For as long as you can remember, you’ve been building wooden birdhouses or sewing tote bags or hand-pouring candles from scratch—simply because the act of making brings you joy.
But over time, you’ve become somewhat of an expert at your craft, prompting friends and family to demand, “Take my money!” Maybe you’ve even dabbled in selling, either through a local marketplace or online selling site, or to friends for cash.
It’s probably time to ask yourself: Could this hobby become a business? There are several benefits to turning your passion into an honest-to-goodness brand—and factors to consider before taking the leap.
Ahead, learn the differences between hobbies and businesses, the legal and financial implications of making the switch, and the steps you can take to turn a hobby into a business today. Plus, get expert advice from hobbyists-turned-entrepreneurs running thriving businesses.
Hobby vs. business: What’s the difference?
In some cases, a hobby and a business can be one and the same. Your hobby is the thing you engage in after work hours and in your spare time, but you also may exchange the results of those hobbies for cash.
In the eyes of the government, that hobby income is real income that you may need to claim. The true difference between a hobby and a business comes down to tax law. The laws vary from country to country and depend on many factors. For example, in the US, the IRS looks at the intention to turn a profit and history of profit. If you have profited from your hobby in at least three of five consecutive years, the IRS will see this as intentional and, therefore, qualify your activity as a business.
While claiming income may seem like a hassle, the benefits to upgrading your hobby to a business can balance the negatives. Business owners can claim expenses like material costs, a portion of utilities (for home-based businesses), or other specific expenses applicable to the particular business—hobbyists cannot.
Once you make the distinction that your hobby is now a venture, tracking and organizing your business finances will set you up for success at tax time.
🛑 Note: This information is general and not intended to replace the advice of a tax professional. It’s important to check with the revenue agency in your country or consult an accountant or lawyer before you launch your business and when you file taxes.
Which hobbies make great businesses?
There are some fairly common hobbies you can monetize—selling finished handmade goods, like knit wool mittens at a craft market, for example. Many entrepreneurs start this way. But there are other types of hobbies that have a marketable angle. A few examples include:
- Musicians can sell music samples or teach guitar classes.
- Gamers can join the creator economy and build a business around streaming.
- Gardeners can grow seeds into plants to sell or harvest fruit to make jams and pies to supply local restaurants.
- Dancers can set up summer camps to teach kids the art of movement.
- Bakers can sell cookies, baking kits, or virtual baking lessons online.
- Home décor DIYers can grow social media accounts with helpful content and eventually earn money through partnerships, affiliate links, and sponsored posts.
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Turning a hobby into a business in 9 steps
- Conduct market research
- Determine your business model
- Develop your brand
- Consider funding options
- Streamline your processes and workspace
- Set up an online store
- Launch and market your brand
- Create boundaries
- Set yourself up to scale
Now that you’ve either determined that you are in fact an accidental entrepreneur or you want to become one, let’s make it official. Here’s how to turn a hobby into a business in nine easy steps.
1. Conduct market research
“Everyone has this million-dollar idea,” says entrepreneur and YouTube chef Wil Yeung, “But not everyone has a million-dollar execution.” Pulling off great execution starts with doing the groundwork. To turn a hobby into a business, there are a few questions to ask yourself about your motivations and the viability of your idea.
The best way to validate your business idea is by conducting market research. This includes a number of steps such as evaluating your competition, researching your target customer, looking at market and consumer trends, and understanding your unique selling proposition.
Answering a few questions about your audience and competitors will tell you if there’s space for your product or service in the market. Can you offer something your competition can’t? Is there an underserved market that your specific brand can target? What trends in your industry indicate that it’s the right time to launch?
2. Determine your business model
What kind of business can you run, based on the nature of your craft? Determine if you will run your business from home or if you will run it solo or with a business partner, and if you need to outsource or hire for any part of the process. Will you sell finished goods or services? Do you plan to sell online or in person? Or maybe some mix of the above?
Writing a business plan will not only answer these questions, but will also help determine factors like required funding and path to profitability. If you choose to seek outside funding, a business plan helps frame your pitch to investors.
3. Develop your brand
Say you’ve been dabbling in jewelry design, maybe gifting or selling your pieces to friends. As you transition that hobby to a business, your work should be anchored to a brand. A brand defines everything around your product or service, including what you stand for, your brand voice, visual guidelines, and your brand story.
