Everybody has ideas. However, very few people actually execute or otherwise take action on those ideas. Most people never actually try to make their ideas come to fruition. They merely let their ideas die a slow death, locked up inside of their brain. And of those few that actually make a go of it, they usually do it with one toe in the water and the other foot on solid land, just in case things don?t turn out the way they expect. In other words, they treat them as mere hobbies, with the expectation that if their hobby ?takes off?, then they will treat it differently.

In most cases, it doesn?t work that way. At least, I don?t think so. You have to go all in. Give your hobby a real chance at success. JFDI.

If you have a sideline hobby, interest, or idea that you would like to do on a fulltime basis or otherwise truly pursue, the following is a list of eleven steps that I believe you need to work on to convert your hobby into a real business.

Disclosure: I am not an attorney nor do I ever want to be one. So use the following information at your own risk. In addition, most of what is mentioned here pertains to a business that can be done online. Some things may not apply to other types of businesses.

 

Buy (And Host) A Domain Name
Who we use: directnic.com
Alternatives: godaddy.com, 1and1.com
direct nic domain names provider ?? godaddy domain name hosting ?? 1 and 1 domain name hosting

Buying a domain name is a pretty obvious first step. I would do this prior to incorporating or setting up a formal business structure. Once you buy a domain name, you can either have that hosting provider also host your email, or you can use Google Apps to host your email. Most domain registry providers offer ample instructions on how to manage your DNS records and other details. I recommend that you simply use the services of the domain registry to manage your DNS records. It is much easier than managing your own DNS server and software.

Bottom line: It?s not complicated, and it is really inexpensive, usually on the order of $10-15/year/name.

 

Incorporate

incorporate your business

Incorporate in the state in which you live. Despite what some people say, there?s no real tangible benefit for a small firm ? initially ? incorporating in Delaware. You can always move your firm later as it grows. Besides, by incorporating in the state in which you live, you won?t have to find someone to act as your registered agent.

If you have one, consult your lawyer about this step, but it is not necessary to have a lawyer incorporate for you. You can save yourself a lot of dough if you do this on your own. Simply Google search ?how to incorporate in? and then click on the State agency responsible for corporations. This is usually called the Department of the Secretary of State. For example, in North Carolina, the proper web address is: http://www.secretary.state.nc.us/corporations/

Incorporating usually means applying as a business corporation (C or S corp) or a limited liability corporation by paying a fee and submitting a form/document called the Articles of Incorporation. This is a simple one-pager defining the number of shares, etc. Nothing complicated. There are plenty of examples online.

There is another document that you will need: the Buy-Sell Agreement. This document spells out the mechanics of how stocks can be sold. You can Google the term ?buy-sell agreement? for examples. In the case of my firm, when I did this 20 years ago, I went to the Law Library at Duke University, found a few Buy-Sell Agreements, made a photocopy of one I liked, and then copied/typed it up on my Mac. There?s no ?magic? to this.

If you want some advice on the pros and cons of the different corporate entity types, consult an accountant or a lawyer. Accountants are less expensive than lawyers and can provide you with most of the information you need regarding this topic. You can also do some research on your own?plenty of websites that offer opinions.

The big difference between an S Corp and a C Corp is that in an S Corp, the stockholders are responsible for paying the corporation?s taxes, whereas in a C Corp, the corporation is responsible for paying its own taxes. One of the big benefits of an S Corp is that if the company experiences losses, then as an S Corp, those losses are carried over to the stockholders and therefore will lower a stockholder?s taxable base. If you decide to incorporate as an S Corp, there are certain rules that require you to make this determination rather quickly. Again, consult your CPA or lawyer.

At Terraine, we started out as an S Corp because of the (double taxation) benefits, but eventually, we switched over to being a C Corp. What it came down to for me was that as my firm grew, we had to pass giant paper gains from Terraine to me personally (to my personal income tax return), which pushed me into a much higher tax bracket. To compensate for this, Terraine would issue me a big check but where the entire amount of money in the check was deducted and paid in as tax. No money for me, higher tax bracket, and major pain in the butt explanations to the spouse, so I eventually opted to switch over to a C Corp. Keep in mind that there are restrictions as to how often you can switch from one type of entity to another?I think it?s every 6 years.

Getting into the nitty gritty on this topic is beyond the scope of this article. Again, consult an expert.

Bottom line: Do some research, ask a few people what they think, and spend a few bucks on an accountant or lawyer for some advice, but the actual incorporating can be done on your own. That?s what I did 20 years ago, and we are still around.

 

Open Up a Separate Bank Account

open up separate bank account

If you are using your personal checking account for handling your business transactions, you are 1) playing with fire and 2) treating your business like a hobby. I have coached a few people about this, and they still don?t get it. To put it in perspective, they no longer have a business and work for someone else.

