Many people decide to become masters of their own career and run their own business. However, not all the budding entrepreneurs manage to keep their business running for a long time and enjoy success. The sad truth is that half of home-based businesses fail within the first five years, and only a third of the remaining ones are still operating after 10 years.
This is not meant as a discouragement for entrepreneurs who want to open an internet home business, but you need to be aware of the pitfalls so you can avoid them. In this article, we have decided to put together the most serious reasons which lead to home business failure. Once you are aware of them, you can think of solutions to avoid committing them.
Without further delay, these are the top five reasons why a home business is most likely to fail:
1. You Go in Business for the Wrong Reasons
A lot of entrepreneurs think that opening a home business is a quick and easy way of making money without a lot work. Or they think that they can obtain a sufficient income with lots of spare time to spend with their family, long vacations and no worries about office hours and bosses.
These are the absolute worst reasons to start a business. Running a home business is not a get-rich-quick scheme (actually, none of the get-rich-quick schemes we have heard of work or are legal). Instead, it is a long-term commitment to work hard, promote your business, find customers, file tax returns, calculate your expenses and your revenues, and find out ways in which you can develop better and more innovative products and services. These take up a lot of time, effort and dedication.
2. You Do Not Have a Marketing and Business Plan
Every business needs a business and marketing plan, no matter how small it is. Why are they so necessary? First of all, a business plan gives you a guideline, helping you achieve small milestones, pushing you towards success. A business plan also helps you obtain bank loans if you need them. Also, you have a go-to written “handbook” for your business, which shows you if you are keeping up with your goals or you are lagging behind.
A marketing plan, on the other hand, is critical to find clients for your home business. You need to know exactly what you need to do, how much to invest in Facebook ads and Google AdWords campaigns, and how to engage your social media followers and convert them into customers.
3. Growing Your Business Too Fast
This failure risk ironically occurs exactly when your business is on the brink of becoming profitable. You gain a steady number of customers and you have satisfactory revenues, so you believe that if you expand your business, the number of customers and your incomes will also expand proportionally. So you invest all your revenues in growing your business.
This is unsustainable growth. Your expenses and your locked assets increase without a solid stream of finances to support this growing phase. If you are tempted to hire people or to get a brick-and-mortar office, thinking that this is the next logical step for your business, think again. You are earning enough to run a business from home, but nowhere enough to support this sudden growth.
4. Betting All on Technology
Modern technology is great, and it can bring you a lot of benefits, but it is not sufficient to run a business for you. People are fascinated by new gadgets, but not too many of them are keen to put their money on a new product, without backing and testing by the mainstream tech businesses and with no certainty that they will actually need it.
Or, they may be fascinated by social media and online tools and games, but that does not mean that they will flock to subscribe to your own digital products. So be careful and wary about betting on brand new tech – before you start a business on an amazing idea you have just had, test it to see if it is viable.
5. No Exit Strategy
It sounds like a counter-productive idea, planning what to do in case you want to get out of business, but it is actually a sound business strategy – one which can either save you losses, or make you a lot of money. What does this mean? Simply, it means that you need to know what to do to mitigate loss if you notice that your business idea is not taking off.
Or, that you need to have a smart plan if your business idea attracts the interest of investors who will want to buy you off. You can either take the money, walk away from your business idea and watch others build a successful company, or negotiate your position after you sell the brand identity and business plan to the investors.
These are five powerful considerations to think of and solve before you start your home-based business. Once you have found clear and pertinent solutions to them, you are a few steps closer to running a successful internet home business.