The 7 Most Common Home Business Mistakes – And How to Avoid Making Them

Of all the mistakes made by new Home Business Owners, 7 seem to come up again and again. With a few minor changes however, these can be avoided and as a result your home business will begin to prosper.

No. 1.) Bad Time Management.

This is a big one. Many people who make the transition from employee to home business owner suddenly find that things have drastically changed. No longer do they have to wake up at a certain time. No longer do they have deadlines. No longer do they have a boss. But what they do have is day time television, a pet to play with, DVDs to watch, and a local park to visit.

They suddenly find that they have all of these tempting distractions in front of them, and their home business often becomes a second priority. Like any business, you can’t expect to get results unless you’re putting in the work.

The easiest way to get past this is to break up your day into manageable chunks of time- perhaps 1 hour segments. Then aim to focus on one task at a time for that hour. Give it your full undivided attention. There are going to be distractions that attempt to lure you away- (believe me, these day time soap operas can be quite addictive!). But pay no attention. Your financial future is more important.

At the end of each time segment, take a 5 minute rest- perhaps go and grab a snack, or walk outside for a minute or two. But then come straight back and start the next 1 hour segment on time. By breaking your day up like this, those seemingly large tasks become a series of smaller tasks. At first this will take some discipline, but over time it will become natural and you’ll get a lot more done.

No. 2) No Goals.

Why is it that we hear so often how important it is to set goals, yet so few of us get around to doing it? Goal setting has got to be the most overlooked tool we have available to getting things done. When starting a home based business, your ability to set goals and follow through with them will ultimately be what determines your success. Without having daily, weekly, monthly and even yearly goals, your home business will have no direction.

Many new Home Business owners begin work with a general idea of what they’d like to accomplish each day, but don’t have specific targets. By actually writing down your goals for the day, (preferably the night before) you will find that productivity will increase and at the end of each day, you’ll feel a sense of accomplishment.

No. 3) No Mentor

Information has been said to be the ‘most valuable commodity in the world.’ And this is no truer than in the home business industry, especially with the recent flood of self proclaimed ‘gurus’ giving out second grade advice. When it comes to online marketing, setting up websites, calling prospects, setting up email auto responders and other common home business activities, there are the right ways of doing things, and there are the wrong ways. Many new home business owners fall victim to services that take advantage of their naievity. For example, there are search engine submission services that advertise that they’ll submit your new website to 300 different search engines for a small fee, when in fact this is completely pointless- Google, Yahoo, and Ask have such a large share of the search engine market that other search engines really don’t matter (especially when your paying). Submitting your site to either of these search engines can be done manually in under 5 minutes anyway.

It’s best to have a mentor who is getting results, and who has a track record in his or her area to teach you directly. And preferably one who has a vested interest in seeing you succeed, like in the network marketing or direct sales home business industry. And the best mentors in these industries are usually the top income earners, who with a little research shouldn’t be too hard to find.

No. 4) Work Environment

Its best to separate your living space from your work environment. For example, if you are working in the same living space as the TV or kitchen, then focusing on the task at hand will be harder. The temptation to do something else will often be too strong for most to exist, so its best to create an office like environment, with everything you need in the one space- stationary, your computer, and business phone.

No. 5) Trying to handle every task- not delegating, and therefore not focusing on the key profit drivers.

In most businesses, there are only several core activities that bring in profit- these are your key profit drivers. For example, in running a direct sales home business, the only two key profit drivers are gathering leads (or potential business partners) through marketing, and then calling those leads to determine whether they are right for the business. Once the marketing systems have been set up, and your email inbox is being constantly replenished with new leads, then calling becomes the key profit driver. All other tasks become a second priority, as they don’t give the financial return that calling does, and should therefore be delegated to outside parties. For example, trying to learn search engine optimization (SEO) will be a waste of a direct sales home business owners time, as it takes too long, and can easily be delegated to a service that specializes in that area for a reasonable fee.

No. 6.) Limiting promotion to the internet- not telling enough people, hiding behind your computer

Leads are the lifeblood of any online business- without new leads coming in, business soon dries up, unless what your selling has continuity -eg. a subscription based members only newsletter. But even with continuity programs, members will often unsubscribe over time, and so its important for any home business to always be filling ‘the pipeline’ with new business. Strangely enough, most home business owners have limited their marketing efforts to online options, like pay per click (Google AdWords) without a second thought to offline marketing. The ‘old fashioned’ marketing strategies, like placing ads in newspapers and magazines still can be profitable, and as marketers flock to crowd the online world, there is increasingly less competition in the offline world. So keep this in mind the next time Google sends you another large bill.