When you open up a business checking account, please don?t tie a check card to your account. If you do, you will abuse it. You will end up buying groceries or filling up your car with gas, or paying for drinks at a bar. You know it and I know it. Don?t. F***ing. Do. It.

Bottom line: If you treat your business as a personal expense account, or otherwise intermingle your personal things with your business things, then don?t bother reading the rest of this article. Keep your hobby.

 

Design a Logo / Website
Who we use: 99designs.com and independent graphic artists like Jose Negron (jose@celebritysites.com)

website and logo designs

Most people are usually really excited about this step: What should my logo look like? It is exciting, but I would encourage you to not get too excited about it. There are other more important functions and tasks to be done to move your hobby into a real business. Nevertheless, this is important too, and it?s fun. A good design can, in some cases, make a big difference.

Rather than hiring a local firm or big-name firm to design your logo and/or website, start a contest on 99designs.com. It is easy, inexpensive, and you will receive dozens of high quality designs from many varied and talented people all over the world. The way it works is that you select a package (logo design, website design, silver package, gold package, etc.), and off you go. You can describe what you are looking for, what colors and themes you like, etc. When you start receiving designs, you can grade them and provide feedback to the designers, and they will go back and either start over or refine their concepts. Once your contest is over, you can then select a winning design and exchange design files. Simple as that.

Bottom line: You don?t need to hire an expensive agency to get a great design.

 

Get a Website Up and Running, Use Branded Email
Who we use: LocalWeb.com and Google Apps
Alternatives: Rackspace.com, GoDaddy.com, Amazon S2

adti website hosting ?? google apps? rackspace?? amazon

With Facebook, Twitter, and other social media tools at your disposal nowadays, hosting a website and branded email are not absolutely necessary. However, it is relatively simple to do, it?s inexpensive, and there are lots of options. We use a small outfit called LocalWeb.com/ADTI. They are good, offer a fair price, and an actual human answers the phone at tech support. When selecting a company to host your data, make sure that the datacenter they use is a SAS70 certified datacenter, and make sure that their tech support hours are reasonable. While we at Terraine own our own equipment (rack-mounted servers, load balancers, VMWare and XenWare software, SQL Server licenses, etc.), there are plenty of options nowadays that include bandwidth, software licenses, hardware, and tech support. This is what is sometimes considered ?cloud computing?.

Obtaining a branded email address starts with your domain name. Usually, the domain hosting provider can provide your email hosting as well. However, you should also consider the free version of Google Apps. It?s easy to set up; if you already use Gmail, you will be very familiar with the UI; and it?s free! More information about GApps can be found at this website: http://google.com/a/

Bottom line: Get a website and branded email address. Don?t use your Hotmail, Yahoo, or Gmail email address for business correspondence.

 

Use Consumer-Grade Communication Tools
Who we use: skype.com and Grasshopper.com
Alternatives: Google Voice, your cell phone #

skype phone ?? grasshopper phone?? google voice

When larger firms think of Voice-Over-IP (VOIP), they think of Cisco Unified Communications, Avaya, Microsoft, or similar tools and hardware. This usually requires expensive VOIP handsets, a VOIP server box, proper routers, and large amount of bandwidth. Do you need this?

Hell no! You can do almost exactly the same thing these larger outfits do by leveraging Skype or Google Voice with a virtual PBX system like Grasshopper.com. The way it works is that you first obtain a permanent company phone number. This can be in the form of an 800-number or some other number that you can purchase from Grasshopper or other provider. Then you associate your Grasshopper.com account with your cell phone, home number, SkypeIn number, and so on for you and your employees. When someone calls your designated company number, Grasshopper then hands off the call to the right person. More information about how this works can be found here: http://grasshopper.com/how-it-works-and-features

While this may sound confusing, it really isn?t. And you don?t really need to do this until you start hiring some employees. Once you have a few folks at your firm, it is best to have a common phone number for clients to call, and using a Virtual PBX system like Grasshopper can handle all the call transfers to particular employees.

Bottom line: Use modern consumer-grade tools for your communications.

 

Host Your Documents with a CMS
Who we use: Alfresco.com (open source)
Alternatives: Microsoft Sharepoint, Documentum, etc.

alfresco?? sharepointdocumentum

Once you start growing, you will need to share and store electronic documents. While tools such as Dropbox and YouSendIt make it easy to share and exchange files, it is best to use a server-based content management system like Alfresco to more permanently store, share, and exchange files. The nice thing about Alfresco is that it is open source and free. You will need someone to install the software for you, but once it?s up and running, not much else needs to be done. You can rest assured that if someone steals your backup drive or if a fire breaks out, all your files are safe, and you can retrieve them from anywhere. An added benefit of using a CMS for all your document files is the ability for employees to essentially share a drive virtually, over the web. Alfresco is pretty good about offering a high level of permissions-based rights for content access, and it also includes solid check-out and check-in procedures and file version control.