A strong brand will inform your website, branding assets like logo design, social media content, and product packaging. Even if you’re selling a product in a crowded market, branding can set you apart from the competition if you can tell a compelling story that resonates with your target audience.
That story can also attract press attention. “If you are not dedicating time and energy to storytelling, then the media doesn’t have a story to tell,” Omsom founder Vanessa Pham says.
4. Consider funding options
If your business is born from a hobby, you likely already own much of the equipment required to produce your product. However, in order to transition, you may need to upgrade machinery, buy supplies in bulk, or even transition rooms in your home to dedicated workspaces.
For example, if you’re a fitness buff looking to parlay your love of movement into virtual classes, consider that you’ll have upfront expenses for lighting and camera equipment. Also consider other costs like website hosting, accounting software, and online advertising.
In some cases you may need to apply for a loan, small business grant, or capital offer, start a crowdfunding campaign, dip into your savings, or seek other types of funding.
Hobby businesses, however, are usually conducive to a bootstrapping method—or funding the business on your own by investing profits back into it. Even if you start a business with no money, as you grow your sales, you can use those profits to slowly upgrade equipment or invest in marketing.
5. Streamline your processes and workspace
Tinkering with furniture making in your garage is one thing, but is the space set up in the most efficient way to transition to a woodworking business? You’ll be spending more hours in the space than you did as a hobbyist.
Consider ergonomics (a better chair, anti-fatigue mats), the flow of your workspace (how things are arranged for efficiency), and whether or not your space and processes meet legal requirements for ventilation and safety.
When Melissa Butler started making lipstick in her kitchen, she was still working on Wall Street full time. When she left the financial industry and made a real go of her small business, she realized her kitchen lab was no longer sustainable. The Lip Bar operations moved to a factory, allowing Melissa to scale and follow beauty industry regulations.
6. Set up an online store
Many hobbies can translate into a business that sells goods and services online. Setting up an online store on a platform like Shopify is a great way to launch your business without a lot of upfront cost. Once you’ve done that, consider other sales channels to expand your reach.
The right sales channels can help you reach the right audiences, even if your marketing budget is low. If you make handmade goods, set up your own website so you have ownership over your brand and email list, but also try selling on a marketplace like Etsy, where handmade buyers can discover you.
If you’re a hobbyist online creator, like a comedian, or you sell virtual class subscriptions for DIY home renovations, consider channels where your personality can shine. TikTok has been a springboard for several influencers-turned-brands—and you can sell on TikTok with Shopify’s integration.
💡 Tip: Start with our guide on how to start a business and follow step-by-step instructions to create an online store for your new brand.
7. Launch and market your brand
It’s time to launch! If you’ve been at your hobby for many years and have had support from family and friends, start with these loyal fans to help promote your new brand through word-of-mouth marketing. Treat these folks as your first customers and nurture the relationship as such.
Set up social media accounts and a Coming Soon page in advance of your official launch to generate buzz and grow your email list and followers. There are several organic marketing ideas for creative small business owners with even smaller budgets.
8. Create boundaries
Hobbies often integrate seamlessly with life—knitting in front of the TV, gaming in your bedroom—but if you’re considering upgrading to a business, those spaces may no longer work for you. Separating your work spaces from your life spaces will help you create boundaries and maintain a healthy work-life balance.
9. Set yourself up to scale
Embrace optimism and blue-sky thinking: your hobby-turned business could catch on, leaving you scrambling to meet demand. That’s the dream! Don’t get caught by surprise and risk annoying your new fan base with slow customer service and sold out products.
Consider how you will scale at each sales milestone. And, get help early, even if it just means outsourcing your least favorite tasks to a VA or part-time employee so you can focus on the big picture.
As you develop your own hobby business, look ahead two, five, and 10 years—can your business scale sustainably, and what will you require for it to do so?
Questions to ask before starting a hobby business
Maresa Smith
Before you take the necessary steps to turn your hobby into a business, there are a few key questions to ask yourself to understand if the move is right for you.
Does your hobby have the potential to become a viable business?
