Home Business or a Hobby?

There are significant differences between a home business and a hobby.

It’s time to get real and ask yourself a few questions about your home based business.  There are significant differences between a home business and a hobby. Consider these key indicators:

Are there revenues (sales) and profits?  A business is structured to turn a profit, while a hobby generally covers costs.  

Do you have financial measurements in place?  Do you track sales and expenses (fixed and variable) on a spreadsheet to understand if you are making a profit, breaking even or losing money?  When is your breakeven and do you have the financial resources to continue until you get to that point? If you don’t track any financial metrics, you have a hobby, not a business.

Do you understand the costs to acquire a customer and who is your ideal customer? Is there a set of defined marketing activities to generate awareness and trial? 

Do you pay yourself?  Though it may be a standard practice not to take a salary when you start out, the business should generate an income for your efforts.  A business without a plan to make a profit is considered a hobby.

Want to start running a business?  Get serious about your time and a structured process.  Track and measure what you are spending and making.  You will need either time or money or both to get a business up and running.  Stop thinking your hobby will magically turn into a business.  Get a financial system in place; it can start with a daily ledger.  Don’t understand finance?  Ignorance is not bliss.  Discipline yourself to learn the basics. Start with a solid foundation of knowledge.  Running a business is a new reality.  And it’s a lot more work than pursing your hobby.