No. 7) Expecting overnight results, and then giving up too early.

Time and time again we hear about the high failure rate amongst home business owners, and this can be very discouraging to those thinking about taking the plunge. But is it any wonder that so few make it when most give up in their first month of business. Take the direct sales industry for instance, that many home business owners are entering. There are several direct sales companies out there that offer people the opportunity to promote their products in exchange for a profit. Many new home business owners buy into these direct sales companies after hearing about the high income testimonials (the record in Australia is $232,000 in a month!) and then become disillusioned when their own results fail to reach the high levels they anticipated.

But in reality, building up a sales organization in your own Home Business is going to take time- to expect to become a top income earner in your first few months is unrealistic. Unless of course you have a top income earner to teach you their methods….

Small Business – Surviving a Cash Strapped Economy

Small business owners across the country, have been affected by the challenges of this economy more than any other type of business. They are the group that has the least resources and leverage to counter what is taking place in their businesses. Phones that rang relentlessly only 1 year ago, are barely ringing today, if at all. Customer cancellations are abundant.

They are experiencing declining sales, increasing costs and decreasing lines of credit. Plus, they are realizing a shortage of cash that cannot be generated quickly enough to stay competitive. As a result, advertising and marketing budgets have been extensively depleted. So, how do they survive in this cash strapped economy, given these circumstances? How do the remaining businesses keep from joining those that have already closed their doors?

First, there are two choices these business owners must make; to struggle through, taking no action, while hoping for a quick economic turnaround or map out a plan for survival. For the entrepreneur who is determined to come out of this still standing, here are some approaches being used for the purposes of gaining new customers, continuing to build business and ultimately increase cash reserves.

Expand Marketing Strategies

- Increase in networking:

Networking groups are increasing in number and so are the participants. Business owners are using these groups more frequently to increase business and gain referrals. Some are attending 5 or more networking events per week, 2-3 per day. Also, memberships in online social networking groups is increasing.

The quality of a networking format and agenda is also becoming more useful for the entrepreneur. Many local networking groups are no longer getting together only for lunch or to exchange business cards. This type of networking is non-beneficial for someone looking to grow their business through substantive business connections, as little time is made for actual networking.

An alternative is a networking group structured to provide brainstorming and consultant advice, free of charge. Here is how it works; a business is randomly chosen each week to receive expert advice, and the other networking group members critique the chosen businesses’ strengths and weaknesses, as well as, its marketing strategies.

The business is offered advertising and marketing suggestions on how and where to attract more customers, based on the needs of the business and market conditions. Because this format gives the business owner a greater opportunity to network, retention is high.

If a networking group cannot be found with this meeting outline, it can easily be established.

- Complimentary services and products

In exchange for publicity and free advertising, some entrepreneurs are giving away services and products to showcase their abilities and gain new customers. The company or event receiving these freebies are often prepared to provide a great deal of advertising exposure to the donating business. This is somewhat in the form of bartering, as discussed below.

- Businesses merging:

In order to strengthen their businesses, some entrepreneurs have decided to merge. This includes competitors. Merging reduces costs as common tasks performed by both companies are combined.

- Online advertising:

Due to cost, many entrepreneurs are reducing their print advertising while increasing online advertising. Many are switching to the popular online advertising sites. As more and more people have access to the internet and begin their search there, it makes sense given the cost of print advertising.

- Co-op Advertising

Advertising arrangements between business owners (manufacturer) and vendors are also being utilized more. This is a form of co-op advertising where both parties share advertising costs. This is a very valuable arrangement, especially if a vendor is not as well known as the manufacturer. The vendor’s brand can create awareness of their product.

- Bartering

Barter Exchanges are on the rise. Bartering is when a service or product is exchanged for another without the involvement of cash. as in the above case of exchanging advertising exposure for a donated product or service. Some entrepreneurs are using this method as a way of building business relationships. In most cases, it is hoped these new relationships will result in paying customers.

- Diversification

Diversifying product offerings is a good business strategy, and should always be considered. Likewise, individual small business owners can tap their own skills, as well as, explore investment and business opportunities to create income.

Robert G. Allen wrote a book called Multiple Streams of Income¹, which is 350 pages and 18 chapters of ways to diversify one’s business interests. Allen talks about getting paid for using skills that many business owners already possess, such as:

- Selling Information – Desktop Publishing – Website Building – Public Speaking

Because most business owners must wear a multitude of hats, these skills can be turned into sideline profits.

