Could Your Hobby Become Your Small Business?

Most people spend their entire lives working for someone else, sometimes doing work they enjoy and other times just earning money to pay the bills. They dream of retirement when they will have enough money to do something they love to make a bit of money and keep busy. Some entrepreneurs have figured out ways to make their hobbies pay, either by focusing their energies and knowledge in very specific ways or by creating side businesses that do not take too much of their time but are still financially and personally rewarding.

Suppose you like coin collecting and have a real passion for it. You are familiar with which coins have very high value, what coins other collectors discuss and search for, and which lower value coins can be located easily and sold for a profit. You’ve read extensively about or even seen famous coin collections exhibited. With this sort of hobby, it’s not the coins you manage to acquire that gives you a marketable advantage - it’s your knowledge of both coins and coin collectors and your ability to bring the two together. Collecting has given you that skill set, and setting up an online storefront/ecommerce site would be a straightforward way of making that available to others. Beyond that initial investment of time and money, all you’d have to do to make your business viable would be to spend more time on your hobby.

This seems like a win-win situation, doesn’t it?

There can be complications, however. A lot of hobbyists dabble in making money, selling to friends or acquaintances or just when they need a little extra cash. They ease into business creation so slowly they don’t realize they are failing to act like business owners, whether that means detailed record keeping or declaring income to the IRS. Obviously, this can get them into trouble - the more trouble the more successful they are.

A long-standing IRS rule is that the income you make doing your hobby is considered business income if you’ve made a profit for three out of five years, including the current year. Obviously, the more money you make, the more it would benefit you to consult a tax professional and ask for advice. You do not want the IRS to dun you for thousands of dollars because you were better than you thought at your interests.

It gets more complicated when you lose income because, while the IRS counts every bit of money made as income and expects you to report it, it only allows you to deduct losses against gains. So if you make $2000 selling coins and lose $775, you are responsible for paying taxes on the net $1225 of profit. If you simply lost $775 this year on your hobby, that’s just bad luck for you.

It’s always best for a business owner to keep scrupulous records and remain apprised of any tax laws that might apply to them, but don’t let those considerations scare you away from trying to build a business with any knowledge or skills you’ve picked up because of your love for something. Chances are that if you’re in expert in something, there’s a way to benefit from that expertise somehow. A little bit of brainstorming into the how could result in money in your pocket.

How Does Your Small Business Cut Energy Costs?

Small businesses have endless expenses, but one of the largest is the cost of energy.  Almost every small business must use energy in one way or another.  For small, local companies that are competing with larger conglomerates, fluctuating energy costs can be quite a hindrance, to plan for and to pay for.  Businesses are continuously looking for ways to cut back on the cost of energy.  Particularly in the wake of rising energy costs such as gas prices, most small businesses are forced to find new ways to ensure they are not losing too much money.  

Small companies that rely heavily on transportation and delivery can save money on energy costs by doing some simple planning ahead.  For trips that require numerous stops, companies should map out the most effective route that encompasses all needed destinations.  Some businesses tack on fuel surcharges when making deliveries at times when energy costs increase and then remove them when they decrease.  This trend began in 2008 when gas prices sky-rocketed.  

In the age of online communication, most meetings can be done via Skype, Google Chat, or in conference call.  Instead of using the money to pay for fuel to drive to meetings, small businesses are choosing to communicate via the internet, setting up meetings online or over the phone. Some businesses have chosen to eliminate their land line and do all of their telephone communication either by cell phone or VoIP.

Another crucial way to save money when energy costs fluctuate is maintaining your business vehicles.  Make sure, particularly after harsh winters, that engines are finely tuned, oil has been changed, and tire pressure is where it should be.  All of these can positively influence your car’s gas mileage.  When gas prices rise, the costs of shipped goods also increases. Small businesses especially must find ways to combat the expense of energy, so some choose to increase the price of their product or service.  Even a small increase can help balance the books.  

Gas prices fluctuate for several reasons.  Generally, the change in season from winter to spring brings more drivers out, which causes prices to rise.  The trend is that prices decrease after the initial spike in beginning of the summer, but after Memorial day will increase again with the amount of travelers on the roads.  Prices also follow the fluctuation of global oil costs; rising and falling when they do.  Another reason prices may rise is seasonal maintenance and upkeep of refineries.  

Small businesses have obvious budget adjustments to make when it comes to fluctuating energy costs.  There are some obvious ways companies cut energy costs such as regular vehicle maintenance.  But also underlying ways that may not be as apparent to the consumer eye but are in direct correlation to the increase in gas
prices, such as product cost inflation.  However small businesses choose to adjust; energy costs have a large impact on net income and in turn, on our local economy.