Small Talk: Many are making thousands from their hobbies, thanks to the web

Hobbyist traders contribute £8bn to the economy mint images

Do you need a killer idea to start your own business? For many of the record numbers starting up in self-employment, the answer is no; they’ve simply worked out how to turn a profit from something they were doing already – and often something they love doing.

If you could make a living from your hobby, why wouldn’t you make the leap? Research by the payments company Visa suggests that’s exactly what many are now working towards – 9 per cent of adults now make money from a hobby, Visa claims, producing an £8bn windfall for the economy.

These hobbyist business founders are cashing in on their love of everything from photography to jewellery-making and from sport to baking. And while they may not be pursuing these enterprises on a full-time basis, they are making decent incomes from their pursuits.

The typical hobbyist businessperson in the design sector, for example, is making more than £3,700 a year from doing something they would have been doing anyway, according to Visa’s research. The figure for photography is more than £2,400.

These sums may not be enough to give up the day job, but for many people they represent the very first few baby steps towards self-employment. As their confidence grows and their businesses expands, some of these entrepreneurs will eventually make the leap to full-time self-employment.

A key enabler has made all the difference to the hobbyists: the internet enables them to sell to a mass audience and their sales and marketing efforts cost them almost nothing. If you’re making jewellery, say, offering your pieces via eBay costs nothing – and the commissions if you do make sales are minimal. Persuading potential customers to take a look at your wares is simple too, thanks to social media networks. Facebook and Twitter are the only marketing tools that many hobbyists use to drum up trade.

A whole ecosystem for this type of small business has developed almost without mainstream commerce noticing. For those who want to move beyond eBay, platforms such as Not On The High Street and Etsy now provide a simple, low-cost way to connect with potential customers, with specialist marketplaces now operating for almost any type of business you can think of.

It’s also possible to expand your business, should you have the ambition to do so, through finance providers that specialise in this audience. Lenders such as Iwoca and Ezbob offer relatively small business loans to online traders in need of working capital to expand – it’s the sort of market in which the banks are completely uninterested given the individual size of these businesses, even though, in aggregate, they have increasing scale.

Many of the hobbyists who are trading in this way wouldn’t even think of themselves as running a small business. That doesn’t matter – it’s not self-perception that’s important here, but the skills and experience these entrepreneurs are acquiring as they learn how to trade; not to mention the money they’re earning and the taxes they’re paying.

It’s also the case that most of these people have built up their businesses with little or no support from government agencies. While policymakers have worked hard to develop support mechanisms for entrepreneurs – from advice and mentorship to outright funding – these are not the businesses they had in mind. And while the hobbyists appear to be flourishing without such assistance, there may be ways to help them do even better – tax incentives that recognise their status, for example.

The truth is that many of these businesses are never going to develop into large-scale enterprises – in many cases they’ll never employ anyone other than the hobbyists themselves. But so what? Those making money in this way are displaying all the entrepreneurial characteristics we value in more conventional business founders, they’re making a substantial contribution to the economy, and they’ve done it with no help from anyone else. This isn’t the march of the makers that the Chancellor once spoke of, but the march of the micro-entrepreneur is to be applauded nonetheless.

Aim’s recovery stalled last month

Could the resurgence of the Alternative Investment Market be damaged by economic uncertainty and market turmoil? The broker Allenby Capital reports that just £187m was raised on Aim during September, the lowest figure for 12 months and well down on the record volumes seen during the first half of the year. Just two companies joined Aim for the first time during September, while a further 31 businesses raised money in a secondary issue.

The recovery of Aim over the past year or so after a period in the doldrums has been dramatic. But while investors have been tempted into the market by incentives such as Aim stocks being made permissible holdings for individual savings accounts, performance this year has been poor – Aim is now down 15 per cent since the beginning of 2014.

Nevertheless, Allenby hopes the September lull will prove temporary. “We attribute the decline in fundraising activity to the cyclical summer holiday slowdown, coupled with the uncertainties surrounding the Scottish referendum,” the firm says.

Demand for debt instruments up

One problem that has held small businesses back in the past has been their inability to raise debt finance other than through relatively small-scale bank loans or overdrafts. Figures from GXG Markets, the small-cap specialist stock exchange, suggest this may be changing.

GXG-listed companies have raised more than £37m from debt instruments such as debentures and convertibles so far this year, well ahead of the £33m raised this way in the whole of 2013. GXG says it is aware of a further £20m of fundraising to come before the end of the year. “We find that many of our new member companies are raising money using debt instruments before they list on our markets,” says Simon Kiero-Watson, GXG’s head of markets. “They can then list those instruments offering investors another form of investment.”

There is also clear demand for this type of security, says Mr Kiero-Watson, with investors valuing the income stream they generate. Securities listed on GXG’s main market are now eligible holdings for individual savings accounts and self-invested personal pensions.

Small business person of the week: Titus Sharpe, chief executive, MVF Global

“We use technology to help businesses expand into international markets by finding them new customers.

“Five of us launched the company in 2009 from a basement in Borough in south London – we had all worked together before in related businesses and we recognised that we had complementary skills and experiences. Growth has come amazingly quickly – we now have 210 employees.

“Having five founders actually helps with that growth – when there are five of you sharing knowledge and managing new staff you can spread the learning much more quickly.

“One aspect of our business is a little unusual: we have developed a ‘family first’ working policy. Four of the five founders are fathers and we were all having our first children around the time when we launched MVF; we therefore built the business around the need to work flexibly – all four of us work four days a week and we extend the right to flexible working to all of our staff, both mothers and fathers.

“The policy has worked very well for our business. There are of course times when you wish you had an extra day in the office, but working this way forces you to focus and prioritise.

“We’re now working very hard to develop in the US, where we’ve already had some success picking up big-name clients such as Verizon.”