In closing, it is commonly said that people who start businesses are risk takers and should be accustomed to dealing with change; so, isn’t surviving in this economy an extension of that belief? Shouldn’t small businesses be prepared to make adjustments, to change strategies, and to adopt some of the methods listed above? Truthfully, the greatest risk will be to do nothing but wait and hope. And, no survival plan should look like that.

Source:¹Multiple Streams of Income¹, Robert G. Allen, Second Edition

Write a Bankable Business Plan – Ten Action Steps

Action Step # 1
Define Your Company: What will you accomplish for others?

Write down all the specific needs your company will satisfy. Potential investors need to know that your business will be meaningful and marketable to people who can use your product or service. So concentrate on the external needs your company will meet. What will your product or service enable people to do better, more cheaply, more safely, or more efficiently? Will your restaurant make people’s palates delirious with new taste sensations? Will your new mouse trap help people capture mice without feeling sick to their stomachs? Will your new bubble gum scented bubble bath revolutionize the way children agree to take nightly baths?

Think of all the positive benefits your company will provide. Write them down. Admire them. Absorb them into your consciousness. Believe in them. These are the primary motivators that readers of your business plan will respect and value.

Action Step # 2
Identify Your Company’s Initial Needs: What will you require to get started?

Whether you want to buy an existing company with 300 employees or you can start your business by only adding an extra phone line to your home office desk, you need to make a list of the materials you’ll need. Some may be tangible, such as five hundred file folders and a large cabinet in which to store them all. Other requirements may be intangible, such as time to create a product design or to do market research on potential customers. You may need to hire an assistant to develop a retrievable filing system for the five hundred folders, or hire a consultant to set up a computer system that’s beyond your technical skills.

If you’re going to build a better mousetrap, you may have constructed a prototype out of used toothpaste tubes and bent paperclips at home, but you’ll need a sturdier, more attractive model to show potential investors. What exactly will your mousetrap look like? What materials will you need? Do you require money for research and development to improve on your original toothpaste tube and paper clip construction? Do you need to hire an engineer to draw up accurate manufacturing designs? Should you patent your invention? Will you need to investigate federal safety standards for mousetraps?

Next, do your homework. Call a real estate broker and look at actual retail spaces in the neighborhood where you’d like to open your restaurant. Make a chart of the most expensive and least expensive sites by location and square footage. Then estimate how much space you require and how much money you’ll need to allow for rent.

Make a list of all the tangible and intangible resources you need to get your business going. The total estimated price of all of these items will become your start-up cost whether you’re buying highly sophisticated computers or simply installing a new telephone line on your desk. If there’s any item in your estimates that seems unreasonably high, research other alternatives. But keep in mind that it’s better to include every element you truly need along with a reasonable estimate of the cost of each item, so you don’t run out of money or default on your loans. Be honest and conservative in your estimates, but also be optimistic.

Action Step # 3
Choose A Winning Strategy: How will you distinguish your product or service from others?

Although there are millions of types of businesses, there are actually only a few basic strategies that can be applied to make any enterprise successful. The first step in selecting an effective strategy is to identify a competitive advantage for your product or service. How will you establish that your product or service is better, cheaper, more delicious, or more convenient? How can you make your company more noticeable than your competitors? What restraints in your business or its industry might determine which strategy you choose?

Your competitive advantage may include designing special features not found in rival products. It may entail superior service characteristics such as speedier delivery, a lower price, or more attentive sales people. Perhaps you’re establishing an image or brand of exceptional quality or reputation. Does your product or service bestow a certain status on its users? Does it create more profits or other benefits for your customers’ own endeavors?

Perhaps you want to position your mousetrap for a primarily upscale market because the best design requires titanium and manufacturing costs will be so expensive only rich people will be able to afford your product. But maybe the mousetrap is so fantastically effective that wealthy people will want hundreds of them around their vast country homes and polo pony barns.

You must have a reason why your business will succeed. This is the competitive advantage your product or service will deliver. Once you’ve established the competitive advantage, you will be able to select the best strategy to reach your goal.

Action Step # 4
Analyze Your Potential Markets: Who will want your product or service?

To determine your targeted market, write down the demographics of the people who will use your product or service. How old are they? What do they do for a living? Will mostly women use your service? Is your product or service attractive to a particular ethnic or economic group of people? Will only wealthy people be able to afford it? Does your ideal customer live in a certain type of neighborhood, such as a suburb with grass lawns, in order to use your lawn mower? Answering these questions about the demographics of your prime market will help you establish the clear characteristics of the people you need to reach.

