Takeaways
- Turning a business idea into a thriving company involves setting company goals.
- Companies can test new ideas and products with a Minimum Viable Product.
- Founders start businesses with savings, credit cards, loans, and investor capital.
- Startups grasp onto their competitive edge to drive sales, traffic, and profits.
- Growing revenue and a customer base involves creating a product market fit and building a sustainable brand.
Starting a successful business can feel like quite an undertaking. But if you have a hobby or skillset you already love, research shows that transitioning a hobby into a full-fledged business can be a smart money move.[1]
When you work on something you already have a calling for from the outset, data show you are more likely to endure the ups and downs of building a business. Your passion gives you the unrelenting edge to work extra hours, navigate new landscapes, recruit investors, convert customers, and create a sustainable business.
Ready to leap into full-time entrepreneurship? Here’s our step-by-step guide on how to convert your hobby into a profitable business.
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7 Steps to Convert a Hobby into a Business
To launch from a garage startup to a budding small business, follow these nine steps to propel you toward success:
1. Set SMART Company Goals
Successful companies have founders with big dreams. The road from a startup to a growing business is paved with inflection points that drive the business forward. You can meet these milestones by creating a step-by-step business plan.
- Be Smart: The most successful goal setters use SMART goals – Specific, Measurable, Achievable, Relevant, and Time-bound.[2] You can use SMART goals to cement yourself to reality and monitor your progress. Most founders set one-, three-, and five-year goals. For example, instead of saying you want to be profitable after the first year, you might say, “We need to sell 12,000 cakes at $25 per cake over the next 12 months.”
- Create Subgoals: Once you have your annual goal set, you need to break down your goals into manageable next steps. To sell 12,000 cakes annually, you need to sell 1,000 each month. That means you need to cover around 30 customers a day or more.
- Get Tactical: With subgoals in hand, you need to get tactical about how your day-to-day activities will translate into reaching your goals. Sure, you need to sell 1,000 cakes a month, but what types of cakes will those be? What portion will be birthday cakes, seasonable cakes, or specialty orders? Once you resolve those questions, you should hire the best employees to meet those goals.
Read More: 7 Steps to Quickly Get Your Employee Identification Number
2. Be the MVP of Market Research
Before investing your life savings in a new business idea, you should do your research. Due diligence in your space involves conducting market research, knowing your competition, and identifying where your business fits within the market.
You can survey local markets, get feedback on your products from family and friends, and talk to prospective angel investors (more on this below).
Many startups try what is called a Minimum Viable Product, or MVP.[3] This is a base model or offering that allows you to test new ideas with minimal investment and maximum feedback. Once you land on a successful MVP, you can pivot to giving the market what it wants. In the end, you want to make sure there is a product and market fit.
Read More: When to Open a Business Bank Account
3. Create a Realistic Budget
Not much happens in business without creating a budget and spending forecast. You need to sit down with a pencil and paper to map out the costs of running your business.
Start with the upfront costs, like website development, inventory, or equipment. From here, you can consider the monthly costs to “keep the lights on,” which include rent, employees, and, of course, your salary.
Once you have a view of your monthly and annual expenses, you can start layering in your forecasts for revenue. Revenue forecasting involves contemplating how many products you will sell each month. If your product is seasonal, don’t forget to incorporate this into your sales projections. Many founders make the mistake of omitting the ramp-up time to get their business off the ground.
Business owners know their numbers inside and out. With a pulse on your monthly revenue and expenses, you can see how much capital you need to take your business to the next level.
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4. Raise Capital Consistently
Depending on the size and scale of your business, you might want investment capital to fund your business.
Many founders initially dip into their savings, or slush funds, to use readily available cash to pay for business startup costs. But when business starts to pick up, and you feel like you have a tiger by the tail, you will need real dollars to accelerate your growth.
Here are ways you can quickly fund your business:
- Credit Cards can help you pay for business expenses when you need them, and cash-back reward credit cards can give you more funds to deploy.
