Do you run a business or just support a hobby?
In his famous address of Stanford University graduates in 2005, Apple founder Steve Jobs said: “You've got to find what you love… and the only way to do great work is to love what you do.”
While Jobs’ sentiments are undoubtedly accurate, there remains a grey area between the world of business and a sideline hobby.
If you’re creating something in your spare time for personal satisfaction and making a few dollars from it here and there, are you an entrepreneur? If not, when exactly does the hobbyist end and the business owner start?
Given the increasing numbers of people who are able to combine a job or raising a family with a sideline venture, the distinctions are becoming a little blurred. But there is a certain mindset, as well as a few other giveaways, that sets aside the business leaders from the dilettantes.
“It’s an issue we’re seeing more and more,” says Anna Pino, CEO of Lighthouse Business Innovation Centre, a Canberra-based venture that helps start-ups commercialise their ideas.
“There is widespread confusion over putting a value on what you’re doing. A lot of people work full-time and happily do something on the side that earns nothing. The problems arise when you do want this activity to be your full-time living, but you can’t put value on it.”
Pino says that to move from a hobbyist to a businessperson, a psychological shift is needed where you realise that a business isn’t just about creating a product or service, it’s also the “boring stuff”, such as paperwork and marketing.
“If people come in and say ‘I’m a business owner and I do this’ rather than say they are a graphic designer or painter, then they’ve made the emotional transition,” she says. “The attitude needs to go from doing something that you want to do to creating something that a customer wants to buy.”
“Most people don’t realise they need a formal company name and to register for GST, get an ABN, get a separate bank account – very basic things that businesspeople think about but people with hobbies don’t.”
Pino adds that there is a gender divide when it comes to making the leap from dabbling in an area to building a business around it.
“There is a big issue around females undervaluing themselves at every level,” she says. “You have to be ruthless. Your time has a specific value and has to have a return on it. You can’t do things for nothing. That doesn’t necessarily have to be a financial return, it can be a networking one.”
“Men are generally more competitive, the issue is more to put the right structure around their business.”
So how can you tell that you’ve got the right mindset to turn your personal interest into a business?
Here are Pino’s five tell-tale signs:
1. The profit motive
You want to make a profit not simply support a hobby – businesses are structured to make profits not simply provide you with a job or with the funds to support your passion.
While entrepreneurs are inspired by their passion, they are in business to make money. A sure sign that you’re not thinking like a business owner is if you have trouble charging a realistic price for what you offer.
2. You introduce yourself as a business owner
If you still introduce yourself as ‘a graphic designer’ or ‘landscape architect’ rather than saying you run a graphic design studio or a landscaping business, then you’re thinking like an employee not a business owner.
If you’re still not sure, ask your suppliers or your customers how they see you. Do they see you as a freelancer or a business owner?
3. You're ready to work
You realise there’s more to running a business than just the fun stuff – running a business is hard work.
Along with the fun stuff, there are plenty of other things that you won’t enjoy and unless you have a lot of money to pay someone to do it you will be doing everything from the sales to the bookkeeping.
4. You respect your time
When you have a hobby you are happy to indulge as much time as you can on it and there’s no accountability for how long something takes.
However, with a business there’s a cost related to your time even if it’s only an opportunity cost. For every hour you spend on Facebook you need to be aware there needs to be a return on investment.
5. “Real artists ship”
“Real artists ship” is an old saying of Steve Jobs at Apple, meaning you actually have to deliver.
It’s not so important when it’s a hobby, but when you run a business it’s vital.