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You
have dreamt of
owning a business, no matter how small it may be (well, at least
initially). Many people like you are pursuing self-employment opportunities today for
various reasons. You may want your own business for the
self-satisfaction that it provides, desire for independence,
limited job opportunities, downsizing and restructuring of
corporations, downsizing of work forces, and threats of
lay-offs.
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However, majority still
fails to translate their entrepreneurial dreams into reality.
The number one culprit? You, the would-be entrepreneur, is
usually immobilized by your fear of
failure. It is true that starting a
business is one big risk – and companies do go out of
business! To improve the chances of the success of your
home business, here are some common causes of business
failures that you need to know (and hopefully, avoid).
1. Failure
to do market research. Many
businesses, whether home-based or a large corporation, fail
because there is not an adequate market for their products
or services. A comprehensive analysis of the business is
especially important for home businesses, since some
businesses lend themselves well to a home-based environment,
while some do not. If your business requires you to see
clients, you must first check how your family (and
neighbors) will react to the comings and goings of people in
your house. If you have employees, check the zoning and
parking laws in your area. Before starting any business, it
is necessary that you conduct a thorough market examination
and market analysis.
2. Passivity.
If you are passive, your best bet is to work for someone
else. Unless you can immediately afford to hire employees,
you may start out as a solo operator. As a one-man team,
expect to do everything – from writing your business plan,
manufacturing your product, marketing and selling your
products and services, doing bookkeeping chores, and a
million other tasks! Remember, you have only yourself to
rely on! While you may not be an outgoing person, you need
to show aggressiveness in getting the word out about your
business. No customers mean no business! Passiveness will
not get you anywhere in business.
3. Poor time management.
One of the advantages of working at home is that you get to
manage your own time. This, however, presents an interesting
dilemma: it is hard to manage your own time! Poor time
management is the Achilles’ heel of many home office
workers, since you are on your own with no one to supervise
you, help you organize and prioritize. Complicating this
problem is the fact that distractions may be a few steps
away! Your spouse and kids may demand attention, your
neighbors can drop by, and hey, Oprah has an interesting
guest line-up today! There are a million and one reasons to
distract you from being productive, and you need to learn to
manage your time effectively!
4. Considering
your home business to be less serious than a
“traditional” job.
You may not have a glamorous office in downtown or
you may not need to wear those power suits to go to work,
but a home-based business needs to be treated with the same
professionalism that you put in your “traditional” job.
After all, your income will be directly correlated with the
amount of time, effort, thinking and money that you put in
the business – a far cry from the days of being employed
when you get paid even if your definition of a productive
day is to write 20 personal emails to long-lost friends.
5. Not
following the 80/20 philosophy.
–
that 80 percent of your business comes from 20 percent of
your client base. Remember, it costs twice as much to get
new customers than to maintain your existing base. Keep your
customers delighted, for it is far less expensive and easier
to market to current clients than to seek customers who
don’t have a clue who you are and what you do. Repeat
sales from existing customers mean lower per-unit marketing
costs and higher profits.
6. Not promoting your business frequently.
Your business is only as good as the size of the market that
you are able to reach. While some businesses are
self-promoting, most often you need to aggressively get the
word out about your product or service. Too often
self-employed workers and small businesses look upon
promotion as an unnecessary expense rather than the
essential investment it truly is. There are a number of
inexpensive ways of promoting your venture. Read the article
“A
Small Business Guide to Free Publicity.”
7. Spending too freely.
During your start-up phase, you may be awash with
capital (or at least, you do have capital). Avoid
the costly mistake of unnecessary expense. Unless your
business model is solid and you have built a steady stream
of revenues, you cannot assume that you will have cash and
working capital forever. Some home business owners are
carried away in equipping their work places that they
over-buy some equipment. Ask yourself: do you really need
that expensive massage leather chair for your home office?
Do you need that top-of-the-line scanner when the most that
you will scan is a picture of your 2-year old daughter?
Others, at the first brush of success, spiral uncontrollably
and expand too quickly for their own good. Poor financial
planning, mismanagement of funds or poor budgeting of
expenditures are common causes of business failures.
8. Not
spending the money when called for.
First, you need to understand the cardinal rule of business:
money begets money. You will sometimes have to spend to make
money. Getting legal advice requires paying for a lawyer.
Sending out press releases by yourself entails communication
costs (fax, postage, envelopes, etc). A lot of home business
owners miss out great opportunities because they simply
refuse to make the investment where its needed. Spend your
money wisely.
9. Not asking for help when you need it.
Your tools to
stay on the right road and get back on the right path when
things get rough are planning, additional financing and
expert advice. Seek assistance; help is out there. Read
business publications. Consult your local Service Corps of
Retired Executives (SCORE) chapter. Seek assistance from
your local chamber of commerce.
10. Not having a contingency plan to deal with tough economic times.
Try as you might, difficulties can hit a business at
different times. Home-based entrepreneurs are notorious for
plunging into business unprepared. They have no contingency
plans or fall-back scenarios. some start their home businesses
naively thinking that everything will go smoothly, only to find
that the road is fraught with difficulties and challenges. Part of the trick is to
recognize the trouble soon enough. Learn to be on guard at
all times, and sharpen those creative thinking. Being
creative in your business thinking can point you on the more
positive direction. More importantly, you need to have a
well thought-out game plan to help you identify potential
problems to the surface before they occur and get the
operation up to speed with little lost time, effort and
money.
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