Is Your Side Hustle a Hobby or a Business?

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Is Your Side Hustle a Hobby or a Business?

In today’s world it may seem easy to start your own small business. Heck, all you need to do is find something to sell (be it goods or services), set up a website, and start working in your spare time, right? But how do you know if your side hustle is a hobby or an actual business?

While some may argue that they can be one and the same, businesses require more planning, more attention, and higher standards than a hobby that might also net you some cash. So how can you tell the difference? Here are three questions to ask yourself about your potential small business:

Is it profitable?

Businesses make money whereas hobbies typically cost money. While it’s normal for startups to run at a loss for a couple of years, if you’re far down the road and still aren’t seeing a profit, then you likely don’t have a viable business. Worse yet some entrepreneurs might not even realize that they’re losing money.

Even if you’re starting a business as a side hustle you should still manage your books as you would any small business. This includes separating out your business expenses so that you can clearly see how much money you’re spending compared to how much you’re bringing in. If you’re not willing to do your books properly (or hire someone to do them for you) then what you have is a hobby and it should be considered as such.

Is it scalable?

With the advent of e-commerce it seems that everyone has an Etsy store or other online outlet to sell their homemade goods now. Putting your talents to good use and making a small profit can be a great idea for a side hustle, but could it blossom into a real business? How will you be able to keep up with demand if your sales skyrocket? And can your business survive without you or is it a one person show?

At some point if you’re concept is successful it will need to be scaled. Unfortunately this is where many businesses fall apart. Having too many sales may be a good problem to have but it is still a problem. In fact not being able to fulfill those orders could be a huge problem and even spell the end for your business if you aren’t careful. With that in mind, remember to be realistic with your side hustle and don’t get carried away trying to turn a hobby into a business that’s doomed to fail.

Would you be willing to leave your day job for it?

Think you’re business is ready for prime time? Are you willing to put your money where your mouth is? The truth is that your small business can’t reach its full potential unless it becomes your main focus. While it can be difficult to know exactly when the time is right to leave your nine-to-five in order to work on your own business full time, being prepared and willing to make that jump down the line is essential for any business owner.

At the end of the day, there’s nothing wrong with having a hobby. If that hobby makes you some extra money — even better. However, if you’re looking to turn your side hustle into a full-blown small business, be sure to ask yourself these questions as well as draw up a proper business plan that shows scalability and a potential for profit. Good luck.


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Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

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