“The way to get started is to quit talking & begin doing”  Walt Disney

Business or Hobby

Written by Doug

I chose the above title to kick off a series of articles that deal with those essential administrative tasks that business owners and managers should undertake to ensure the (continued) success of their business.

In this real life example I refer to our then business which was a guest house, but this is relevant to any type of business you are operating.

In 2004, my wife, Gaynor and I built and opened our guest house. We ran a successful establishment for the next seven years. In keeping with both our backgrounds as commercial accountants we naturally applied the processes and disciplines we had learned from our previous lives to ensure that the guest house ran smoothly and profitably.

In other words, from day one, we regarded our guest house as a serious business and ran it as such.

Hobby or business – what’s the difference?

A hobby is an activity that brings you pleasure, challenge, satisfaction etc, but costs money to pursue. How much money you invest or pay for your hobby is up to you.

A business is an activity that brings you pleasure, challenge, satisfaction etc, but despite requiring money to set up and run, must ultimately generate more money than has been put in.

This phenomenon is known as a profit and to my mind is the key element in distinguishing hobby from business. The business must do everything in its power to generate its profit.

If you do not regard the generation of profit as the most important goal of your guest house or business, then you, my friend, have a hobby, not a business!

The good news for hobbyists reading this is that you can stop right here!

For those of you who are definitely running a business, my articles will give you an insight into what steps to take to either achieve profitability (you might be currently making a loss) or sustain the profitability you have.

Building on that I will then explain how these steps and processes can help you to:

  • Increase your profit to the appropriate level for the business;
  • Assist with business decisions such as reinvestment, procurement and cost cutting;
  • Delegate activities to managerial staff whilst retaining control;
  • Respond promptly and correctly to changes in business conditions

I hope that you will stay with me as I unpack the relationship between accounting, budgeting and business administration.

As a confirmed accountant at heart, my favourite analogy to the “dull as dishwater” view of accounting is that, when buying a new car most folks focus on the sleek lines of the bodywork, the seductive smell of new leather, the amazing functions of the console and so on. They know the car has an engine, but so what – that’s not the sexy bit. The reality though is that if the engine is running sick or won’t start, all the sexy features in the world will absolutely not get you from A to B.

I hope you found this article interesting.

Until next time!

Doug

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