Larry Brauner

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

Look up companies at the Better Business Bureau, and see if they belong to the Direct Selling Association — even though neither guarantees a company’s legitimacy!

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

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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22 Responses to “Home Based Businesses Don’t Work”

  1. Chris (fypprtygrl) on September 12th, 2008 12:26 am

    Well, I read your article and have to agree and disagree.

    Yes, there are soooo many scams out there, and I’ve fallen for some WAH businesses that just left me high and dry. However, there ARE ones that work and DO make you a profit!

    Fortunately, after trying a few, I finally found one. I AM making money and having a great time doing it. Not only are the rewards that hostesses receive COMPLETELY paid for by the company, unlike many others in the same catagory of companies, but I actually don’t have to pay for anyting other than my start up kit and any additions I want to make to it. If I’d like to pay for advertising, postage, mileage and that sort of thing, that’s my choice, and it’s all a tax write off.

    Yes, I sympathize with those that have been taken for a ride, but just so people don’t give up total hope, just know that there ARE home based businesses that DO work!

    Thanks,
    Chris

  2. Jeffrey D. on September 12th, 2008 12:41 am

    Larry,

    So much “food” for the mind. You are a very insightful person. If a normal person thinks “out of the box” your thinking is “out of the universe”.

    I listen to you speaking about home based businesses and how 98% fail. You are only speaking of MLM and Internet marketing businesses.

    I know for a fact that home based businesses that [directly] provide a service or sell a product have a much higher percentage of surviving.
    I cannot say that I have created a super amount of success with my construction business, but I have at least turned a profit for the last 4 1/2 years! If I had to depend on peddling HERBALIFE products to make a living I would be broke.

    Aside from this, my question is “How do I apply these marketing techniques to my construction business?”

    I hear everyone on the web screaming about how they can help your ONLINE and MLM business, but how are people supposed to take their “normal” home-based businesses “to the next level”?

    I would really appreciate any information about how this is possible and where it can be found. By the way, MPC and your Online Social Networking blog have helped me out tremendously in my other business, Send Out Cards.

    Keep up the great work!

    - Jeffrey

  3. Debbie Morgan on September 12th, 2008 1:53 am

    Hi Larry!

    Once again, thanks for communicating sound information for us to consider.

    I really appreciate the point about working on number one. Thanks to blogs like this and social sites like Ning, I am exposed to great information and able to interact with successful friends.

    Learning is a life long process.

    Thanks, Larry, for being part of that process for me.

  4. Gary Rocha on September 12th, 2008 2:53 am

    Dear Larry,

    I have been reading your posts, and although some may think and perceive you as being “negative”… I value your input.

    Personally, I started with Internet marketing with the intent to pay off my credit cards … which have been maxed. It doesn’t matter what the amount. But for the records it is not as a result of IM, but of a human (mine) error.

    What little money I invested, I am happy to be able to say I recovered. But … the time I invested for a financial return has not paid off. That is OK by me and I can live with that.

    Why? - Because my secondary goals are to mentor others for positive thinking and believe that LOA does work … with ACTION!

    Keep up your good work and let’s stay connected. I for one, do appreciate you and the work you’re doing.

    Enough is enough! Let’s join our energy and clean up IM of all that “crap” that’s proliferating.

    Your friend and partner at work,

    Gary L. Rocha
    WORLD ALLIANCE OF MENTORS
    A Group of Like Minded People Who Want Only Success for ALL

  5. TeasasTips on September 12th, 2008 9:56 am

    Awesome post Larry.

    It’s amazing how many people will fall for hype and not substance.

  6. Larry Brauner on September 12th, 2008 10:11 am

    Chris,

    I’m happy you found a home based business that’s meeting your expectations. One comment though.

    Home businesses only work for the people who make them work.

    Jeffrey,

    I cannot discuss all the ins and outs of marketing a local offline business.

    My guess is that referrals and endorsements from satisfied customers would be the single best way to add new clients.

    Dan Kennedy in his books stresses the importance of reaching people multiple times with our message. Blogging does that for me.

    If there is a small weekly newspaper in your vacinity, it might make sense to run a small ad EVERY week. The repetition you get will help you get people’s attention and gain their trust.

    Lawn signs might also be a good idea.

    Gary,

    Thank you for your support.

    I wouldn’t say that my articles are either positive or negative. I try to take a balanced approach.

    You keep up the great work too!

  7. Mari Torres on September 12th, 2008 10:54 am

    Hey Teacher,

    Great post! I agree with so much of what you said Larry.

    I just recently took advantage of a new business opportunity, but I have been taking my time to grow it. I am sure my sponsor is wondering what the heck is taking me so long to really start.

    The reason I haven’t been recruiting is that I have a love hate relationship with network marketing home-based businesses.

