This topic has always intrigued me.Â As you all may already have figured out, I’m the shop owner of Herban|Luxe on Etsy, where I offer handmade makeup products which are created using formulas I developed. I have been creating my products for over 10 years now – but here’s the funny thing – when I sold myÂ company in 2009, two years after appearing on Oprah, my business turned into a hobby.
I always get the question, “Why do you consider your makeup crafting a hobby and not a business?“Â It’s a loaded question. For all intents and purposes, especially tax purposes, my shop is considered a business but in my treatment of it – is as hobby.Â There are several ways to look at a venture to help you decide if you have an actual business or a hobby.Â Since we all see the world through different colored lenses, I like to use three criteria to help me decide if a venture is a business or just a hobby. Here they go:
By definition “a business is an activity that you start with the intent of making a profit“.Â With this definition in mind, do you think of your craft as a business or a hobby?Â These two different mindsets take you down very different paths.
If you see your shop as an actual business, you tend to have a different set of priorities, than someone who sees it as a hobby.Â People with business mindset dream “big”.Â They have a ambitions for their venture and pay attention to the details involved in reaching their big dream. Dreaming big can be something as simple as supplying a chain of boutique with your product or something is huge as becoming a global supplier.Â They also price for profit.
Someone who sees their shop as a hobby, tends be content with putting their passion into creating their items because it gives them great pleasure or as in my case, it is an activity they enjoy because it’s a creative outlet.Â Some are many times willing to just give their creation away as they find it sometimes hard to charge their worth for their work.
2. Let’s Talk Money
Which brings me to the topic of money.Â A topic that many try to tiptoe around.Â When it comes to money, business owners concentrate on know how much money comes in and how much goes out. They keep an eye on their sales, and are careful with how they spend their funds to ensure they get the most bang for their buck.Â This is not to say that someone who considers their shop a hobby doesn’t do the same, they just may not be as focused on this matter.
For many who see their shop as a business, the goal is to make enough profit to either reinvest back into the business and/or supply a form of income to pay the bills.Â They plan for expansion, even if just in their heads, trying to figure out how much funds they will need to move forward. They set budgets for operations and marketing, they develop business plans and marketing plans that ensure they pave a path for financial success in their business.
3. Time & Energy
Productivity has more to do with time than anything else.Â How much time are you spending on your craft and your shop? I can always spot a business mindset just by asking, “so how much time do you dedicate to your shop?” Those who consider their shop a business share the fact that they work endless hours a day, many complaining they don’t have enough hours in the day to do it all. All their time and energy is spent trying to get their business up of the ground, noticed, and headed towards the big times.Â Yes, they may need to add a few new words to their vocabulary such as “delegate”, “time management”, and “prioritizing”, but these business warriors are serious.
These are my three criteria for deciding if a venture is a business or a hobby. So, I ask you, do you consider your Etsy shop a Business or a Hobby? Remember, it takes more than a banner, a few business cards, and a small online ad to turn your hobby into a business.Â It takes, time, energy, money and determination.