It is a fact that as many home businesses are started, only a few succeed, many remain so-so, and many more fail with their owners actually losing their money. This is sad because almost all who ventured to do business at home have done so thinking that it is the best way to get out of the 9-to-5 rut while earning lots of money they never even dreamt of as employees. It’s when these owners face the stark reality about running their business that many find themselves falling short of their expectations. Below are 6 common reasons many home businesses become failures and what you can do to make sure your home business doesn’t suffer the same fate.
1. Lack of business plan.
Any business that launches without a plan is bound to fail. Any business owner who wants to succeed in a new undertaking must write a business plan to concretize his visions and what he wants to do with the business. The business plan maps out the directions the owner must take and the strategies that must be adopted to achieve goals.
2. Poor planning.
Many business plans are too optimistic they tend to overestimate the market and demand for the product or service. Sometimes, business owners underestimate the production costs and expenses of running their business. As a result, profits are smaller than projected. Sometimes, the operations result into a net loss and the business is rendered incapable of sustaining its own operations. Know your market thoroughly so you can make more realistic projections.
3. Insufficient working capital.
There are people who boldly start new businesses even without sufficient working capital. And when they finally run out of cash, many resort to mortgaging their homes, risking the financial security of their family. Therefore, make sure that you have enough business funds before establishing your home business. Keep your business funds separate from your personal money and don’t use one for the other. Commit your finances only up to a certain extent. Know when it’s time to quit but you don’t have to if you can manage your business well and grow it to be big and strong.
4. Lack of knowledge, experience and management skills.
Many home businesses fail because the owner does not know enough about the business. Or, he may be too inexperienced and lack the managerial skills necessary to make the right decisions in steering the business into profitability. If you wish to enter a particular industry and you do not have any prior experience in it, you should do your homework first. Read up and do the necessary research. Learn about production, marketing and financial management. Go back to school if you must so you can prepare yourself adequately for the demands of the business.
5. Lack of self-discipline and commitment.
Many home business owners think that they have the right to sleep late and work whenever they feel like. Unfortunately, such an attitude is a recipe for failure. Laziness and procrastination have caused the downfall of many home-based businesses. You should be prepared to toil hard if you want your business to succeed and this means having to work longer hours if necessary, and going out of your way to provide excellent customer service. However, make sure that you take breaks in between and get enough sleep to keep stress from consuming you. Home based businesses can turn into a monster if you don’t take full control at the onset.
6. Inability to cope with changes.
It is common among home business owners to be so absorbed in what they’re doing they fail to notice the changes happening around them. They are unaware of the latest trends and before they know it, the product or service they sell is on its way to becoming obsolete. As a home business owner, keep your nose onto the grindstone but keep your eyes and ears wide open. Maintain contact with your peers in the industry and try to widen your network. Be alert for hints of forthcoming changes so you can prepare to adapt yourself and your business to any developments.
Building your home-based business can give you a sense of fulfillment but you need to be disciplined and driven. Tap into your creativity to make the most out of the many opportunities that are present. If you can’t commit yourself to nurture your business through the highs and the lows, then you might as well continue being an employee and enjoy a more peaceful sleep at night.
Do You Know Why the CRA Uses a Profit Test for Business?
What is Income Splitting and How Can it Reduce Your Tax Bill?
Self Employed? Do You Know What Your Tax Obligations Are?
How Can You Claim Expenses on a Business Loss?
What are Input Tax Credits?
Tax Strategies to Reduce Small Business Income Tax
10 Red Flags That Can Trigger a CRA Audit For Your Small Business
Common Income Tax Business Deduction Myths