How to cash in on your hobby


Amid widespread pay freezes and the rising cost of everything from food to fuel, most of us could do with a little extra cash each month.

The number of part-time business owners has risen by 200,000 since 2010, according to Barclays, with many more hobbyists cashing in on their craft. As the part-time owner of a furniture restoration business, these are the key lessons I have learnt.

Define your skill
Skills derived from professional training such as plumbing, photography or beauty therapy present obvious money-making potential, while others may require more lateral thinking. If you're a nab hand with a toolset for example, you could take on handy man jobs, while baking enthusiasts could sell their creations or run cake decorating classes.

Gaining the necessary training and becoming competent to offer a high quality product or service is key to a successful venture. Many creative crafty talents don't require formal training, but it is a good idea to be upfront with your clients if you are self-taught.

Research the market
With a business of any size, research is vital to see if there is a gap in the market for your product or service. It might be time consuming, but it will save a huge amount of effort and money to figure this out before you get started.

Research online to see what competitors are offering and evaluate their products, prices and branding. Think about how you can carve a niche to set yourself apart from what is already out there. Consider whether you will keep it local, or open up to national or even international customers.

Promoting yourself
Having a great business idea is pointless if no one knows about it, so start talking. Word of mouth is invaluable for hobbyists and small businesses, and social media presents massive opportunity for free international networking and promotion that should not be ignored.

If finances don't stretch to a website, invest time in building a strong Facebook page and maintain an active Twitter presence to publicise your skill. Consider starting a free blog to showcase your products or document commissioned work, and ask happy customers to share feedback that you can publish. If relevant, consider advertising in the local press.

Time and money
Be realistic from the outset how much time and money you can commit to your sideline and think carefully about the scale that you want your venture to take. If you are an upholsterer for example, you might decide to take on one project a month to ensure you can commit the necessary hours to do a good job in your spare time.

Remember to factor in set up costs too, such as the materials and tools required to offer a top quality service.

Competitive pricing
Pricing your product or service correctly is the key to success and one of the trickiest elements to get right. Your prices need to be competitive to attract business, as well as covering materials, labour, overheads and profit.

Underestimating your worth is one of the most common mistakes for new businesses, particularly creative and craft ventures. You may love what you're doing but the figures need to add up to make it financially worthwhile. Always monitor your time and shop around suppliers to get the best possible price for materials.

Tax implications
There is no statutory definition of when a hobby becomes an actual trade and the decision for tax purposes is made on a case-by-case basis. Mitch Young, a tax partner at Lerman Jacobs Davies explains: "HMRC states that where the amounts are too small to tax, it is their decision and not that of the taxpayer, and that the obligation to disclose must have been met.

"Therefore I would usually always be cautious and contact HMRC to let them determine whether you should be declaring this 'hobby' income to them."

If you decide not to advise HMRC because of a lack of liability, Young advises to keep a record of dates, receipts and expenses, to cover yourself in the event of a future enquiry from HMRC.