Starting a business can be a time of high excitement. The vast majority of new businesses are started by people in their homes on a financial shoestring. Often their intent is to produce a little extra income or possibly a full time income for themselves. Very few rise above the level of a small home-based enterprise. Seven big reasons exist to explain why most home businesses fail to thrive or even exist beyond a year or so.
The owner fails to plan before launching the business.
To begin a business or company that has staying power requires significant planning at the beginning. This plan can be adjusted to accommodate the growing pains of increasing business. However, solutions to a number of the early potential problems need to be built into the business plan. This allows the home business to be guided through the tentative early stages of development. Suppliers, shippers, production models, and strong record keeping have to be a part of any successful business plan for starting a new company.
The business has too little financial backing at the start.
It is all but impossible to foresee all of the financial pitfalls for a new business. If you do not have a significant amount of capital set aside to cover these hidden expenses, the entire enterprise is in jeopardy from day one. Eventually, a growing company will experience cash flow issues because of the time lapse between having to pay suppliers and receiving income from customers.
There is a lack of commitment by the owner.
Frequently, people start a small home business without actually thinking of it as a business. It is a hobby that pays for itself by selling the items produced as a result of the hobby. People who enjoy woodworking, handcrafts, and other similar hobbies are often asked to produce the items for their friends, family, and perhaps coworkers at their job. The result is that when the business starts to grow, the owner has no desire to see it develop into something more that it was when it started. So, the home business returns to hobby status.
Interest in business growth is low.
Even if the business started out to be a business, it does not mean that the owner wants it to become a driving force in his or her life. The idea that it is big enough is a heavy player in this equation. Businesses that stay small are easier to control. If the owner is not interested in hiring employees or enlarging production space, the growth of the business will be severely limited. Without growth, the odds are high that the day will come when the business folds from lack of interest.
The product has a low or decreasing demand.
Unfortunately, some businesses start with a bad product choice. Businesses that try to jump on board the latest fad near the middle of the fad’s life cycle are destined to die off. By the time the business can ramp up production enough to make some real money, the demand for the product has disappeared. Unsold inventory becomes a liability that sinks the ship.
The product has poor quality, is priced too high or has slow delivery time.
Competition is the name of the game when you are in business. This is true even for a home business. Your product has to compete well in the market place. In fact, small businesses generally have to produce a superior product because it is hard to match the pricing of large companies due to the lack of economies of scale. If you are lackadaisical about delivery times, your customers will quickly lose interest in ordering from you. Small businesses can quickly receive more orders than they can produce in the needed time frame.
Marketing is weak.
Customers must know that you and your product exist. Advertising must be well placed and attractive. Use the type of advertising that will present your product to the largest number of potential buyers. Developing some type of sales force to help you market your wares is a big part of business success. This can be word of mouth, friends and family who hawk your goods, or actually hiring a proven sales professional to carry your message out to clients in your area. Even a legal multi-level marketing set up can achieve this for some types of products or services.
Trying to grow too rapidly can be a downfall.
Steady growth along a comfortable path is always best for small companies. With the Internet, the temptation to go big too quickly can bring thousands of orders while you are only staffed to fill hundreds of orders. Be careful to put production processes in place before you attempt to reach to high or too far.