Surviving the First 1,000 Days of Your New Business
By Isabel Isidro
From money problems to management problems, plenty of pitfalls can
sink home-based businesses before they can reach their potential. Here
are some of the common stumbling blocks to watch out for and how to
Each year, many new home-based businesses are started; but many also
fail. Many newcomers, at first excited by the prospect of working-at-home,
soon become disenchanted when they realize that even a home-based
business requires tremendous effort and hard work.
We have listed the most common stumbling blocks that businesses fall prey
to. Here are some guidelines to help you from falling victim to these pitfalls
and survive your first two years in business. These reminders should be kept
within easy reach as you operate your business.
1. Under Capitalization.
Lack of funds is the number one reason for
failure. Many entrepreneurs fail to plan properly, expanding too soon or
spending unwisely, and don't get enough money to keep the business going
for a certain period of time. A good business plan can help you avoid this.
Invest enough to keep your business growing for three months.
Investment in inventory is critical.
Take a hard look at your debt. While it may not be as enjoyable as
preparing a shopping list, sit down and make a list of all your debts.
Sell whatever you can.
Do not rush into expansion.
Cut expenses across the board. Small reductions all around are
easier to handle than depriving your business of an entire budget line,
such as advertising.
2. Be realistic about money.
If you are weak in financial
management, it is best that you hire a professional accountant or
bookkeeper, even on a part-time basis. It is important to constantly know
where you stand financially. A lot of small business owners run away from
accounting. They avoid tasks like figuring out what to charge, keeping
records, or sending out invoices; often losing track of how much they are
earning -- or should be earning. Hire an accountant to do it for you and put
this into your business plan.
However, over-reliance on accountants and letting them run your business is
also a big no-no. Avoid the trap of some business owners who make
financial decisions without financial knowledge. As much as possible,
everyday bookkeeping chores should stay in the hands of the owners, while
delegating to accountants some tax reporting and preparation of financial
statements. Turning over all bookkeeping duties to an outside source is both
expensive and dangerous.
3. Poor management and organization.
You will need to decide
on the best organizational structure for your business. Learn the advantages
and disadvantages of each legal form. You may end up paying taxes on your
Also, do not forget to be generous in allocating time and earnings for
yourself. Often, self-employed people are not efficient about using their own
time, partly because they think there is no end to it. If you are working in
your bathrobe in your bedroom, what's the difference if you call that client
now or after lunch. And now that you are home, you can catch all the
noonday showings of your favorite drama shows on TV. It is also important to
4. Miscalculated market potential.
Making business presumptions
without taking the time to learn your target market is a serious pitfall for any
starting entrepreneur. Research your market carefully in order to avoid
missing the mark on what product is needed. Label very specifically who
your ideal customer will be. Properly determining the market determines the
location, the marketing plan and the product mix of the seller.
In addition, avoid basing your business on trends that may soon fade.
Research trends very carefully to determine whether the passing fad has the
potential to stay.
5. Ineffective Marketing.
Study carefully how you will attract and sell
to customers. Formulate your advertising and sales philosophy using the
most appropriate media, timetable and budget for your promotion efforts.
This is a serious problem on the Web. Some sites have been able to attract
huge traffic, but fails to convert this to sales. You can attract six people a
day to your site or six million but if they do not buy anything from you, it
doesn't matter if a handful or millions came. It is important to devote plenty of
energy and expertise to improving your conversion rate -- the number of
people who check out the site and then actually buy something. Conversion
of visitors to buyers will give you a strong foundation for a successful
Remain positive. If you feel as though you are losing control, then you
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