More than 8,000 home based businesses are started daily in the United States. In fact, the Office of Advocacy, Small Business Administration states the number of U.S. households that have a home-based business exceeds 15 percent.
Unfortunately, an estimated nine out of ten such businesses will ultimately fail within their first year. So, the question is: why do so many home-based businesses fail within their first year.?
If you do an internet search for answers you will find a whole host of experts willing to tell you they have the answer why so many fail.
Here are some of the real reasons why some home-based businesses fail:
- lack of credibility – people will check you out before they decide to do business with you. If your business appears like an unprofessional start-up they may shy away. You gain credibility by having a business license, DBA, LLC, Inc., branding your business with respectable marketing tools, and a good informative website. Starting out without a website, and handing out business cards with “free” stamped on the back, is never a good first impression. If you add to that a business card without a mailing address, everyone you hand them to will know that you are a start-up.
- being invisible – if you operate a business from home you need to advertise and promote it. The one way to do that is to get out and attend networking events where you can meet people. That’s the one sure way to accumulate contacts that can be leveraged into cash.
- treating your business like a hobby – If you do this your prospects or customers will too. You’ll have better success if you set aside several regular, uninterrupted hours daily to work your business.
- answering your own phone – A professional business should have an answering service or let the call go to voice mail. That way you can make sure you know why they are calling by listening to the message, and it gives you time to make sure you have a pleasant voice when you return their call, plus it gives you an opportunity to be prepared to address their concerns.
- poor bookkeeping – It’s really easy to forget about that $5 copy paper, $22 ink cartridge or the $6 you spent on coffee when you met with a prospect, but in a year’s time those small cash out lays add up. A system like Quicken or Quick Books is excellent for tracking your finances and TurboTax does a great job helping you prepare your taxes.
- not keeping an accurate record of your travel and vehicle expenses– if you do this, you will be amazed how many miles you rack up in a year. The IRS allows about 57 cents a mile. If most start-ups, home-based businesses, and sole proprietorships keep an accurate record of their first year’s receipts and expenses, there’s a very good likelihood that they could get an income tax refund that year.
To summarize, most if not all small business start-ups begin with a “good idea”, but if that good idea is launched as a business before creating the appearance of a business, it will struggle to get off the ground. There is no substitute for stepping out into the business world with a business that is properly branded. If you’re contemplating starting a small business, I highly recommend seeking the advice and guidance from a S.C.O.R.E. counselor. To learn more about S.C.O.R.E., contact your local Small Business Administration (SBA) Office. 