Each year, many new
home-based businesses are started; but many also fail. Many
newcomers, at first excited by the prospect of working-at-home,
soon become disenchanted when they realize that even a home-based
business requires tremendous effort and hard work.
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We have listed the most common
stumbling blocks that businesses fall prey to. Here are some guidelines to help you from falling
victim to these pitfalls and survive your first two years in
business. These reminders should be kept within easy
reach as you operate your business.
1. Under
Capitalization. Lack of funds is the number one reason
for failure. Many entrepreneurs fail to plan properly, expanding
too soon or spending unwisely,
and don't get enough money to keep the business going for a
certain period of time. A good business plan can help you avoid
this.
- Invest enough to keep
your business growing for three months. Investment in
inventory is critical.
- Take a hard look at
your debt. While it may not be as enjoyable as preparing a
shopping list, sit down and make a list of all your debts.
- Sell whatever you
can.
- Do not rush into expansion.
- Cut expenses across
the board. Small reductions all around are easier to handle
than depriving your business of an entire budget line, such as
advertising.
2. Be
realistic about money. If you are weak in financial
management, it is best that you hire a professional accountant or bookkeeper, even on a
part-time basis. It is important to constantly know where you
stand financially. A lot of small business owners run away from
accounting. They avoid tasks like figuring out what to charge, keeping records, or sending out
invoices; often losing track of how much they are earning -- or should be
earning. Hire an accountant to do it for
you and put this into your business plan.
However, over-reliance
on accountants and letting them run your business is also a big
no-no. Avoid the trap of some business owners who make
financial decisions without financial knowledge. As much as
possible, everyday bookkeeping chores should stay in the hands of
the owners, while delegating to accountants some tax reporting and
preparation of financial statements. Turning over all
bookkeeping duties to an outside source is both expensive and
dangerous.
3. Poor
management and organization. You will need to
decide on the best organizational structure for your business.
Learn the advantages and disadvantages of each legal form. You may
end up paying taxes on your losses.
Also, do not forget to
be generous in
allocating time and earnings for yourself. Often,
self-employed people are not efficient about using their own time,
partly because they think there is no end to it. If you are
working in your bathrobe in your bedroom, what's the difference if
you call that client now or after lunch. And now that you are
home, you can catch all the noonday showings of your favorite
drama shows on TV. It is also important to have fun.
4. Miscalculated
market potential. Making business presumptions
without taking the time to learn your target market is a serious
pitfall for any starting entrepreneur. Research your market
carefully in order to avoid missing the mark on what product is
needed. Label very specifically who your ideal customer will be.
Properly determining the market determines the location, the
marketing plan and the product mix of the seller.
In addition, avoid
basing your business on
trends that may soon fade. Research trends very carefully to
determine whether the passing fad has the potential to stay.
5. Ineffective
Marketing.
Study carefully how you will
attract and sell to customers. Formulate your advertising and
sales philosophy using the most appropriate media, timetable and
budget for your promotion efforts.
This is a serious problem on the
Web. Some sites have been able to attract huge traffic, but fails
to convert this to sales. You can attract six people a day to your site or six million
but if they do not buy anything from you, it doesn't matter if a
handful or millions came. It is important to devote plenty of energy and
expertise to improving your conversion rate -- the number of
people who check out the site and then actually buy
something. Conversion of visitors to buyers will give you a
strong foundation for a successful business.
Remain positive. If you
feel as though you are losing control, then you probably will.
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