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Hobbies offer a way to express yourself and take a break from your day-to-day routine. And the more you enjoy your favorite pastime, the better you get at it.

Your hobby could be the foundation for a profitable company. Many small business owners start their companies from a passion. Does your hobby have the potential for a business?

Does your hobby have the potential for a business?

Over 30 years ago, I was an engineering graduate working at a big company. I made considerable money and was on the fast track to a great career.

And, then, I quit.

As a tech-savvy mover and shaker with a life-long dream of becoming a business owner, I finally decided it was time to quit the nine-to-five and be my own boss. I partnered with a childhood friend, and we decided to start a business writing software.

The road to success was long and difficult. Eventually, I was able to turn a hobby into a growing company that offers Software as a Service (SaaS) payroll solutions to small businesses across the U.S.

Are you thinking about making money from your passion? Take a look at the following questions to see if you’re ready.

1. Does your hobby solve a problem?

One of the most important aspects of starting a business is honing in on what problem your idea solves. Your business needs to fill a hole in the market and offer something consumers want to buy.

Some hobbies fit these criteria better than others. For example, you might have a better chance of success if your passion is cooking or painting rather than reading or hiking.

Determine whether there is a demand for the thing you do or create as a hobby. Test your idea with market research. Start by asking your peers what they think. Then, conduct surveys, interviews, or focus groups with your target customers.

Use the information you gather to make adjustments to your plan. If you’re not willing to adapt your passion to a market, you might not want to start a business.

Remember, a hobby is all about you. When you start a business for profit, it’s all about your customers.

2. Will your idea drive revenue?

Profit separates a hobby from a business. If your idea can’t generate revenue, it’s likely that the government will not consider it a business.

If your operations can’t be called a business, it can cause problems come tax time. The IRS does not give tax deductions for hobby-related expenses. You can only deduct costs if you are actively trying to turn a profit.

Usually, the government considers you a business if you make a profit for three out of the first five years operating. It can be a small amount, but you must show that you earned money.

Ensure that you drive revenue by using the right pricing strategy. You need to price your offerings so that you can cover business costs and have money left over. You must also be careful not to price items so high that customers aren’t willing to pay.

3. How much will your idea cost?

We’ve all heard the saying, “It takes money to make money.” Chances are, you will need to put money into your new company. Make sure you know the costs before investing.

You probably already know the costs involved in your hobby. When you transition to a small business, those expenses will increase. Make a list of what it costs to provide your offerings and multiply it by how much you think you will sell.

The cost to start a business includes more expenses. These expenses might include licenses and permits, insurance policies, and a website. You might need extra equipment or space to help you run your business. And, you might consult professionals, like accountants and lawyers, to get started.

According to the Kauffman Foundation, the average cost to start a business is $30,000. You might need more or less money for your startup.

It’s a good idea to start small and build your company up before investing a lot of capital. You might use your personal savings, help from friends and family, or business financing to get started.

4. Can you sell?

You might have a great business idea. But if you can’t sell it, none of it matters. Don’t overlook the importance of getting the word out about your brand.

Sales are everything, and you gain them through relationships. When you connect your brand with buyers, you evoke something like, “That person gets me, so I’m going to buy from them.”

A great selling strategy starts with defining your brand. Make sure it’s consistent across all communication channels, including your website and storefront.

Show customers the value you offer and how your business is unique. Form relationships with customers by getting to know your target audience. Find out their interests, problems, how they speak, what they do, etc. Continue to foster relationships to grow a steady following.

Are you ready to turn your passion into a business?

Our passions can motivate us to become better, create new things, and connect with others. Sometimes, they even become our source of income.

When I decided to turn my passion into a business, I struggled at first. So much so that I nearly when bankrupt. But with a lot of hard work, help from the right people, and asking the right questions, I now get to do what I love every day.

If you’re wondering whether your hobby has the potential for a business, consider the points above. Reflect on your skills, character, and resources before diving into business ownership. When you’re ready, don’t be afraid to take the leap and turn your hobby into a profitable business.