Resources listed on the show:
Starting a home business allows you to design a career you love to fit in a lifestyle that suits you and your family. But it is not without its challenges. Failure to plan and learn the activities required to build a profitable business can hinder your success. Here are five mistakes many budding-home-based entrepreneurs make and how you can avoid them.
1. Not running the numbers. Many people believe that their home business needs to earn the same amount they earned at their job. This is not necessarily true. Working at home can come with many cost savings that can result in your need to earn less. On the other hand, running a business has expenses. Budgeting and accounting can be boring, but if you don’t know exactly what you need to live on and how much it will cost to run your business, you could end up in financial trouble. Start by determining the money you need to survive. Calculate the expenses you foresee in running your business and add any additional profit you hope to earn. Then add 10% more just to be safe. Finally, track your home and business expenses regularly so you can determine your actual costs.
2. Not charging enough for your time. Whether you have a service or product based business, you need to make sure that you charge enough to cover your expenses and the value of your time. In an effort to enter the marketplace, many new business owners undercut their prices. The problem with this is that if you undervalue your work and your customers will too. Further, with lower prices, you may not be charging enough to maintain your business. To price properly you need to take into consideration the amount of time needed to deliver your service or create your product, and your overhead expenses. If you charge $100 for a service that takes you 5 hours to deliver, it seems like you are earning $20 an hour. But that $20 an hour needs to pay for your business expenses such as Internet connection, materials, advertising and other costs associated with doing business.
3. Working without a contract. Always develop a contract for service-based businesses and terms of service for product-based business to protect you and your customer. These not only help ensure you are paid and avoid legal hassles, but it ensures that everyone is on the same page about what you provide and at what cost. A service contract should define the scope of your work, a deadline for delivery, payment information (i.e. deposits and rates) and recourse for your client if he is not satisfied such as additional edits or refund. In a product oriented business, have a terms of service that outlines product warranties and refund options.
4. Not maintaining a professional attitude or image. The customer isn’t always right, but he should always be treated with respect. On more than one occasion, I’ve had people request a refund — sometimes using harsh language — on products I don’t sell. I get annoyed and want to express that annoyance. But I am in business and I know that one bad customer encounter can do more damage than ten good ones. So I am always respectful and helpful. You should be too. A professional image is not just how you treat people, but how you are seen in the world. Before doing business with you, a potential client might do a search on your name. If he finds party pictures from Cancun on Facebook, he might think twice about hiring you. Separate your personal and professional online profiles by making your personal ones private for your friends only. You can share personal information on your business profiles, but avoid anything that might offend potential clients and customers.
5. Not marketing. Without marketing, you don’t have a business. Period. The money comes from the marketing. Start by identifying your target market and the triggers that will cause them to buy. A trigger isn’t how great you or your business is, but how you or your business will make your customer’s life better. Next, determine where your target market hangs out and create marketing materials to put in front of them. Develop a marketing plan that involves doing at least one marketing task, if not more, every day.