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Why do people start a hobby and end up doing more work than they would in a “real” business, and how to avoid that?

Skilled Chef
Skilled Chef

Of course, we asked ChatGPT to answer that question. I’ll put its response below as to why it happens, but the solution is a lot simpler than that. In fact, in our experience, all of this can be avoided if people would just do what is now about 2 hours of work “on” their business right at the start. It’s usually too late after that.

When does a business start?

When you first get paid to do what you love. Which most people find out by accident. How often do you see a post on social media of someone’s handy work and someone asks where can you buy that?

Or as we call it, Business Inception starts when you start to believe you can get paid to do what you love, even if it just getting a job. It’s not imposter syndrome that prevents people from starting a business. In fact, that’s an advantage when starting a business these days as we explain in one of our other blogs.

It’s not out of fear of having to put on staff as the next common reason for not starting a “real” business. The fact is, in this case in Australia, over 60% of all registered businesses are deemed “non-employing” businesses. Sole traders, or partners, working under an ABN. And with an average turnover of $220,000 per year, confirmed for us by the ATO, ABS, and the Queensland treasury department, that’s not a low-paying job.

You can have a six-figure income, but profit includes the 2 figures after the decimal point. This means that on average, again in Australia, businesses only make 10% profit, and the small business ombudsman says last year 43% of all businesses didn’t make a profit. So if you don’t have financial literacy skills, you would make more money if you were on Job Seeker with Centrelink.

People that start a business are not as affected by rising costs of living, or the rental house crisis in southeast Queensland, so this is not a reason stopping people from starting a business. They probably even get a bigger tax deduction because of those rising costs as most would have a home office set up. Again, the fact is, COVID made it more acceptable to work from home, which is different to doing remote work (under fair work, WHS, and ATO definitions), but home many of you reading this understand that?

It’s even easier now than ever before in history, to create a side gig income and multiple streams of income. And an ABN stands for Australian Business Number, so no matter what you do, if you have an ABN, it is a real business.

Why don’t more people do it? I don’t know!

But here’s what ChatGPT thinks…

ChatGPT’s “Whys”

The phenomenon you described (in the blog title) can happen for several reasons:

  1. Passion vs. Obligation: When people start making money from a hobby, they often enjoy what they do, and it doesn’t feel like work initially. However, as they turn it into a business, they might feel obligated to maintain a certain level of productivity and consistency, even when their passion starts to wane. This shift from doing something they love to something they must do can lead to increased workload and stress.
  2. Lack of Business Experience: Hobbies and businesses require different skill sets. While someone might excel at their hobby, they might lack the knowledge and experience to effectively run a business. This can lead to inefficiencies, poor decision-making, and increased workload as they try to figure things out.
  3. Scale and Growth: When a hobby turns into a business, there is often a desire to scale and grow. This means dealing with more customers, managing inventory, handling marketing, and other aspects of running a business. Scaling up can be challenging and require more effort than initially expected.
  4. Customer Expectations: As a hobby becomes a business, customers’ expectations may change. They might expect faster response times, better customer service, and a more professional approach. Meeting these expectations can require more time and effort.
  5. Administrative and Legal Responsibilities: Running a business involves administrative tasks like bookkeeping, taxes, and legal compliance, which can be time-consuming and burdensome.
  6. Competition and Market Demands: As a hobby transforms into a business, it enters a competitive market. To stay relevant and successful, individuals may need to invest more time and effort into differentiating themselves and meeting market demands.
  7. Pressure to Monetize: Turning a hobby into a business might be driven by the desire to make money, leading individuals to take on more work and opportunities to increase revenue.
  8. Balancing Passion and Profitability: Sometimes, turning a hobby into a business requires making compromises to make it profitable. This could mean taking on projects that are less enjoyable but financially rewarding, leading to an increase in workload.

It’s important to note that while some individuals may experience these challenges, others manage to strike a balance between their passion and running a successful business. The key lies in understanding the demands of running a business, seeking guidance from experienced entrepreneurs, and finding ways to preserve the joy and enthusiasm that made the hobby enjoyable in the first place.

Thanks for that Chat (Australians shorten everything)! It even alludes to how to overcome these issues, even though I didn’t ask it that. Go AI, thinking for us and all that.

This raises the question we’ll answer in our next section, “What do experienced Entrepreneurs (or mentors) do?”.

Simple, to me. Ironically, they avoid doing too much work. That is how they are able to keep doing what they do without burning out.


How to avoid doing “too much” work

I often hear business coaches say, “if you fail to plan, you plan to fail”. More than just a cliché, or as a friend of mine said on her LinkedIn page today, “Indecision is a decision” to do nothing about your current situation.