If you’re selling soap, you may believe that every dirty body needs your product, but you can’t start with the entire world as your initial market. Even if you’ve developed such a ubiquitous item as soap, you need to identify a smaller, more targeted customer group first, such as children under eight for the bubble gum scented bubble bath. If your soap only works with pumped well water without fluoride, you must acknowledge that your intended market has geographical limits as well.

Establishing the size of your potential market is important, too. This will be easier once you’ve completed the demographic analysis. Then you’ll be able to research the numbers: How many car mechanics, house painters or bathroom contractors are there in any given community? How many children in the United States are currently under the age of eight? How much soap will they use in a month or a year? How many other soap manufacturers already have a share of the market? How big are your potential competitors? And where do you find the answers to all of these questions?

Identifying your market is one of the great satisfactions of starting your own business. You’re thinking about the actual people who will use your product or service and how pleased they will be buying it as you are selling it.

Action Step # 5
Develop a Strong Marketing Campaign: How will you reach your customers and what will you say?

Entrepreneurs, especially inventors, often believe that their business concept is so spectacular that promoting their product or service won’t be necessary. Sort of a “build it and they will come” attitude, especially if what you’re building is the proverbial better mousetrap. One of the most common flaws I see in plans is the entrepreneur’s failure to describe exactly how customers will be reached and how products will be presented to them. Potential investors, staff, and partners won’t be convinced that your idea can succeed until you’ve established well-researched and effective methods of contacting your customers – and the assurance that once you’ve reached them, you can convince them to buy your product or service.

Marketing describes the way you will position your product or service within your target market and how you will let your potential customers know about your company. Positioning your company means concentrating on the competitive advantages you have identified: will your product or service distinguish itself by its superior quality, its revolutionary features or its ability to make your customers happier than they’ve ever been in their lives? Marketing helps you focus on identifying your competitive advantage so you can position your product or service. It also establishes the best ways to reach your potential customers and what to say to them.

When you have the right marketing campaign in place, you have an operating plan to gain market share, generate revenue, and bring your financial projections into reality.

Action Step # 6
Build A Dynamic Sales Effort: How will you attract customers?

The word “sales” covers all the issues related to making contact with your actual customers once you’ve established how to reach them through your marketing campaign. How will you train your sales staff to approach potential customers? Will you divide up your sales staff so some become experts in selling your bubble gum scented bubble bath to small, independent retail toy stores? Will other salespeople concentrate on developing relationships with major manufacturers so your product could be sold in tandem through their national distribution outlets? Will you have a sales force expert in buying television slots on Saturday morning cartoon shows or placing ads on the backs of kid-oriented cereal boxes?

What advertising and promotional efforts will you employ – two for the price of one specials or free coupons inside those same kid-oriented cereal boxes? Where can you locate lists of the greatest concentrations of children under the age of eight or whatever group constitutes your market?

In planning your sales activities, you will also need to answer questions such as: Is it ethical to contact your colleagues and clients from your former job as a door-to-door soap salesperson to tell them about your new business. Will you be the only salesperson in the beginning stages of your company? When will you know it’s time to hire more sales staff? How do you convince your clients that your sales staff will take care of them as well as you did? What will your basic sales philosophy be – building long-term relationships with a few major clients or developing a clientele of many short-term customers?

You will also need to consider how you will compensate your sales staff – with a base salary plus a commission? Will you hire full time staff with full benefits, or part time staff without benefits. How will you motivate your staff to do the best sales job possible?

Knowledge of your competitive advantage is just as important in designing a dynamic sales effort as it is in developing an effective marketing campaign. You’ll need to think about what product or service qualities will be the most compelling to your prospective customers. Then you’ll have to devise convincing language that clearly communicates this competitive advantage to your sales staff who will in turn use it when talking to your customers. In my experience, the most important element of an effective sales effort is having a sales staff that thoroughly understands your business and the needs or your potential customers. Therefore, your sales plan must address the issue of how you will create a sales staff that is as knowledgeable about your business as it is about your potential customers.

Action Step # 7
Design Your Company: How will you hire and organize your workforce?

By the time you’ve reached this stage of thinking about your potential business concept, you’ll probably have a good idea of the number of people you’ll need and the skills they’ll require to get your enterprise up and running. Keep in mind that your initial plans will undoubtedly change as your business grows. You may need to hire more managers to supervise your expanding staff or to set up new departments to meet new customer demands. Projected growth and expansion for your company should be mentioned in your business plan, but it’s not the primary focus. For now you want to secure help in getting started and convince your funding sources that you will become profitable.
Investors will want to know if you’re capable of running the business. Do you need to bring in experienced managers right away? Will you keep some of the existing employees or hire all new people? And where do you find these potential employees?

