So, you have been working on tuning your craft and you have had a few friends tell you “You should sell this stuff”, now what? Turning a hobby into a part-time small business you run on the side can take a great deal of time and effort. However, if your hobby is something you love to do in your spare time and what to expand, it can be worth it.
You will want to confirm how you intend to grow your hobby into a side business. The best place to start is to see if there is a demand for the product or service you will be providing. You can do this by researching the market and doing a test run. First consider how many other similar companies are out there. For example, if you love to make candles, you will be competing with not only big companies like Yankee Candle©, Wood Wick©, and others but also small competitors. Go to a few craft fairs and search online to see how many other small companies are selling similar products to yours in your area. If there are many competitors with similar products, it might not be the best market if you can’t provide something unique or different. If there are not many competitors do a test run by either starting an Etsy store, Facebook page, or renting a booth at a local craft event to see if your product sells.
If you do test out your company and find a demand for the product, and a market to grow in, it might be a good idea to start your side hustle. Make sure you can dedicate the appropriate amount of time and manage your time for the business. Since this is a side hustle, you will probably be managing your 9-5 as well as this business and any other priorities you may have. It is always good to start small and make steady progressive growth over time.
Make sure to track your progress and financials to help you decide on future business moves and for tax purposes at the end of the year. If you do decide to scale your business up significantly, or it requires a barrier to entry with expensive equipment you might consider some financing options.
Possible funding options to purchase the supplies and equipment you need to scale up the production quickly include a small business loan, personal loan, or investor funding. A small business loan is a small loan that has the primary use of helping you achieve some business goal. These are typically backed by the Small Business Administration (SBA) for 85% of the loan, allowing lenders to offer lower interest rate and lower fee loans to small businesses. However, for microloans, under $50,000, it can be difficult to find a lender and the rates are a bit higher.
Personal loans are based on your current income and not future income from a side job. These can have a varying range of rates but have a wide net for what the funds can be used for. However, most personal loans typically cannot exceed $10,000-$25,000 depending on what you can qualify for. This is a good option if you are looking to expand something small that is not entering a market with a large barrier to entry.
The final option for funding outside of your business revenue stream is investor funding. This is reaching out to friends, family, or investors to gain funding to expand or begin your business. The draw back with this, is the fact that normally investors require ownership in your business for the funds or longer-term paybacks on specified terms.
If you are sure of your product and have a plan to grow your company, you may be ready to take the plunge and start your side hustle. We wish you the best of luck and are here for any of your financing needs.