Home Business Survival Crash Course
People launch all types of businesses every day.
Despite enormous investment and months or years of preparation most new businesses fail. Their once well lit storefronts and offices are now dark, and their employees are searching for new jobs.
I don’t have precise statistics for a home based business. I estimate that perhaps 98% of new home businesses never earn a dime. If my estimate is too high, it can’t be too high by much. Don’t let anybody tell you otherwise.
My first home business with Excel Communications lost money for five years before finally turning a profit. I have since embarked on other ventures. Some have worked out well, and others not.
Let’s discuss why home based businesses usually fail and what you might be able to do to succeed. First I’ll share my thoughts about this, and then you’ll have a turn to express your point of view.
Reasons for Failure
The following list of causes for failure is arranged with readability in mind, rather than the relative importance of the contributing factors:
- YOURSELF - You have an uphill battle if you lack internal motivation, commitment, relevant skills (such as organization, communication, sales, marketing, online social networking or prospecting), proper training, posture, preparation, productivity, or some combination of these.
- Others - Other people can lack all of the above. Sadly, they can also lack integrity. I believe that people not doing as they say they will is very disappointing and the greatest business obstacle. Read the story of Orovo and Network Success Builders for a good example of this.
- Hype - Exaggeration and misrepresentation of products, services and business opportunities are all too common today as people try desperately to differentiate themselves from their competition in an over-crowded marketplace.
- Company Affiliations - Your success is likely to be tied to the success of a parent company. New companies are unstable and inherently risky to do business with. However, old companies tend to have insufficient momentum.
- Wrong Side of the Marketing Equation - Your cost per acquisition or sale exceeds the value of the sale. The more you sell, the more money you lose. Every business, even a major corporation, can find itself on the wrong side of the marketing equation.
- Over-Reliance on Systems - Your business depends on a system, and when that system stops working, just as systems usually do, your business also stops working. People who preach that people don’t duplicate but systems do are lying big time. Do not fall for this one! What is the truth? Please read on.
Work on Number One
You are #1. Your long term business success hinges upon your mastery of life and business skills and upon your growth as a person. Read books such as biographies, business books and books on personal development. Read blogs, watch videos and associate with successful people. You will improve your chances of succeeding in your personal life and your business endeavors.
Check Out People and Companies
Do the best you can to check people’s backgrounds. Request references.
Google people and companies alike, and don’t stop after page one or two. Keep going. Try adding in keywords such as scam, rip-off, accused, alleged, cheated, lied, stole, swindled, cheated, convicted, etc.
Limit the extent to which your success depends on people and organizations doing exactly as they say they will. Try to diversify your business so that it doesn’t collapse if a single person or company flakes or rips you off.
If you’re honest like I am, you’ll tend to place too much trust in others. Trusting people is good, but be sure to limit that trust and the damage that any single person or business can inflict on you.
Don’t Fall for Hype
Do you believe everything you hear? Then I know somebody who will sell you the Brooklyn Bridge. Old New York joke, but I can assure you that the joke doesn’t date back to before 1883.
All kidding aside, there are people out there who will say just about anything to get you to buy from them or to recruit you into something.
Do your homework. Use common sense. If something sounds not quite right or too good to be true, assume that it is until you believe that you’re proven wrong.
Consider getting a second opinion from a highly knowledgeable independent third party. Don’t ask Uncle Harry, your neighbor or your accountant. Ask an expert. You will probably have to pay for the advice you get, but the time and money you can save by avoiding a scam or jumping into a business with the wrong expectations may far exceed the cost of a qualified consultant.
Old vs. New Companies
Mange your risk.
Younger people can assume more risk than older people, because they have more time to recover from setbacks. A startup business will best suit a young person. High risks, high rewards.
Older people ought to be more conservative and choose a business with a proven track record.
If you are middle aged or older, here’s another option for you. Spend part of your time and energy on a new business that’s just launching and the rest of your time and energy building something safer.
Even a young entrepreneur can use this strategy, but it does have a drawback. It’s harder to focus on two ventures than on one.
Business Analysis 101
If you’re math phobic, this one is going to be difficult, but help is available.
Your cost per acquisition should be less than the net present value of your expected future profits from the acquisition, also called the customer lifetime value.
CPA < NPV
In plain English, don’t let your cost per sale (in both time and out-of-pocket dollars) wipe out your profit. You can never make it up in volume.
If you cannot figure this one out, get help from a business analyst or a qualified accountant. You’ll have to do your part. You will need to track your sales and your expenses very carefully in order to reach a correct conclusion.
If the basic marketing equation (CPA < NPV) doesn’t balance in your favor, consider using an ethical funded proposal to fix the problem.
Sell another more profitable product or service to “get the customer in the door”. Then sell your main product, service or business opportunity to the customer on the back end.
Systems Don’t Work
Last but not least, despite all the hype about the SpiderWeb System and the Reverse Funnel, systems don’t duplicate. They don’t work for long. In the home business world these systems produce a bunch of clones that run around competing with each other. Believe me, that’s not a pretty sight.
Unfortunately people don’t duplicate either. We know this from the childhood game of Telephone. The message always gets distorted. Any person can become a weak link in the duplication process.
Now, the one thing that does duplicate…
Leadership does duplicate. Leaders will get the job done. If more leaders are needed, they will find them.
How do you find leaders?
Be one! Leaders attract leaders.
Now It’s Your Turn
Be a leader. Write a comment.
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