Funding sources will also want to know if any of your partners expect to work along side of you or if their obligations are only financial.

Your plan will need to specify the key management jobs and roles. Positions such as president, vice presidents, chief financial officer, and managers of departments will need to be defined along with stating who reports to whom. You may hope to run your company as one big happy family – and it may work out that way – but organizations require formal structure and investors will expect to see these issues addressed in your plan.

And as soon as you have employees, you need to consider how you will handle their salaries and wages, their insurance and retirement benefits, as well as analyzing the extent of your knowledge of tax related issues. As you think about hiring personnel and organizing your workforce, you must also confront your desire and ability to be a good boss. If you haven’t contemplated this aspect of your commitment to owning your own business, now is the time to give it serious consideration.

Action Step # 8
Target Your Funding Sources: Where will you find your financing?

As your business concept begins to take shape, you can begin to home in on the most likely financing sources. Issues such as the size of your business, the industry it is in, whether you are starting a new business or buying an existing one, and whether you can provide collateral to a lender are among the issues that must be considered in creating a target list of funding sources. Banks and other funding sources don’t lend money because people with interesting business ideas are nice. They follow specific guidelines, such as the RMA database, which are designed to insure that they will make money by investing in or lending to your business.

For the vast majority of entrepreneurs, the well-known, high profile means of raising money, such as through venture capital companies or by going public, are not viable options. Your own credit, credit rating, and business history are key factors in obtaining financing for your venture through Small Business Administration (SBA) guaranteed loans and other bank credit. Your ability to tap into your personal network of friends, family, and professional contacts is crucial to raising money beyond what your own personal funds or credit can provide. In all of these cases, there are important considerations such as the potential impact on relationships when family and friends become investors.

When you have completed this process of identifying the likely potential funding sources and writing a bankable business plan that addresses their needs and answers their questions (even before they ask them!), you will have greatly increased the likelihood of obtaining the financing you need.

Action Step # 9
Explain Your Financial Data: How will you convince others to invest in your endeavor?

The accuracy of your financial figures and projections is absolutely critical in convincing investors, loan sources and partners that your business concept is worthy of support. The data must also be scrupulously honest and extremely clear. Since banks and many other funding sources will compare your projections to industry averages in the Risk Management Association (RMA) data, I’ve stressed throughout my book how you can use the RMA figures to test your projections before the bank does. Your numbers will be more credible if they compare reasonably to the industry averages.

The actual number crunching portion of your business plan is the place to discuss how and why you need certain equipment, time or talent, how much these items will cost, when you expect to turn a profit, and how much return and other benefits your investors will receive.

More new businesses fail because they simply run out of cash reserves than for any other reason. Investors lose confidence in the entrepreneur and the business and become reluctant to invest more when projections are not met. Had the projections been less optimistic and the investors asked to invest more in the beginning, they probably would have done so. In most cases, proper planning and more accurate projections could have avoided this problem completely.

Your business plan should clearly state the amount of funds you need, how soon you require them, and how long before you start repaying investors. You should also explain what type of financing you hope to acquire, either equity (such as through the sale of ownership shares in your company) or debt (such as loans to the company).

If you’re planning to buy an existing business or already own a business you would like to improve or expand, you will also need to provide a detailed historical financial summary of how well – or poorly – the business has done in the past. This analysis should also include a comparison of this venture’s financial performance compared to the industry standards.

Action Step # 10
Present Yourself in the Best Light: What are your qualifications for bringing your plan to fruition?

The talents, experience and enthusiasm you bring to your enterprise are unique. They provide some of the most compelling reasons for others to finance your concept. Keep in mind that investors invest in people more than ideas. Even if your potential business has many competitors or is not on the cutting edge of an industry, the qualifications and commitment you demonstrate in your plan can convince others to proffer their support.

Your resume will be included in the separate appendix of exhibits at the end of the plan, so this is not the place to list every job you’ve ever had or the fact that you were an art history major in college, especially if these experiences have no direct bearing on your ability to start your own business. But it is the place to emphasize qualifying skills that may not be readily apparent from your resume.

But don’t overlook the impact being some part of your background that might even seem unrelated to your new venture. For example, having been a pilot may demonstrate that you know how to supervise a crew of people working together to make a group experience if not comfortable, at least safe. You have undoubtedly handled dissatisfied or enraged customers. Even that BA degree in art history may enable you to make your products or store more appealing to the eye.

Your unique qualifications will separate you from all the other people who have sought venture capital for similar ideas. Boasting about these skills is not hubris; it indicates that you have a highly honed business savvy.