- Wed Feb 23, 2022 2:39 pm
#14643
Business vs. hobby. You have to decide this when you start something new. I have had to "reinvent" myself a couple of times in my career and am doing it again now. If the work you are doing is a "hobby" then recovering your costs is great, if you intend to operate a business that will support you and your family then you have to be extremely profit focused.
You can't offer goods and services at a loss if you want to turn a profit. Running a business has a lot of "hidden overhead" that no one considers when they engage in a hobby.
Think about all the machines you have purchased to do this work, each one takes up space in a shop or your home, it has to create more profit than the floor space costs you annually, and the purchase of the machine and the maintenance of the machine over it's expected lifetime and for some machines you have to include a replacement fund for when it wears out in a few years.
I was speaking with a friend in LA about this recently, he is a film editor and provides his own equipment and a room in his apartment to do client work. He intends to run a profitable business, but has never set aside enough money to replace his editing system, which for him can easily cost $25K to replace. His current system is old enough now that it can no longer run the latest software version so he will have to upgrade soon or will be "out of business" because he didn't charge enough to replace his equipment to stay current.
If you are really dialed in on your profitability you will be able to track each of your major equipment purchases vs the profit it generates. Some things you have to keep for the occasional job and it may take decades to realize a profit on a single item, and other things you will be able to know it wasn't worth the purchase price and it should be sold to recoup some money to invest in other gear that will earn a profit every year.
Business or hobby? You have to choose.
My $0.02/ adjusted for inflation $0.25
You can't offer goods and services at a loss if you want to turn a profit. Running a business has a lot of "hidden overhead" that no one considers when they engage in a hobby.
Think about all the machines you have purchased to do this work, each one takes up space in a shop or your home, it has to create more profit than the floor space costs you annually, and the purchase of the machine and the maintenance of the machine over it's expected lifetime and for some machines you have to include a replacement fund for when it wears out in a few years.
I was speaking with a friend in LA about this recently, he is a film editor and provides his own equipment and a room in his apartment to do client work. He intends to run a profitable business, but has never set aside enough money to replace his editing system, which for him can easily cost $25K to replace. His current system is old enough now that it can no longer run the latest software version so he will have to upgrade soon or will be "out of business" because he didn't charge enough to replace his equipment to stay current.
If you are really dialed in on your profitability you will be able to track each of your major equipment purchases vs the profit it generates. Some things you have to keep for the occasional job and it may take decades to realize a profit on a single item, and other things you will be able to know it wasn't worth the purchase price and it should be sold to recoup some money to invest in other gear that will earn a profit every year.
Business or hobby? You have to choose.
My $0.02/ adjusted for inflation $0.25
- By JimmieJoe
- By WILD BILL