Your hobby may be close to your heart, but are there others who share your love of this craft? Validating your product idea through research will help you determine if there’s demand for what you’re offering and if you are bringing value to the market. This is also where you ask yourself if your hobby is sustainable as a business—is it something you can scale? A business plan can answer many of these questions for you.
Are you in it for love, money, or both?
A common pitfall for those who turn their hobbies into businesses is that the thing that once brought distraction from work and stress can suddenly become work and stress. When your craft is a hobby, you only answer to yourself. Expectations from customers, vendors, and retail partners can add pressure. Is your hobby something you will still enjoy if it becomes your full-time gig?
Your business doesn’t necessarily need to scale exponentially, however. If you’re in it for the love of your craft, a business can serve as a way to pay for itself or generate a little extra spending money.
Will your hobby become a side hustle or a full-time business?
It’s possible to keep your business small, running it on the side while you still work. Consider whether this is enough or if you plan to scale your hobby into a full-time business. It may also become your early retirement plan as you transition to an income source that’s more flexible with fewer hours.
Hobby to successful business examples
Many entrepreneurs found their start by transforming their passion into a brand. They saw potential in what they already loved to do in their free time as a viable business capable of making enough money to become a success. Here are a few hobbyists who became their own boss.
Mush Studios
The height of the rug tufting trend collided with the COVID-19 pandemic and Jacob Winter was looking for a new hobby. He took to the craft immediately and started sharing his processes and creations online. When audiences took notice, Jacob saw that his newfound passion could become his own business. Jacob launched Mush Studios, selling amorphous rugs to his TikTok fans. In explaining his viral success, he says, “People wanted something they had never seen before in terms of shape and texture.”
Floof
When Hannah Perry became a single mom after a divorce, she needed to find a way to support herself and her family. She had already been experimenting with baking and cotton candy creations when the idea for a rainbow cotton candy cake took hold. The cake went viral online and Hannah realized it could be a real business. She launched Floof, selling her cakes across the country including to celebrity clients.
Prairie Sage Soap
Trisha Trout made soap as a hobby while staying home to raise her children. When her husband passed away unexpectedly, the family needed a new source of income. Trisha turned to her passion as a way to support herself and built Prairie Sage Soap into the thriving business it is today.
Jaswant’s Kitchen
Jaswant Kular raised her daughters on traditional Indian cooking. But when her kids moved out on their own, she realized they struggled to recreate the dishes of their childhood. Jaswant made spice blends to help her daughters more easily cook curries and other traditional dishes. That’s when she discovered demand for the product beyond her own family. Jaswant’s Kitchen is now found online and in grocery stores everywhere.
Craft your career around what you love
There’s nothing more relaxing and satisfying than losing yourself in your favorite pastime. When you know, you know. If you’ve ever wondered how to harness that feeling and turn it into your livelihood, you’re at an exciting crossroad.
As a creator or as someone passionate and skilled at your favorite thing, you already have an important advantage. You have the product, you have the knowhow, you have the drive. What’s stopping you from making the leap from hobby to business?
Hobby to business FAQ
How much money can you make before a hobby becomes a business?
In the eyes of the government, hobby income is real income that you may need to claim. The true difference between a hobby and a business comes down to tax law. The laws vary from country to country and depend on many factors. Check with your local government to find out how much you can earn before you are required to claim it on your taxes.
Do I need to register my hobby as a business?
The short answer is no. In many regions, you can operate a business without a license. But this depends on the industry, too—some industries require specific licenses (say, if you process meat products). Check with the government agency that regulates small businesses to see if your hobby business requires any sort of licensing. Registering your business is usually a good idea either way, as it generally comes with certain protections.
Should I turn my hobby into a small business?
You should turn your hobby into a business if the advantages of doing so outweigh the challenges. Many hobby businesses are easy to convert into businesses that allow you to make money on the side from home. Learn how to turn a hobby into a business and understand the implications before you do. Do your research to see what, if any, modifications you’ll need to make to comply with law and file taxes.
What is the most profitable hobby?
Profitability of your hobby business comes down to having a solid business plan, the right pricing, and an interested market for your product. Any hobby can be profitable, provided you have those elements in place. While high-end custom furniture could fetch high price points, you’ll be selling fewer of these than $8 knit mittens. Invest time in a financial plan to determine how much you need to sell and what retail prices to set in order to turn a profit.
