
- Have lower overheads, and
- You can CHOOSE when you want to work and where.
If you want a weekend off, you can take it – because your hobby is mostly likely not your sole source of income, it’s milk money!
However, after a while though, the hobby business can, and if you have found a niche that serves your target market will likely morph and shift from a hobby to a side hustle, and the into a fulltime business – and this is where the intention comes in.
As you sell your product, or offer your service, you start to see that you can make “real money” from it, and so you start to get more organised; you deliver the service or make the product more regularly, and suddenly you begin working to service the client demand…
a.) Not offering as much money as your “hobby”
b.) Cutting into your delivery/production time, and
c.) No longer making you happy.
And so, at this point, you realise your hobby is actually a full-blown business.
The transition from a “hobby” to a “business” is something that many businesses and entrepreneurs go through. This transition has nothing to do with the legal structure you choose, rather the way you interact with your business and how your business interacts with its clients.