Have you found something outside of your 9 to 5 job that you are talented at or passionate about like photography, crocheting or baking?
Many choose to turn their favorite hobby into a lucrative side business. With Etsy (there are more than 4,000 active shops) and other easy-to-use ecommerce sites, providing a tempting ideal medium for selling your latest creative endeavors. If you are contemplating turning your favorite hobby into a side hustle, we outline five important considerations.
How do you decide what to charge?
A common question when starting up a small business selling hand-crafted items, photographs, baked goods or more is how to price your work. To make a profit, the cost of your materials and labor should be less than the price you charge. Much less in fact, as your time is your most valuable resource.
A search result can yield dozens of formulas to help you determine how much is appropriate. If you need to ship, be sure to take that into account as well and make it clear to potential customers if they are responsible for shipping charges.
PRO TIP: Don’t be tempted to price match mass produced goods! A common question is why a box of grocery store cookies are cheaper than your decorated, made-from-scratch cookies or why a knit sweater from a department store is much cheaper than the hand-made version. Mass production often means discounts on raw materials, or other efficiencies that you may not have as one person. Don’t be pressured into lowering prices and devaluing your time or effort.
Article That May Interest You: How to Do What You Love
Tax implications and reporting income
Selling items that you make or services you perform is a form of self-employment, and it’s important before you make your first sale to consider the potential tax implications. This includes keeping receipts for materials, tracking business expenses and incoming revenue, and any state or local taxes you may need to remit for sales. If you are using a site like Etsy, some of these may be taken care of for you. There are a lot of grey areas with ecommerce and state and local taxes (for example, if you are selling clothing that is tax exempt in MA to someone in New York where clothing is taxed). It’s best to consult a business tax professional to determine what taxes you may need to remit and the best way to handle that process.
Depending on the amount of profit you make, you may also have to pay income or self-employment taxes. Self-employment taxes, used to cover Medicare and Social Security, come into play after you make a certain amount in net profit, or your revenue minus your business expenses. Contact your CPA to discuss your personal tax situation and how a side hustle may impact you.
Licensing and other legal and regulatory matters
Characters, logos and other such items are often copyrighted and trademarked, meaning that you cannot sell items with that character, logo, name, lyric, etc. without the express permission of the person who holds the legal rights. Sellers who use this intellectual property without a licensing agreement risk legal action by the entity that holds the rights to that image or phrase.
Thinking about selling food items from your home? There are important state and local regulations to consider that may require you to get a permit and to comply with certain rules. If you don’t have access to a commercial kitchen, you can find more information about residential kitchens and the sale of food on the Massachusetts Food Protection Program website.
Depending on the type of product or service you plan to sell, there may be other regulations or laws pertinent to you. A good business lawyer or business advisor can help you determine what you need to know.
It’s perfectly fine to do something just for the pleasure of it!
In case you need permission: It is perfectly acceptable to do something in your spare time just for the pleasure of it. Instead of dealing with the headache of creating, marketing, pricing, shipping and maintaining a relationship with customers, you may find that you prefer to only use your talents for your friends and family.
Our Learning Center has plenty of budgeting advice if that helps make ends meet without needing to turn your passion into a profit-making venture.
Ready to make a business plan?
If you are ready to start your own business, we are here to help! Check out the Business Resources page on our Learning Center for helpful tips. The following articles may help get you started:
Get the latest financial tips and advice by signing up to receive our emails.
Rockland Trust Online Banking gives you a variety of services that help you use and manage your accounts, whenever and wherever you want.
* indicates a required field.
Rockland Trust makes it easy to manage all of your accounts with our simple online portals.