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.
However, majority still fails to translate their entrepreneurial dreams into reality. Starting a business is one big risk – and many 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.
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.
As a home-based entrepreneur, you will be faced with skepticism and distrust because of the size of your business. Even potential clients may not consider you seriously. As a home-based entrepreneur, it is important to work towards getting respect for your home business.
5. Not following the 80/20 philosophy.
The 80/20 philosophy states 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. Learn the rules of marketing a business.
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. Make sure that you have a back-up plan for your business.
Recommended Books on Home Business:
- The Work-at-Home Success Bible: A Complete Guide for Women: Start Your Own Business; Balance Work and Home Life; Develop Telecommuting Strategies
- The Complete Idiot’s Guide to Starting a Home-Based Business, 3rdEdition
- Work at Home Now: The No-nonsense Guide to Finding Your Perfect Home-based Job, Avoiding Scams, and Making a Great Living
- The Six-Figure Second Income: How To Start and Grow A Successful Online Business Without Quitting Your Day Job
- Pros and Cons of Financing a Business
- Master Your Money Type to Create a Life of Wealth and Freedom (Part 2)
- How to Raise Money to Finance a Franchise
- Book: The Last Chance Millionaire
- Top 10 Ecommerce Mistakes