Should I turn my hobby into a start-up business?
Many successful businesses started out as a hobby. Facebook did it, Disney did it, and Apple is another one that did it. So, should you also do that? The Straits Times featured last Friday a start up called “Bikes 4 Fun”, which turns old bicycles into newer creations (“Start-up turns old bikes into fun rides”, ST, page B12, 10 July 2015). Yet, while I found that it had a great social angle, there was very little business in it. According to the manager, whom I presume is also the founder, Bikes 4 Fun takes old bicycles and reinvents them into something new, and through this process, he hopes to show children the value of creativity. So, is the start-up about teaching creativity, or is it about reinventing old bicycles? Should it be a start-up or should it just remain a hobby? In this article, I surface four crucial questions that all hobbyists need to answer to bring their garage project into a true start-up business.
1. What is your market and what is it worth?
These questions are important because one needs to identify the target market, what the market needs, how much is it worth, how the business is going to meet those needs, and why you should be the one doing it. Ultimately, there has to be a sustainable market in it. I am not insinuating that there is no market in recycling bicycles – I think there is a great market potential here – but the creations that have come out of this project are, well, unconventional. When you make one-of-a-kind products, there is no scalability, something we will talk about later. If you are in the business of teaching creativity and some basic handicraft through customizing bicycles, then, there might be a market there. But the ST article pitches the products, not the learning, leading me to surmise that the business of Bikes 4 Fun is really in the creations themselves, and that is a really small market. Even if you could capture 100% of the market, how much is that worth? If the market cannot sustain the business, keep it as a hobby.
2. Can you execute it?
The next question to ask is, “Can you make it happen?” In the case of Bikes 4 Fun, they have been able to make the creations that the children brainstorm during the reinvention process. The outcomes have been things like a train tricycle, or a Penny Farthing knock-off. Great, as far as creativity goes, but is creativity the product? Again we need to go back to the first question and see what value you are providing, and if you are meeting it? If Bikes 4 Fun is in the business of educating youngsters, the test would be the children’s ability to replicate the process, and not their ability to build a new bicycle. But let’s assume that the value proposition is in building a custom bicycle, there is yet another question to ask…
3. Can you scale it?
This is where many garage-based startups fail. Perhaps the cost of production is extremely high. Perhaps the demand for each custom project is extremely low. Perhaps the skills to produce more of such units are not available. So many great ideas fail the scalability test because, while we can make one such product, we are unable to make many at an affordable price that produces sufficient margin to sustain the business. If your market is small, and a one-of-a-kind custom product has a market of one, there is no way the project can scale into a business. (I know, you watch Counting Cars on History Channel and they are making big money customizing cars! Remember, the Count has 4 businesses, so you really don’t know what is sustaining what! And then again, that is Hollywood; so everything is dramatised!)
4. Can you defend it?
Finally, what are you going to do to stop the next garage from doing what you are? After months or years of research, and of making the market, how are you going to defend that? Do you have the means to protect it? It does not mean that if you have an indefensible product, you cannot start. Defensibility comes in the form of design, intellectual property, and start-up costs. If you don’t have any of these, then your go-to-market strategy is key.
So, should you turn your hobby into a start-up business?
It is more complex than the question begs, of course. A lot of this rests on what you are trying to achieve, and whether there is a market out there for you to do so. The market must be big enough for you to continue your business, even when there are substitutes. Can your business survive and grow at 50%, 30% or even 15% of the market? Ultimately, you would have to answer all these questions convincingly to turn your hobby into a business. Remember, the lifeblood of a hobby is passion; the lifeblood of a business is cashflow.