    I got into the opportunity because I think it is a phenomenal opportunity to make a long lasting residual income. The compensation plan is excellent and the product is something that people will not stop using anytime soon.

    But! I refuse to try and get my friends and family into the business. I refuse to go to hotel meetings and I refuse to be a groupie and rally up all of my prospects for the “company leaders” that are coming to my town to do a biz opp presentation.

    I am growing my business by finding people that are interested in a partnership with me, who will be committed to learning marketing skills and good solid business practices.

    I have a group that I started called “Network Marketing” Rebels. We plan on showing people how to “Remove The Crutch” of network marketing. For example 3-way calling makes me want to pull all my hair out. That is when you call your “upline” with a prospect on the phone and your “upline” tells the prospect how great the business is. What this really does is show your prospect from the start that you are incompetent and unable to present the product on your own (my opinion) so why the heck are you in business anyway.

    Larry, I could go on and on about this subject I am glad that you brought it up. Hopefully more people will take responsibility for their own failures in MLM and stop blaming it on the industry and start finding business solutions that work!

    Mari Torres “The Network Marketing Rebel”

  8. Tim Southernwood on September 12th, 2008 12:19 pm

    Hi Larry,

    Great article for your blog. I wonder why someone hasn’t nominated you for the Blog Awards yet??

    Your article is as usual, on the mark. You speak clearly and without self interest. This article isn’t just a coverup for an endorsement of any MLM company or service.

    Scary thing those numbers, and although I’ve heard anything from 92% to your 98%, who cares? Over 9 out of 10 people FAIL in business online. I don’t hear anyone disputing that fact.

    You’ve also clearly outlined the likely factors that cause online businesses to fail.

    These things I’ve learned personally and first hand. I can tell your readers that if they are new to online marketing and all of a sudden someone’s telling them how quick they can make thousands a week, they had better remember this article and your warnings to do their due diligence, ask other people (preferably experts) and if it sounds too good to be true IT IS until proven otherwise.

    Let me say that of all the lofty promises of vast riches I’ve passed up..compared to those I fell for, I’d have made more money on the ones I PASSED UP!! Simply from the money I’d have saved.

    But I didn’t give up, and I chose to take all that as part of my education, and I dug even deeper in to learn even more — at a much better price ;-) — and today I can even say that I’ve learned what it takes to be in business. It was an expensive education and I wouldn’t recommend it to anyone the way I did it.

    Much better to just pay up front to a good online marketing training service, because the “do it yourself” path costs WAY more!!

    Now get on over and nominate your blog at Blognet Awards. Nominations close on the 15th! and thanks for a great blog!

  9. Ginger Jones on September 12th, 2008 5:05 pm

    Hi Larry!

    Fantastic post! I could have really used this about six years ago.

    I didn’t realize that I was the biggest variable in my business.

    The rest is pretty much a numbers game, right?

    Unfortunately, 98% is a very large number!

    Thanks for your post — hopefully through posts like this we can get those numbers down.

    Ginger Jones

  10. Barb on September 12th, 2008 10:18 pm

    You hit the nail on the head for sure.

    I like what you said about leaders attracting leaders. Yes, and we get energy and become stimulated by others who lead us forward.

    Learning is an adventure. It is hard work but the rewards are tremendous. In order to become a leader, you have to grow and let go, and that’s where self-development comes in.

    We need teamwork and good strong and wise leaders.

  11. Mitch on September 15th, 2008 12:56 am

    I guess I’m sort of confused by the title as opposed to the rest of what you wrote. I thought you were totally against home based businesses, but then you gave some tips on how a home based business could work, and then talked about some other things to watch out for.

    I’ve been an independent consultant for over 7 years now, and in my mind home based businesss work. Now, I’ve been trying to add Internet marketing to that for the past 4 years, and I’d be less than truthful if I said I’ve been all that successful at it.

    I assume you’ve worked for yourself. Am I wrong in that assumption? Or is that not what you mean by the term home based business?

  12. Linda P. Morton on September 15th, 2008 10:55 am

    Hi Larry,

    This is a great post. I agree that you should nominate yourself for the blog award. Or guide me through it and I’ll do it for you.

    I also found the posts here to be relevant with good additional thoughts.

    For those asking about marketing for offline businesses, please remember that my blog focuses on offline small business. Although I do sometimes write a post more relevant to online. I’ve linked to it.

    Thank you for being a good leader and mentor. I think your readers’ comments testify to the good job you’re doing.

  13. Larry Brauner on September 15th, 2008 6:21 pm

    Hi Mitch,

    Please dont be confused. :)

    The truth is that from a statistical point of view home based businesses don’t work. However, the small percentage of people who do things right sometimes succeed.

    I have had home businesses. Having a home businesss goes beyond self employment which is more like owning a job rather than a business.

    Independent consultants own their job, unless they have people working for them. It’s the leveraging of other people’s time that makes something a business.

