The advice “Do what you love and the money will follow” is a little bit misleading.
To a person who’s experienced in running a business, this is sound advice. Inherently they have some key insights on “how” to make something pay. However not all people are born with the skills to run a successful enterprise.
Here’s a few key points to consider if you’re thinking of following your passion:
1. A business isn’t about you, it’s about your clients getting value and being willing and able to pay for it. Hopefully doing what you love will lead to insights on creating a highly valuable product or service that’s delivered with enthusiasm for the person buying from you. Hopefully within your passion will be enough people who can support your business financially through their custom.
2. Not all industries are the same. People who love fracking, finance and oil will do a lot better than people who love kittens, knitting and kites. Your business will be constrained by the size of your market, their ability to pay and the perceived value of what you do.
3. Some things you might love because they punctuate your life – diving, skiing, cooking, yoga, etc – however, maybe doing it 10 hours a day 6 days a week would kill your passion for it. Maybe having to sell it to others over and over again might cause you to tire of this passion.
With that said, it’s also important to look at your financial expectations. Making enough money from something depends on what “enough” means to you. We live in remarkable times whereby you can tap into global markets at a keystroke and small businesses can look and behave big. My belief is that most people should be able to make $40,000 from most things. You could make $40,000 a year from teaching music classes, making clothes, organising sporting tours, teaching and training people things. With smart work, even a fairly esoteric hobby could be turned into a micro-business.
Making $100,000+ will require a better industry and better business skills. If what you love relates to something where many people are already spending money, then you could easily make a six-figure enterprise from it if you’re willing to get skilled up in business. Industries like fitness, wealth, travel/tourism, food, entertainment have enough money flying around that a well run small business should be able to catch some of it.
Making $1m+ requires a healthy market, advanced business skills and more than a smidgen of good luck. Bare in mind that only 15% of all businesses in the western world make more than $1mil in revenue! In the UK less than 6000 people in total declare over £1m income each year – that includes all the footballers, entertainers, bankers and entrepreneur; not many considering there’s 30million workers.
Just because the odds are against you (massively) doesn’t mean it’s not possible, it just means you need to genuinely have a passion for something that makes a lot of money and you have to be better than the hoards of people that money attracts. Finally, you’ll need some luck - none is successful without it.
The very good news is that you don’t need to earn anywhere near $1million in order to maximise your happiness.
A lot of research has been done that clearly shows that the more you earn the happier you will be… BUT only up until $100,000 a year. After that, it’s hit or miss whether you’ll be more fulfilled with more money.
Note: This amount is measured per adult in a household so if you’re a couple and you want peak happiness for your money, it’ll cost $200,000 per year. To make things a little trickier though, if the complete earning responsibility falls onto one person entirely that can reduce the happiness of both people! eg: a couple where one person earns $200k and the other earns $0).
So there you have it, if you want a business to help make you happy follow your passion into an industry with money and get the business skills to earn $100,000 per year … Then help your partner to do the same.