How to Determine if an Idea is a Hobby or a Business

Ideas abound everywhere. Sometimes, they die before they’re realized. Sometimes they’re realized but not monetized — a hobby. Sometimes, an idea is so good that it must be acted upon and turned into a business.

Business make a profit. They need to in order to remain above board and pay their bills. A business requires 110% of your time to maintain, especially in the beginning. A hobby generates little to no income and is done during free time. Most importantly, a business addresses a problem while a hobby is done for fun.

So how to know if an idea can be turned into a successful startup? The first step is to see if it answers a widespread problem, or just a personal problem. For instance, if someone who loves making candles comes up with a great new way to handmake them, will anyone else really care?
A successful business targets widespread problems and comes up with a scalable solution. A successful hobby is something that helps the hobbyist and perhaps a few others.

If it is determined that the idea does indeed solve a problem, the next step is market research. Some key research questions to ask are:

  • Have others already provided a solution to the identified problem
  • If so, is it a good solution?
  • What does the competition do well, and what do they do poorly?
  • Who would be the most interested in your idea?
  • What is the best way to package or present your idea? i.e. mobile app?

These are just the first few questions that need to be asked before an idea can become a thriving business. In truth, it is helpful to create an entire business plan around an idea, just to see how it could all play out. This helps visualize an idea and makes it simpler to determine if an idea has long-term, sustainable business value.

The next step is determining if the idea is scaleable. While it’s good to start small and build big, the idea is has to be scalable. If the idea is to make an app that highlights the best local hiking trails in Silicon Valley, is it going to be possible to expand beyond Silicon Valley? The idea may be a great room, but if there is no room for growth, then there is no way it can be turned into a successful business.

Be aware of the level of commitment that a business requires. Probably the biggest contributing factor to the success of a business is the person steering the ship. An idea might be a great one, but it requires an entrepreneurial spirit and whole-hearted dedication. Anyone who starts a business absolutely needs to be aware of what they are getting into.

Volunteering, interning or working part-time at a startup or company in a related field is a great way of gaining an insight into what is required of a SMB owner. Another option is to start small — run the business on the side, in addition to working a standard job. This gives potential entrepreneurs a taste of the level of commitment a business needs.

If just running the business on the side requires too much time, then perhaps this idea is a hobby. Again, there is absolutely no reason an hobby can’t generate a revenue, though the profit margin will never be as high as that of a business.

The work isn’t done here, of course. The last step in determining whether or not an idea is business worthy is if there are others willing to invest in the idea. This doesn’t mean mom and dad coughed up 2grand for the idea. While there is nothing wrong with mom and dad contributing, parents and other family members or friends tend to be biased and probably won’t be honest.

An idea needs to be vetted by someone who is familiar in the field, or at the very least familiar with what it takes to run a business. A serial investor is needed here: if a venture capitalist firm or angel investor finds merit in the idea, it is much more likely to succeed. After all, most VCs and angel investors are have years of experience in the field the entrepreneur is attempting to enter.

This is the last hurdle mentioned here for a reason — what VCs look for the most in an investment opportunity is a well-researched and scalable idea that answers a marketable problem, pitched by a passionate and dedicated entrepreneur. Remember — a pitch needs to be fantastic or investors will not fund a project.

An amazing company with a young and vibrant team that I would recommend to any business is SDI. This team of highly professional experts with a quick turn around time are always bursting with ideas. Sometimes I wonder where do these guys get all their energy from? Hey, why not have a chat with them and see what freebies they have to offer for 4th of July :)

About the author:
Sakshi Sharma is an employee with Software Developers India, an app, software and web development firm located in Silicon Valley, California. SDI has years of experience turning ideas into thriving businesses, and can put you in touch with investors throughout Silicon Valley and elsewhere. Get in touch now by email or by calling 408.802.2885.

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