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Escape A Trap Of A Hobby Business

Hobby business

‘It’s just a hobby business, I don’t really need to make a profit…’

Believe it or not, I hear this sort of statement, with small variations, quite often. In fact, probably more often than I would like to, which is why I’m writing this post.

‘Hobby business’

Can you spot a contradiction here?

A business is an activity generating revenue and hopefully making a profit (it’s in trouble if it doesn’t).

A hobby is something that we usually keep spending money on but don’t expect to make a return.

A business should make you money!

A business makes products or provides services and gets paid for it. A decent business generates more revenue than it costs to offer these things to the public.

A business either makes a profit or a loss. OK, strictly speaking it can also just break even, but let’s focus on the two most likely scenarios. If a business makes a profit, all is good. If it makes a loss over a long period, it becomes non-viable and closes down. That’s the end of it.

Anyone running a business needs to register it, comply with regulations, file the financial statements, report the revenues to the tax authorities and pay taxes when due.

A hobby is a drain on your pocket…

A hobby is something done purely for pleasure. It can be done for free but often involves spending money. Whether it’s photography, oriental cookery classes, mountain biking – people can easily spend huge amounts of hard-earned cash on doing something they simply enjoy.

We don’t need to inform anyone about the fact we have a hobby. There are no rules and regulations involved, unless we join a club of some sort and have to abide by their rules.

In my mind, there is no such thing as a ‘hobby business’. There is a huge difference between having a business and having a hobby so it can only be either one or the other.

Running a profitable business is great. Having an enjoyable hobby is fantastic. The important thing is to make sure we’re clear about which one it is that we have.¬† Confusion between the two can easily lead to financial difficulties and that’s not where anyone would want to end up.

If you do have a hobby that you’d like to turn into a ‘proper’ business but don’t know how to go about it, get in touch and we’ll have a chat about how I could help.

What are your thoughts on my post? Please share!