It happened again. A colleague of mine approached me seeking insight and assistance on how to start a business based on an interest she has had for over ten years. With all of the enthusiasm and excitement that many hobbyists have, it is still not sufficient to expect that just having a passion for something will be enough to sustain a business. Running a business can certainly be fun and provide a level of enjoyment that rivals that of engaging in a hobby, and it is certainly highly recommended that one have a deep interest in their work or it will become even more difficult to succeed in the business; but at no time should work be considered a hobby.
Business As Excuse To Play
I subscribe to many e-newsletters, paper-based subscriptions, and participate in numerous forums and share group about business and business issues. Lately, based on the fact that we are approaching April 15th and the payment of taxes, there seems to be an undercurrent in many of the discussions occurring about how one can get the federal government to underwrite one’s hobby and pass it off as a business. To quote one of the newsletter writers (www.smallbusinessvictory.com) -
A couple years ago, I decided I was tired of paying for golf. Now I write golf off my taxes. (Effectively making it free) How? Am I breaking the law? Am I pushing the limits? No and no. I simply started a business in the golf market. And when you’re in the golf market, the act of golfing is… sorta necessary. In fact, you could say it’s necessary and ordinary. (The two magic words when determining if something is a valid tax write-off.)
While that may in fact be correct from a tax standpoint, just loving to golf will not be enough to run a successful business. In fact, that love of something can actually get in the way if one ceases to be objective and make fact-based decisions instead of operating out of a fondness for the activity.
What my colleague temporarily forgot and the newsletter writer’s quotemisses (though later in the newsletter, it is addressed more fully), is that business success is predicated on doing a number of thngs correctly and deriving pleasure from successfully completing those tasks appropriately. Hobbies are fun for the participants in that they organically provide pleasure in the activity. They are not the same.
- A business is dependent on there being a market for the product or service. There have to be sufficient number of customers and they have to be willing and able to make purchases. If only your Aunt Gertrude and her four Bridge playing friends like a product, it is not likely to be a good business. Further, if Aunt Gertrude is living in subsidized housing, and the product is a cruise adventure vacation, she may not be able to ever take advantage of the great product idea. Without having sufficient numbers of prospects on which to draw and without those prospects having the willingness and ability to spend money, the business idea will fail.
- Communicating with the market is an essential skill. If prospects are unsure of how the product or service works, or when they would be inclined to use it, they will not be likely to purchase. Understanding the needs of the market and providing a solution that is easily understood is essential.
- The logistics of running a business are not the same as engaging in a hobby for leisure. One must know how to interact with agencies, licensing bureaus, vendors and suppliers, etc. to bring a product or service to the market and understand how to manage finances, inventory, customer relationships, etc. in order to provide the business with a chance at success.
- Whether marketing is to be done through word-of-mouth or through advertising or other means, there has to be a method for measuring it, monitoring it, and improving it. If the marketplace is unaware of the product and sales are not occurring with sufficient margin to sustain the business, then being broke would be a step up from where you find yourself.
Being in business can and should be fun for the entrepreneur and it is not uncommon to have one’s hobby become a business opportunity for the business owner. However, a business should not be treated as a hobby if it is to flourish.