    I hope this helps.

    Larry

  14. PlanetThoughts on September 17th, 2008 7:08 pm

    It was not home based businesses, but the economic meltdown going on right now was due Reason for Failure #5.

    These companies, directly or indirectly, kept buying mortgages that were inherently money losing propositions.

    But when one is not thinking, the “shell game” looks so good that you then increase the volume of transactions. After 5 years of this, “the crows come home to roost”.

  15. Lee on October 9th, 2008 5:17 pm

    Hi Larry,

    I’ve been quietly checking out your site for some time and abandoned one online venture after reading what you had to say about it which made perfect sense. (I want a business I can run with integrity.)

    After reading this article–which I think is sound and realistic–I’ve finally decided to toss my hat in the ring.

    I have a family member that is pressuring me to join The MLMLeadSystemPRO Attraction Marketing System. (He even has a nice MLM he wants to sign me up with.)

    My impression of MLM home businesses is that they don’t make money for more than a few people, and I’m not too interested in going that route, since I have another business I’m already seeing some nice results with, with very little effort so far. (I’m also impressed with the level of responsiveness and integrity of its founder, whom I’ve dealt with one on one.)

    Anyway–

    ;-)

    I’m assured by this relative that the MLMLeadSystemPRO will work well with the business I have, but I’m a little skeptical (OK, more than a little). Web searches only seem to turn up sites advertising this system, even though I specifically entered search terms looking for references to it being a scam–so no luck there.

    What can you tell me about this system?

    Many thanks, both for any information you can share, and for this sensible and straight up forum/site.

  16. Larry Brauner on October 9th, 2008 9:24 pm

    Hi Lee,

    Thank you for reading my blog.

    I think the main reason you haven found any dirt on MLMLeadSystemPRO is that the site is only three months old.

    I cannot tell you anything about their program, but I can tell you that their domain name expires in less than nine months. Either they’re not serious, or they don’t really know what they’re doing.

    In addition, their site hasn’t been set up correctly from either a search engine optimization standpoint or from a social marketing standpoint, so I wonder whether they’re really qualified to teach you anything.

    They do have a fair amount of traffic going to the site, but that’s no guarantee that they will be able to deliver what they promise.

    It may be a fine program after all, but I think it’s a very risky proposition.

  17. Lee on October 10th, 2008 9:22 am

    That’s the kind of balanced and realistic reply I’ve come to expect from you. Many thanks. I will pass this on to the family member, and he can make his own calls.

    Have a great weekend!

  18. Larry Brauner on October 10th, 2008 9:34 am

    Thanks Lee.

    Incidentally, this is my second article to be picked up by Reuters.

    You can see it at Home Based Businesses Don’t Work on Reuters.

    I will be writing another article on home based business opportunities very soon.

  19. Jason on October 16th, 2008 7:16 pm

    I’ll take your “leadership challenge.”

    Nice work, Larry.

    Good work and you deserve the credit and respect for your time and efforts.

    Much Success,
    Jason Spurlock

  20. Eunice Coughlin on December 8th, 2008 10:40 am

    Larry,

    I believe that to be a leader, you have to be wiling to learn from failure as well as success in order to carve out your own slice of the home business pie. Thanks for helping me do that with your excellent blog posts.

    Eunice

  21. Michael Taplin on January 19th, 2009 3:28 am

    Larry,

    This is a necessary warning for the naive wannabe’s, but…

    To be true, your statement must be based on a very narrow definition of HBB. I say this because we have operating a very successful HBB for 20 years, in two countries. Our business is management consulting, employment relations, mediation and teaching/training.

    Over that time we have has extended client relationships with governments, multinationals, major corporates, SMEs and many HBBs.

    There are some tricks of the trade involved in making it work but people should be assured about three things:

    1. If is sounds too good to be true, it probably is.
    2. All successful businesses add real value and leave the customer better of than you found them.
    3. In any new business, serve your apprenticeship and learn the tricks of the trade. Only then can success be assured.

    If anyone is still reading this old post they can learn from an old dog about some of this stuff by attending the February VEC Forum free sessions. See details at our site.

  22. Don on September 7th, 2009 10:23 am

    Hi Larry….

    Since January is the last post it’s obvious that I’ve just caught up with you on the net and find your writings very informative.

    Unfortunately, brick and mortar businesses have a 9 out of 10 failure rate too. Today, the network marketing option has winners and losers just as before.

    Misguided mentors or upline is usually all about “me” not YOU. My impression is that few folks will personally recruit anybody to any program, good or bad. It’s called the rejection fear.

    Today, my upline has former EXCEL guys/gals who made millions [they say], like Jan Johnson, Rick Rountree and others whom seem very honest promoting the new Global Verge plan.

    Maybe you know these folks too. Just looks good from this end today because of the one product everyone uses across the world.

    Best regards,

    Don

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