June 26, 2019 Last updated June 24th, 2019 48 Reads share

How Patreon Can Turn Your Hobby Into a Business

How Patreon Can Turn Your Hobby Into a BusinessImage Credit:

It’s 2019, and it’s never been easier to turn a hobby or niche interest into something profitable. Crowdfunding websites have allowed small businesses to go stratospheric, capturing the public’s imagination with big ideas and lofty goals, and giving them the chance to be early adopters. For individuals, however – artists, musicians, writers or podcasters – it’s been harder to make a living outside the usual channels. Thankfully, Patreon is here to change that.

From its founding in 2013, the website for donating to creators has gone from strength to strength and is now a viable platform for businesses as well as hobbyists. From humble beginnings, small projects are now routinely snowballing into multi-employee studios – and leaving people with more questions than answers about how to incorporate, pay taxes and figure out the day-to-day of running a business. Here then are a few tips on how to start a Patreon account, and where to go next.

 

What is Patreon?

The name Patreon is derived from the word patron and the ancient concept of patronage. From the Romans right the way forward to the Victorian era, many artists, playwrights, and other creative individuals had patrons, who would pay them regularly to continue their work. Sometimes the patrons would commission a specific piece of work, such as Botticelli’s famous painting ‘The Birth of Venus‘. Others would simply pay to keep them working, as a means to support their continued output.

This essentially donation-driven model fell out of favor with the rise of corporate enterprise, with individuals becoming either careerists, business owners or freelancers. The rise of internet payments and eCommerce, however, has allowed people to connect with these patrons again, and Patreon has thrived in this space. Creators on Patreon can explain why people should donate to them with a message and a video – usually as a means to continue producing content – and individuals can then give them money each month based on certain donation tiers.

To encourage people to donate, there are preselected tiers of donations, which often come with some kind of reward. A podcast may, for instance, have a $1, $5 and $10 tier. The $1 tier may offer access to some special podcasts that aren’t publicly available. The $5 tier may offer video versions of the podcasts, which would be of interest to more hardcore fans. The $10 tier could offer private Skype chats with the creators, or allow the $10 patrons to have some say in what the podcast will cover next. This is similar to the way Kickstarter or Indiegogo encourage donations, but as the product offered on Patreon tends to be digital, so do the rewards.

 

Who is Patreon for?

Patreon is home to all kinds of creators, from musicians to writers to artists. Perhaps its biggest niche is podcasters, whose regular output and connection to their community makes Patreon a perfect fit. Patreon is particularly notable for offering private podcast feeds to patrons, allowing them to subscribe to ‘patron only’ podcasts in their podcast app of choice as long as they continue to donate.

Many Patreon campaigns are goal-oriented. For example, a podcast might have a goal of producing an extra episode each month or starting a brand new show dedicated to a different topic, which would require a certain amount of money per month. Fans (often known simply as ‘patrons’) would then be encouraged to donate to the Patreon to reach this target.

Individuals often use Patreon as a way for fans to supplement their income while they work as part of a larger business. Musician Scroobius Pip, for example, allows fans to donate any amount over $1 to support his continued music and video creation while offering no rewards. Game developer American McGee meanwhile has a Patreon to support his goal of getting a new game published, but offers no promise that this will happen. Others tie their Patreon more closely to a business venture, with specific targets such as hiring a new editor or producing new content.

This is a sense in which Patreon differs strongly from crowdfunding platforms such as Kickstarter. As payments are on a monthly, subscription basis, patrons can stop paying you at any time. This puts the onus on you to continue providing good value content, rather than locking in funds for a long term project. It is a similar concept to freelancing but provides a far more consistent source of funding than wondering where your next commission is coming from.

 

Making money with Patreon

There’s nothing to stop anyone from starting a Patreon. Getting people to give you money, however, is harder. Many a well-intentioned Patreon litters the site with zero backers, just as many crowdfunding campaigns fail to find their feet. Sometimes this is down to the quality of the content, but it’s just as often a case of poor marketing and failing to connect with an audience.

Many creators come to Patreon from existing jobs in the media, as a way to secure both financial and creative independence – and they bring an inbuilt community with them. This doesn’t mean it’s impossible to find your feet from a standing start, however. Patreon provides plenty of space on its site to find new creators, and the platform isn’t yet so crowded that new projects will get buried. There are however a few tips that will help you take your chance.

Like a Kickstarter campaign, your Patreon will benefit enormously from an introductory video. This should sell the basic concept of your Patreon, and ideally include some snippets of your work, to show exactly what people will be paying for. This can be as simple as a video of you talking to a camera about your idea, with a bit of backing music and some quick cuts to make it look more professional. The lower barrier to entry of a monthly subscription means there’s less risk in a Patreon than a crowdfunding campaign, so this doesn’t have to be too flashy or make outlandish promises that you won’t be able to keep.

You should also employ some help to create strong graphics, such as a logo and banner image to sit at the top of the page. These will reflect a level of professionalism that will make you more trustworthy, as well as catching the eye of people browsing creator pages. If you’re creating digital content, you should consider embedding some past work in the description so that people know what to expect. This might go as far as making some of your posts public so that visitors get a sense that the feed is active. Many Patreons will make a small amount of their ‘reward’ content for private backers public, too, to show exactly what patrons will be getting from their subscription.

 

Taxes and formation

If your Patreon only involves you and your personal project, you might be able to get by just filing your own tax returns as a self-employed person. When you get bigger, though – or if your Patreon project has multiple members – things get a little more complicated. Your tax is likely to be higher than that of an incorporated business, and the arrangements for paying others while staying within the bounds of tax law are extremely complicated.

It’s at this point that you’re likely to want to incorporate properly and turn your hobby into a business. For Patreon, this is likely to mean incorporating as a partnership or a limited liability company, known as an LLC in the US. A partnership is the simplest way to go about this and essentially formalizes each member as self-employed within the confines of the business. Profit is shared and management conducted according to the terms of an agreement that is drawn up between all parties. The downsides are that there is no protection against debts incurred and that the tax benefits tend to be lesser to a limited company.

A limited company is a more formal business structure, existing separate in law to their shareholders (i.e. you and your partners/contributors). This means that the only thing on the line is your investment and not any debts the company incurs. Taxes are taken from your profits, while you will receive dividends (shares of the profits) with a reduced rate of tax, as well as drawing a salary if you so choose. This is generally a more generous arrangement, but also requires more paperwork and management of the business and its cash flow. It’s at this point that you’re likely to want to enlist the help of a company formation or tax expert to guide you through the process and make sure you’re staying on the right side of the law.

Not every campaign will make it, but more than perhaps any other platform for creators, Patreon offers a chance to be seen and to build a passionate, engaged community. By creating content that people value and supplementing it with other revenue streams – live shows, merchandise, and other tangible products – you really can turn your personal passion into a thriving, successful business.

Crowdfunding

Katya Puyraud

Katya Puyraud

Former journalist Katya Puyraud is the co-owner of company formation specialists Euro Start Entreprises. Since 2007 Euro Start Entreprises has helped budding entrepreneurs and expanding SMEs to set up companies around the world, and provides services in more than 30 countries worldwide.

Read Full Bio