How to Determine if Your Business is Just a Hobby

The difference between a business and a hobby is pretty easy to spot: A business is intended to earn money. A hobby might make you money, but you’d be doing your hobby whether or not it ever earned you a dime. A business that never makes any money is a failure, but you can be a successful hobbyist whether or not it earns you anything, and whether or not it costs you anything.

It really is as simple as that. Everything else that makes up a business, from business cards and apps to corporate accounts and corner offices- that will come later. It will come to you as you need it. If you’re just starting out, then you can officially start calling your business a business the first time you take an honest shot at making a sale, or from the minute you slap a banner ad on your website, or as soon as you begin work on your product. A business is just a system by which the owners, employees and contractors try to earn an honest dollar. If you think you need anything more than a solid product or service to in order to call what you do your business, you don’t. So don’t waste any money renting out office space for all the employees you don’t have or buying advertising for a product that isn’t nearly finished yet.

This leads us to a follow-up question: When is it time to call it quits?

The answer to that one is a little more complicated, but it starts with those two words we all hate to hear, “It depends.”

It depends on how much time you’ve given your business to flourish, what your business goals are, and whether or not you can afford the time, money and energy to keep it afloat until you hit your profit point. Of course, the answers to these questions will vary from one project to the next. A traffic school, for instance, has very clear goals: Teach people to drive better. The same goes for a restaurant: Feed people good food, get paid for it. The clearer your goal, the easier it will be to know whether or not you’re reaching it.

Money and other resources, on the other hand, are the deal breaker. Even if your business isn’t costing you much in the way of cold hard cash, at some point you have to figure out whether or not it’s worth the energy you’re putting into it. Again, for a hobby, this isn’t a serious concern: A hobby is worth however much time, money, and energy you enjoy putting into it. Sooner or later, a business needs to give more to you than it takes from you.

As a general rule of thumb, you don’t want to put anything into your business that you can’t afford to lose. We hear fairy tales about people mortgaging their homes and quitting their jobs in order to pursue a new business idea. In reality, those who succeed will generally keep their job, keep their home, and explore business ideas that have a low bar of entry. Once you’ve made your first few thousand with the website that’s only costing you ten bucks a month to keep online, then you can think about getting in a little deeper.

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