I believe, when it comes to business, the only what it can truly fail is to do nothing. And the Government seems to agree. It’s not that 30% of businesses fail in the first year (according to government figures), they just don’t do anything about it.

The opposite of a good decision is not a bad decision. Indecision is the opposite of both.

The first tip for avoiding too much work takes about 2 hours of thinking and writing dot points that I mentioned at the top of the page.

Start a business plan.

I was chatting to a friend, Shalini Nandan-Singh, a solopreneur who owns a law practice that specializes in custom drafting contracts, and predominantly deals with women in business when they are looking to scale up.

We discussed the lengthy business plans the government-funded training was getting students to do to start up a business, and we couldn’t think of any successful business owner who did that when starting out. Maybe that’s because it takes an 8-week course at TAFE to fill it out, and even if you don’t have to pay for that course, who can afford to go without income for that long with no guaranteed income outcomes?

Sure, that is what you need to do to answer questions from investors on Shark Tank when starting a company and pitching for funding, or as Uni’s would call it, a “start-up”. And some parts of the complicated plans were relevant, in theory, but in reality, they were anything but when you started dealing with real customers.

We set about creating a template that was practical enough to start a business that employs 4 or fewer staff. Called “micro-businesses” by the Government, they make up 85% of all businesses in Australia.

The outcome of our collaboration

The result is up on her website, and an example of how collaborations should work.

This business plan guide is designed to help small business women gain direction and clarity in their business, mitigate risks, attract customers and aligned partners, and set a foundation to potentially seek funding or investors in their business” Shalini says.

“You can download the Essential Business Plan Guide (for free) and access a comprehensive resource covering everything you need to know about crafting an effective plan. From executive summaries to legal considerations and more, our guide breaks down the process into manageable steps, ensuring you don’t miss a beat.” – Love your legals website.

And yes, it should only take you 2 hours to fill out if you are already selling products and/or services as a hobby, or you may be overthinking things. If it takes longer than that, do more research into the market viability.

In this case, we suggest picking just one product or service to start off. What Entrepreneurs call a minimum viable product (MVP).

Fill out a business model canvas (download HERE) on one product first, then add 2 more. Then transfer that to your business plan. The Canvas is essentially a 1-page map of your business showing you the 9 key areas you focus on to ensure business success. If you can’t answer section 9, revenue, you have a hobby, not a business. So, you will continue to do it if you don’t get paid if you love doing it, but it will only add to the costs of living.

Marketing professionals
Marketing Professional/assistant employment data

Double $50, not $10

Our last tip relates to the “value” of your work to paying customers.

The whole gig economy exists because people get paid to use their existing skills that they have strengths in, and someone else will do the rest. Even the 60% of all businesses that don’t employ any staff don’t have to do everything themselves.

They often engage an online assistant that gets paid for outcomes, who usually have other side gigs themselves to do other work for the business owners, like updating their websites or marketing content needed by the business as well.

If you do a course, even a free one, it’s to overcome your weaknesses, so it’s like doubling $10. This increases the costs and barriers to entering a side gig, and you are unlikely to recover those “sunk costs”.

You will find local networking events that are full of people that do this and have already doubled their $50, which is the average hourly rate a specialist would earn as an employee. So now with $100 to spend on doing the same work, they can afford to through you $30 per hour to do 5 hours of work and still be $20 in front.

But the incentive for the gig economy is you get the work done in half the time, you still get paid the same. My hobby of building startup websites started out as a side gig where I would charge $100 per hour for around 6 hours of work.

Good money 5 years ago. But better money today. I traded training services and helped mates in Marketing create their own courses, and they created templates and told me what apps to use to make the same website in under 1 hour. Still charge $600 as people will pay for your experience, even if they can do it themselves.

What are the costs of entry?

If you don’t know what you love doing, then quitting your job now may be too big a price to pay. The cost is low, but it could cost you more time and effort than your saving will be able to afford. Which is a big gamble to take if you are not sure it’s what you really want to do.

In business decisions, it’s not about what things cost. It’s about how much revenue can be generated from the cost, known as ROI, or return on investment.

That is how you add value to a business. This is a common question asked in an interview, too. If they pay you $50 an hour, how much money can they make from your skills in the job is the real question. So you have to decide if owning a business is right for you.

If you can’t find someone to give you a job doing what you love, how can you expect customers to pay you to do it?

I final piece of advice if you are still struggling to decide what to do now. Think about whether you are doing what you love, or do you love what you do. Make a decision on that to guide you.

Inception Network, click to contact us.
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