It's a well-known fact that a large number of businesses fail each year. Many of those failures are home businesses.
Whether a business is run from a home, or from a large office building, the principles are the same. A business must be managed well if it is to survive in the long run.
Here are eight common business mistakes that home business owners, in particular, seem to make:
- Not Planning - If I had a dime for every freelancer who told me that they "just kind of fell into their business," then I'd be a wealthy woman today. While it may be true that your business may have started when someone asked you to do work for them and they paid you for it, but if you don't set goals and make plans then your business is not going to go much further.
- Not Saving - Most Americans live from pay check to pay check. While this is not a good practice even for those who have a steady corporate pay check, it can spell financial disaster for a freelancer whose payments may come in spurts.
- Not Putting Money Aside for Taxes - When I was in the corporate world I remember hearing about a young colleague, a programmer, who decided to become an independent contractor. At first, he would talk about how much more money he was taking home now that he was self-employed. His "success" lasted about a year - until income tax time. As it turned out, he had not been setting anything aside to pay income taxes. At the end of the year he found himself with a huge tax bill that he couldn't pay. (Fortunately for him, the corporation took him back.)
- Not Having Health Insurance - The number of home business owners and small business owners who choose not to purchase health insurance shocks me. This is gambling in the worst kind of way. You may be healthy now, but sooner or later, you will need some time of medical treatment. Even a minor medical procedure can break the bank for an uninsured person. Some time back my husband had a fairly routine type of back surgery. If we hadn't had health insurance, then we probably would have lost our home - the bill was that high!
- Not Managing Time - When someone works from home, it's easy for the line between work and personal tasks to become blurred. Most people either tend to lean one way or the other - towards spending too much time on personal tasks, or towards spending too much time on work. Either way can spell disaster for a home business. If you lean towards too many personal tasks, then you may lose income as you fail to complete assignments. If you lean towards spending too much time on work, then you may be headed for burn out or damage your personal relationships.
- Not Knowing How Long a Project Will Take - Estimating is a crucial part of being self-employed. Whether you are selling a product or selling your services, you should know how long it takes to get the work done. If you allow too much time, then you'll have gaps where you do nothing when you could be earning revenue. If you allow too little time, then you risk charging too little or missing a deadline. A good way to manager your estimates is to keep records of how long tasks take you. That way, you'll have some historical basis for your estimates.
- Not Knowing How Much To Charge - Many home business owners fail to understand how much it really costs to make a product or perform a service. The most common reason for getting this wrong is failing to consider the cost of overhead when setting your prices. What is overhead? For the purposes of a home business owner, it's any cost that you can't directly connect to a product or service. It could be administrative or marketing costs that benefit the business as a whole or it could be the additional telephone and electricity charges that you pay each month because you run a business in your home.
- Not Marketing Your Business - A business cannot survive without customers. Without customers, there is no income. Without income, there's no business. It's that simple, but many business owners depend entirely on one or two large clients. When those clients no longer need their products or services, the business folds because the business owner has failed to market it.
- From Freelance Switch, The 10 Biggest Mistakes Freelancers Make and How To Avoid Them - Manage your customers correctly and save your business.
- From Bootstrapper, Rookie Mistakes: 15 Blunders New Freelancers Make and How To Avoid Them - Business planning is vital.
- From Daily Writing Tips, Top 5 Freelance Mistakes To Avoid - How freelance writers can avoid making bad business decisions.
- From Freelance Folder, My Top 5 Biggest Freelancing Mistakes - Learn from the mistakes that a successful freelancer made.
- From Home Biz Notes, 9 Mistakes A Home Business Owner Shouldn't Make - Here's practical advice to help you run your business properly.
- From PowerHomeBiz.com, Top Ten Home Business Mistakes - Here is a list of mistakes that home businesses should avoid.
- From eMoms at Home, The Top Ten Working From Home Mistakes - Tips based on the true experiences of a working-from-home mom.
Leave a comment and let us know.
And you can add number 9: Underestimating the time it will take to do each of the above!
Seriously, most people from the corporate world have no idea how much goes into the behind-the-scenes part of their job - the part OTHER people used to do!
Great list, Laura!
Posted by: Robert Hruzek | February 27, 2008 12:55 PM | Permalink to Comment