- Business Loans tend to finance more considerable business expenses, such as hiring employees, inventory needs, equipment, or lease obligations. Check out how to apply for an SBA loan.
- Personal Loans are highly flexible in how they let you spend funds. With an excellent credit score, you could get the funding you need in hours. Check out our picks for the best personal loans.
- Investors can offer installment loans, convertible debt, or equity investments. Angel investors and other early-stage investors can help you start your business and often take a sliver of ownership in the company, guiding your initial takeoff.
One of the biggest mistakes startups make is raising money only when they need it. A smarter strategy is to raise capital consistently.
Read Also: What Is an Accredited Investor?
5. Build a Memorable Brand
To create a lasting brand, founders need to turn inward and decide what type of company they want to build. You want to convey a consistent culture and ethos as you serve your customers.
Your social media messaging, branding, and marketing materials will serve as your company's external face. Often, this is the first interaction customers have with your build.
Titrating your business marketing to pique and capture the attention of new customers is an art form.
Here are several marketing aspects you need to nail:
- Website design
- Company logo
- Mobile app
- Social media pages
- Packaging
Above all, your brand needs to have a consistent feel across all external points and can capture attention in a crowded market. You need to stand out.
Read Also: 5 Great Business Ideas to Start Now
6. Choose a Business Structure
Choosing the best legal entity is one of the most critical aspects of starting a business. Your legal structure needs to align with your vision for the company's trajectory. Here are some legal structures to consider:
- Sole proprietorship: If you want to remain a solopreneur, a sole proprietorship might be your ideal structure. However, this structure sacrifices ease of set up for lack of scalability.
- Partnership: Brick-and-mortar businesses, like dental, medical, and legal offices, tend to operate as partnerships. Partnerships allow a group of founders to agree on how to operate a business and share profits.
- Limited Liability Company (LLC): Establishing an LLC allows you to shield your personal assets from the company's liability. LLCs can be single-member companies or member-managed.
- C Corporation: This is the preferable structure for founders who dream of scaling a business to become a publicly traded company or raise significant investor capital
7. Get Active on Social
There has never been an easier time to promote your business. While you can attend local business events and lunches, social media is the fastest way to do so.
You don't have to be a social media pro on every outlet. Instead, choose a social media platform that suits your target audience and skillset. For example, a bakery or coffee shop might thrive on Instagram with tasty-looking photos of freshly baked croissants.
8. Develop a Competitive Edge
Differentiating your business in a crowded landscape is about developing a competitive edge. Your company's advantage could be continuously surprising and delighting customers, providing the best information, fantastic customer service, or creating the highest-quality product.
Businesses that don't have a competitive edge lose in the long run. In the early years of building a business, founders often poll their customers to understand what sets them apart. Leaning on this uniqueness will separate you from the competition.
9. Build a Solid Customer Base
Many early-stage startups focus on a customer's lifetime value (LTV). LTV is the total revenue a business expects to yield from a customer. It can be one of the key performance indicators of a business's "stickiness" with customers. LTV is often counterweighted against customer acquisition cost (CAC), or how much the company spent attracting customers.
Profitable businesses pay close attention to keeping their LTV above the CAC. Startups that genuinely delight customers will reap major rewards by building a solid customer base, which is the glide path to organic growth.
Smarty Summary
Growing your hobby into a side hustle or full-time business takes time and attention. You can make your passion a profitable business by creating a successful launch strategy and following through on your commitment to grow your business. Once your business gets large enough you should right size your business to suit your personal and lifestyle needs.
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(1) Journal of Business Venturing. Growing revenue and a customer base involves creating a product market fit and building a sustainable brand. Last Accessed April 7, 2025.
(2) University of California. How to Write SMART Goals: A Guide for Managers and Employees. Last Accessed April 7, 2025.
(3) The Lean Startup Co. What is an MVP? Last Accessed April 7, 2025.
