First, I want to say this isn’t about the legal definition of hobby and business. I want to make this clear as this can be quite different from what I consider a business and a hobby.
As for everything, the rules will be different in each country so make sure you know what your country/state definition and rules are. In most cases, even if you don’t make a profit, if you
you are a business and will have to lodge a tax declaration. This is not the definition of HOBBY or BUSINESS we are using today. Today we are going to call a hobby a shop that’s not set up for a decent profit. And we are going to call a business a shop that (whether you make sales or not much yet) is set up for profit. A shop that has the potential to grow big enough to support you and your family. We’re not looking at the sales but the profitability, the potential for profit and success.
FREE WORKBOOKS, CHEAT SHEETS, AND RESOURCES TO HELP YOU START, GROW AND PROFIT FROM YOUR HANDMADE SHOP.
The first question you need to ask yourself is: are you priced for profit? In my opinion, you need to make money from your shop to actually call it a business. If you make 1500 sales but you’re just or not even breaking even, in my definition of hobby VS business, you have a hobby. If you aren’t making a decent margin of each of the sale you are making – you’re just covering the cost of your expensive hobby.
To make sure you are pricing for profit, you need to know:
There are two parts of that. One is bookkeeping and actually managing and organizing everything. The other part is accounting and actual financial strategy. You can’t make proper financial decisions if:
Without that, you can’t really plan and make strategic decisions in your business. You can’t decide whether you can afford to hire a graphic designer or if it’s just a lot of cash sitting there but next month you’ll have to spend it all on supplies. You can’t decide (AND TRACK) how much you can spend on ads/marketing expenses etc. Here’s a free cheat sheet to help you start with accounting for your handmade business.
You probably went into the handmade business because you’re creative and love making. That’s completely fine, but the moment you decide you want it to be a business, your product creation has to be strategic. It’s a bit of a mix between the right and left side of the brain. You need to create art that you’re able to apply to a market. Knowing the trends and what’s working and not working for your customers is very important and I feel is often neglected, leaving you more in the “hobby” than “business” category. You can still create whatever you want in your free time, but your products need to be created strategically if you want to run a business. The product collections should be cohesive – your shop should make sense to your customer, and not just be a collection of various, unconnected items. It’s okay to have a range of product, but it should always have something to tie them together. Without that, it’s going to be hard to scale and profit from your handmade shop. If you want to learn how to create cohesive shop collections, you can look here.
If you don’t have a marketing/promotional system in place, if you’re playing it by ear or going with the flow, you need to pause and take a step back and work on that. If you’re running a business and not a hobby, you can’t just rely on your friends and family buying from you and an occasional sale. You need to actively plan and sell your products. It’s one of the parts of business we all probably hate (me included) but if you want to be in business, you need to respect yourself and your work and make a profit out of it. That means you have to have a strategy in place:
Here’s an example of a plan to prepare your handmade shop for Christmas.
To sum it all up, to have a business instead of an expensive hobby you need to:
you might also like…
If you want to be found in search results on Etsy, you need to optimize your product listing for SEO. And if you want to
There has been a lot of talk in the Etsy community — and I mean A LOT of talk — about Etsy’s payment account reserve
Anyone who knows me knows that I am a HUGE advocate for using email marketing to grow and scale your handmade business. But you may
Get Instant Access to
The FULL Resource library
free download: handmade shop costs cheat sheet
Get Instant Access to The pricing calculator
