Prosper Newsletter: March 2008 > Ecommerce

You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.

Making Your Hobby a Business

Deciding What Business to Start

The world of eCommerce is huge! There are people selling everything from used curtain rods to new hot rods. There is such a large variety of products sold on the Internet and companies through which to sell them. Deciding where to place yourself in the endless companies and products is one of the most difficult steps when starting an eCommerce business. However, one of the best places to look for ideas is yourself. What do you enjoy doing? What hobbies do you have that others also participate in?

Many people are skeptics when they are told to look at their hobbies. They ask, "Are there really enough people out there with similar interests that would be willing to purchase my company's product?" That is a good question, but before you answer it, you should think of a few things. First, it is easier to jump into a field that you already know something about. By starting a business that is connected to one of your hobbies, you have the advantage of previously thinking and acting like a consumer; thus, you are more likely to be in tune with the consumer's wants and needs (as they relate to your company). Also, if you are part of any large organizations (like a group of hobby enthusiasts), the members of those organizations may be able to help you start your business or provide expertise on how to maintain it. Creating a business often involves finding investors, mentors, and potential buyers; and many of these types of individuals can be found in large, hobby-oriented organizations. Take full advantage of such organizations. Finally, if you are working on something that you truly enjoy, you will generally be more pleased with your business. In other words, if you enjoy your niche, you are more likely to put in the long hours and the effort required to start up a new business.

Keep in mind that interest in a hobby does not mean that a hobby-oriented business will be successful, or that you are proficient enough with that hobby to make your business successful. For example, say you want to start a piano music store because you have played the piano for three years and your really enjoy it. Realistically, as a third-year student, will you know which types of music appeal to higher-level customers? Would you be sufficiently trained in piano to make decisions regarding types of music to sell? Would you be able to intelligently discuss your decisions?

When you pursue a business based upon a hobby, you should first perform some intense research about the business niche, its potential customers, and its competitors. Research your competitors and determine their numbers and how each one appeals to its consumers. How you would differentiate yourself from them. Next, you need to examine your own proficiencies in each area.

To be successful in your business, look for a need that is not being filled. Your product could be anything from a unique product, a variation on a common product (which may make it easier to sell), or a cheaper product that undercuts the competition. Remember also to step back and examine your interests and skills, and perform some research to see if any of your hobbies would make a good business.

Tax time is here!

To best position yourself (and your business) to take advantage of the best tax breaks, you need to be organized. Here are some tips to help you prepare and better organize for tax time.

Set up your home office. Most serious runners ascribe to an unwritten rule: use one dedicated pair of running shoes for all races. Talk to a runner and they may tell you that their exclusive use of one pair of shoes has a psychological effect on their running. When they put on their running shoes, they FEEL like running.

When you set up your home office, use it exclusively for your Internet business. When you sit down in your special place, or in that special chair, you will FEEL like building your Internet business—it will help motivate you to accomplish your goals. Quite simply, you will have made a comfortable place for you to conduct your business. It does not matter whether you have a separate room for your office or if you work at the kitchen table. But wherever your office is, make sure that the following fundamental items are present:

Atmosphere—Make sure your office is in an area where you may concentrate (the quieter the better). Having your desk in front of the TV is not a good idea (you will be distracted). You want to be able to review your materials, to make calculations and important decisions, and to call business partners, affiliates, and product suppliers in a business-like atmosphere without interruption. If you dedicate a certain room within your home for your business, the space will also become a tax deduction. You may write off a certain portion of your home expenses for your business. These expenses may include a percentage of your utility bills, telephone bills, and Internet access. You should consult with a tax professional for more specific information regarding your taxes.

Materials—all of your books, tapes, forms, and contracts should be within reach.

File system—keep a file system where you can store all of your business documents, expense receipts, etc.

Phone system—while it is not a necessity, many successful business owners have a dedicated phone line for their business. You may use either a landline or a mobile phone, depending on your preference and budget. It is best if only yourself, or others working with you, have access to the dedicated phone line. You should always answer that line in a professional manner—possibly announcing your business name when you answer. Be sure you have some sort of voicemail set up so you never miss a call. Also, consider having some way to be contacted while out of the office, whether by a wireless phone or a pager. You always want to be available. You should also take advantage of available tax breaks for the expense associated with your business phone line. Again, consult with your tax professional.

Computer system—computers created a great Internet opportunity and are now a part of our everyday society. There are many wonderful ways to access the Internet. There are also many timesaving software programs available to assist you with your business. If you have an older computer, you might want to consider upgrading to a newer model. If you have a slow Internet connection, you might want to consider upgrading to DSL, cable, or a satellite connection. This is not a necessity, but you will be able to accomplish much more in less time with a faster connection.

Business plan software—there is no better way to organize your business venture then with good business plan software. Business plan software may be able to help you in each of the following areas:

In summary, it is important to be as organized as possible with your new business. Whatever system of organization you establish, it should be something with which you are comfortable. Otherwise, it will not be effective. Proper organization is CRITICAL at tax time. Remember, many initial organizational expenses are tax-deductible business expenses, which you may use to your advantage. As a small business owner, you are now contributing to the national economy. The government provides tax benefits to encourage and to reward small business owners. Make sure you are in a position to take every advantage of them.

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*Please see the Elective Class Catalog in your Success Center for dates, times, and class details.

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