You are probably thinking that an economic downturn is not the best time to be thinking about turning your hobby into a profitable business. Think again. This can be one of the smartest moves you can make – if you take the time to plan ahead and give yourself the best chance possible of success.
Here are 5 tips that you can follow to turn your dream into a plan of action.
1. Write a business plan
This is a requirement for any business that will be seeking funding from other people but there is an even better reason for writing a detailed and comprehensive business plan. When you are forced to write your ideas for others to read it tends to focus your thinking, make you seek better proofs for your assumptions, and sharpen your description of the actions that you will be taking. You can find some good business plan models online but the basic requirements are that your business plan should define your business, the products and services that you'll be offering, how you will distinguish yourself from your competition, and your proposed operating procedures.
2. Consider a corporation or an LLC
If you do not have the time or the inclining to research the best form of business organization for your company then get the advice that you need from an accountant that specializes in business tax returns. Corporations and LLC's help to protect your personal assets from your business debts and liabilities but there are certain tax advantages to formal business organizations that are simply not available to sole proprietorships. The Inc. or LLC after your business name also adds credibility and cache with customers and business partners.
3. Get the business licenses, permits, and tax identification numbers that you'll need
Every business other than a sole proprietorship requires a federal tax identification number and every business that hires employees will require one also. Depending on the nature of your business activities and state and local requirements your business may need a particular license or any variety of permits. Do your own research on this or consult with a local attorney who is familiar with other businesses like yours.
4. Open a business checking account
Even if you decide to operate as a sole proprietorship you will still want to open a separate checking account for the business. It's always a bad idea to mix personal and business income and expenses. For one thing, commingling accounts makes it a nightmare to separate them back out at tax time, and two, you will lose the ability to manage your business finances because you'll quickly lose track of its actual income and expenses.
5. Create your brand and start promoting
If you do all your business locally then get business cards and a letterhead that will distinguish your business. Develop your business persona and promote it through the community. People do business with people that they trust and they like. If your business will be online or with remote customers the same rules apply. Deliver what you promised, and make everyone feel that they are getting their money's worth from you and more.