Bottom line: Once you grow beyond your own hard drive, don?t send your files around via email. Store and share your documents using a CMS.

 

Add Quality Content to Your Site
Who we use: hubspot.com
Alternatives: Google Analytics, WordPress

hubspot logo? ?? google analytics logo?? wordpress logo

If you build it, they will come. NOT! Once you have your website up and running, you will need to add rich, quality content regularly to your site. While search engine optimization and the art of blogging are beyond the scope of this article, the takeaway here is that you need to consistently add quality content to your site to keep people coming back for more and to also rank well enough on long-tail keyword phrases for people to find you in the first place. Once you start adding quality content, you need to then start tracking the metrics to make sure that what you are doing is working. If not, change course, make a few changes, and track that.

Bottom line: Your website should not be treated as a static site, where nothing new is ever added. Use a tool like Hubspot, or Google Analytics in conjunction with WordPress, to add content and track results.

 

Mock Up Your Ideas
Who we use: Balsamiq Mockups
Alternatives: iRise, Axure

balsamiq logo?? iRise_production?? axure_logo

All of us have great ideas in our heads about something we?d like to build. Getting those ideas conveyed to others can be challenging. One way to do this is to sketch out those ideas on a napkin, sheet of paper, or chalkboard. Another way is to use rapid prototyping software to help you sketch it out. I would encourage you to download and try Balsamiq Mockups. It is an awesome piece of software that is very affordable (less than 80 bucks) and can be used to mock up/design a website, mobile app, you name it. It?s also a lot of fun. Balsamiq now has a web version of its software that can be used as a collaborative tool, where you can share a design with someone, comment on an existing design, and offer alternative designs.

Bottom line: Don?t use standard graphics packages to design your app screens; use Balsamiq Mockups or something similar.

 

Get Stuff Built by Quality Contractors
Who we used: odesk.com and elance.com

odesk logo?? ? ? elance logo

If you are in need of programming assistance or otherwise have a need for someone to build something for you because you don?t have a) the chops to do it yourself or b) the time to do it, outsource it to someone through a service like odesk.com or elance.com. Setting up a project on either of those sites is a cinch. Thousands of sharp contractors are accessible at those sites, they both contain customer reviews, and in the case of odesk, you can actually view the contractor?s computer screen via snapshots taken periodically. Payment for services rendered is usually conducted on a weekly basis. In order to succeed at this, it is best to post a small, relatively simple project first. In other words, throw someone a bone, and if they prove themselves to have what it takes to build what it is you wanted them to build, on time and on budget, then throw them more work. Eventually, you will find a contractor you are happy with and can make arrangements outside of odesk or elance.

Bottom line: Use services like odesk and elance to find inexpensive, high quality experts

 

Manage the Accounting Side of Things
Who we use: workamajig.com
Alternatives: freshbooks.com, quickbooks.com

workamajig??? freshbooks logo???? quickbooks logo

If you stuff receipts into a shoebox, and then hand that shoebox to your accountant or spouse to enter into some mysterious ?black box?, then you are running a hobby. While I am not advocating that you run your own books, you do need to understand accounting to some degree, and it is important to keep a tidy and up-to-date ship as it pertains to accounting.

A mistake many people tend to make is to rely on a copy of Quickbooks software running on a single computer. The issue is not the software; it?s the motivation to enter the data into the software. In most cases, people tell themselves ?I will enter those receipts tomorrow?. Then tomorrow comes, and it doesn?t get done, then a month goes by, and so on, until you have a stack of receipts to enter, a bank account to reconcile, and so forth?too much to do, and it?s easy to see why you get overwhelmed and resort to a shoebox full of receipts. Avoid this trap by paying for a web-based software accounting subscription. Every month, a small amount of money will be taken out of your checking account for this service, which is more motivation for you to actually do something with the software. And if you can?t seem to ever get motivated enough to do it yourself, find and pay someone to do it for you.

When we started using a web-based accounting software service in 2002, it was something that was not very popular. Security was always cited as a concern back then. Nowadays, using web-based accounting software as a service is fairly common and an accepted practice. We currently use a software product called workamajig.com, but there are now others available that at one time didn?t exist. When choosing a package, make sure it is simple enough to understand, and if project costing is of importance, make sure that the package you choose can handle that, because some don?t.

Bottom line: Throw out your envelope/shoebox full of receipts and get serious about your business by using web-based accounting software.

 

Running a small business can be scary, painful, and a lot of work. But it can also be awesome and a lot of fun. If you plan to take your hobby to the next level, you will need to get serious about a few things first and act on those things. I hope that the information above was useful for you in taking those next steps.


Written By:
James Young
Terraine, Inc

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