2021 Goal: Turn Your Hobby Into a Job

Here are the steps to take if your dream is to make money while working on your favorite hobby.

What if you could get out of bed each morning knowing that your day would be spent working on your favorite hobby? As 2020 so clearly illustrated, anything can happen, and traditional jobs are not always secure. If you've ever dreamed of turning your hobby into a career, or hoped to earn enough to invest in the future, now may be the time to give it a shot. But first, there are a few things you need to do.

Be real with yourself

Let's say sewing is your passion, and your custom draperies are the envy of all who know you. Or maybe you have been drawing lifelike portraits since you were a kid, enjoy building decorative windmills, can bake the best oatmeal-raisin cookie this side of the Mississippi, or have another hobby that relaxes you.

Before you do anything else, ask yourself how you're going to feel when your hobby -- an activity that has always been accomplished on your timeline -- becomes a job. Imagine a year down the road. Perhaps you have four sets of custom drapes on order, and two of the customers are hounding you for their projects to be done before the holidays.

Are you passionate enough about your hobby to enjoy it when customers become involved and your schedule is not necessarily your own? If so, it's time to lay the groundwork for your new business venture.

Find a market

Thank goodness for the internet because figuring out if there's a market for your hobby is as easy as typing it into a search engine. If your hobby is a crafty one, you can check sites like Etsy, eBay, Artfire, or Bonanza. If your hobby is writing and you want to turn it into a profession, sites like Upwork and Fiverr can help you build a customer base.

Don't be discouraged if you don't see anything similar to the product or service you plan to offer. That just means there will be less competition. It also means you may have to try several advertising methods before you find your ideal customers.

Set parameters

Turning a hobby into a job involves making decisions -- lots and lots of decisions. Write everything down and keep notes together to refer to them as you're finding your feet. Here are a few things you should decide in advance:

• How many hours will you dedicate each day? If your business will be part-time at first, factor in the hours spent at your day job and any other obligations you have. If you can only dedicate time on the weekends at first, that's okay.
• How much money will you invest? If you'll need funds to purchase supplies, make a note of how much. If you plan to advertise in your local newspaper or on social media, add that amount too. Make sure your bank account can cover the expenses you'll face as you get started.
• How much will you charge? One way to settle on a price is to add how much it costs to create a product to your desired profit margin. Let's say you build decorative windmills, the materials for one cost $50, and your desired profit margin is 15%. The math would look like this: Cost of materials ($50) x desired profit margin (15%) = $7.50. Profit margin ($7.50) + cost of materials ($50) = $57.50. That means the price of the windmill would be $57.50. Of course, your desired profit margin will determine the final price. If you offer a service, you can also research typical hourly rates in your specific industry to help price your offerings.
• Do you want to "beat the competition" or set yourself apart? Let's go back to the example of creating custom draperies. Keeping your prices low may bring in more customers, but it could also devalue your talent. If your skill is unusual, you have specialized expertise, or you are exceptionally gifted, your target market will be consumers willing to pay for superior service.

Get your name out there

Marketing your own business can feel shameless. It's not. Whether you advertise on a local neighborhood website, Facebook, Instagram, Twitter, or in emails to everyone on your contacts list, let people know you're open for business. Get your friends and family in on the act by asking them to promote you on their social media accounts and among their friend groups. The less money you have to take out of your savings account to pay for advertising, the better. Remember: It all starts with one or two customers. When you've satisfied them, it's just a matter of building momentum.

Make it official

Once it becomes clear that you're going to make a profit, make it legit. First, find out if you need a business license in your state. Consider setting up a limited liability company (commonly called an LLC) to protect your personal finances from business losses. Check with the IRS to learn whether they consider your activity a hobby or a business. If it's a business, make sure to fill out the correct paperwork to avoid getting stung by an unexpected tax bill.

If 2021 is the year for you to dip your toe into the entrepreneurship pond, you owe it to yourself to do it right.