I talk to a lot individuals (myself included) who have started some hobby or pet project that has some sort of business experience. An example may be a blog or website. Maybe a piece of software. Could be a book or an invention. Unfortunately most get stuck as pet projects. What can you do about that?
As pet project or hobbies we do stuff ourselves, and we talk with our friends about it. The whole time doing everything we can to spend as little money as possible on it – because it is a hobby.
At some point the pet project needs to be evaluated to see if it has business potential. This evaluation is as much a gut check (what do you want) as creating a business plan and evaluating it for income potential. Your frustration will be reduced if you accurately evaluate it though.
Four outcomes are possible:
- It stays a pet project and you continue to invest little money in it. Pros: Doesn’t cost much and stays “fun”. Cons: Doesn’t generate much income.
- It becomes a semi-self funding hobby – still a hobby, but it generates almost enough to cover the costs. This may even look like a business at this point, but the objective is a self funding hobby. The principle remains the main player, usually with their friends. Pros: Still doesn’t cost much, may even cost less, gets more exposure. Cons: You may have just created yourself a new job. Little income potential. Element of risk.
- It becomes an underfunded business. The objective is for the business to generate revenue for the business owner and employees / shareholders. But it is funded like a hobby, and requires way too much time from the principle (the principle becomes the biggest cog and the biggest clog.) Pros: Could grow to a level 4. Cons: Takes a lot of time, but produces little output.
- It is treated like a huge business and becomes a huge business. This represents an investment in sound legal and financial council. Everyone’s roles are clearly and legally defined. A corporation is often setup. The principle has the potential to retire and earn residual income. Pros: Greatest income potential and greatest impact. Cons: Requires capital (maybe investors), time, and some risk.
The cost, potential and risk goes up with each level. A level 1 costs very little, but generates very little income. A level 4 costs more, and generates a lot more income. Not to say a level 1 cannot generate more then a level 4, but it will usually mature to that level before the income gets that high.
Are you involved in a pet project that may have income potential? What I would recommend is you set down with your principle players (maybe just you). Decide what your objective is. Put it in writing. Define everyones’ roles. Put it in writing. If you want to go the business route then make a business plan and find a business coach/mentor (someone who has done it before). Secure some investment capital (which may come from the principles or outside investors) and then get some good sound legal and financial advice.
Or you might be happy with a lower business maturity level. It is important you know what exactly you want, because before you define what you want you cannot get it. As long as you are honest with yourself, there is nothing that says you can’t start at a low maturity level, and advance it over time. It is important that you take the income you generate and reinvest it in growing the business.
Most people who have move to level 4 maturity level and experienced success will usually jump straight there next time.