So, you want to start a business (Part 2)
In the last blog we asked you to work out your ‘why’, your ‘what’ and your appetite for risk. In this and the next few editions we’ll explore what your answers might mean. See if you recognise yourself in the various persona’s we describe.
Today we introduce - the enthusiastic hobbyist
The enthusiastic hobbyist has a deep interest and love for their hobby and wishes to earn an income from it (their ‘why’). They also want to jump in with both feet to do it, keen to learn new skills (their ‘what’), but are clear that it is still a hobby, and are only willing to commit a small sum to the business (their appetite to risk).
So how should the enthusiastic hobbyist proceed?
The key here is that the business remains a hobby. Market forces might dictate that more profit will lie in moving away from making necklaces (for example) towards making earrings, but if making necklaces is your passion (your ‘why’), then you must accept that the normal business rationale (to maximise profits) will not always win out and act accordingly.
The appetite to risk (low) dictates that you only spend money on critical things, and where there is no reasonable alternative. Free/low-cost online services and tools are your friends (more on these in a later episode) and your ‘what’ suggests that you’ll enjoy learning how to use them, be it building a website, writing Blogs, getting to grips with accountancy software or mastering Canva.
Your most likely expense apart from stock (if you have a physical product) is customer acquisition – money spent marketing to and winning new customers (see below).
Growth of such a business is going to be fairly slow because the enthusiastic hobbyist won’t spend any more money (in stock or customer acquisition) than they’re willing to invest at any one point in time. Any growth for such a business will be truly organic in nature.
Limited company versus sole trader for the enthusiastic hobbyist?
If you don’t intend to go into debt (including trade debt – money owed to suppliers), there’s no absolute need for the enthusiastic hobbyist to create a limited company (which would limit your liability to the amount you invested in the company). Operating as a sole trader is simpler and easier to operate, though you do miss out on certain tax efficiencies that apply to limited companies. The enthusiastic hobbyist is unlikely to make the kind of sums where this becomes a significant concern, but if they do, you can always choose to incorporate it later.
Even if you don’t incorporate, it’s still worth creating a trading name – something easy to remember that encapsulates what you do / who you are. There are all sorts of traps and dangers when creating a name/brand and this is something we’ll cover in more detail later.
Finally, you're going to need a customer acquisition strategy, which is a fancy way of saying you need to find customers willing to buy your product or service. As the enthusiastic hobbyist already has an existing (and possibly) long-held interest, the chances are that they are already connected with other people with similar interests, either directly (people they know) or indirectly (online groups they are part of). These are your best first stop for customers and referrals – you are already connected to them, they understand and get your ‘why’ and are very low cost to reach. Generally, local events and referrals will be where most of your business comes from unless you are willing to stretch your appetite to risk and pay more for marketing.
In a later post we’ll discuss some of the detail we’ve introduced here, but in the next one we will introduce you to the 'Reluctant Entrepreneur'.
If you can’t wait to know more about how to start a business, please drop a note to the author, Colin Hall, Founder of bizplansuk.com a business planning consultancy, specialising in helping small and medium businesses plan for growth
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