5 Key Steps of Home-Based Businesses, Part 1: Look Before Leaping
Starting a business is often like “feast or famine.” On one hand, there’s the entrepreneur who has over-researched, planned, tested, borrowed, and sought out people “in the know” before making the big leap; on the other hand, there’s the small business want-to-be who has done nothing but is ready to take the plunge just the same.
The former method is more realistic simply because planning assures a better chance for success. Can a small business ever be completely certain of the outcome? No, but it is possible to make intelligent decisions, based on accurate research.
If a home-based business is successful, it can expect to move from home-based to mainstream within a couple of years. This five-step series outlines some basics for entrepreneurs to consider while planning, starting, operating, growing and moving the business outside of the home. These key steps are:
- Look Before Leaping (planning may save your bacon)
- Ready, Set, Start Up (opening the doors for the first time)
- Keep on Tracking (stay on top of competition, product/services, operations, record-keeping)
- Growing with Magic Beans (marketing, networking, building customer base, increasing sales)
- Anchors Away (Moving into Mainstream )
Look Before Leaping
- Ask the question, “Do I have passion for this?” Without passion, the business will not succeed. Working 16 hours a day, 7 days a week, and 52 weeks a year requires passion for the product or service. Otherwise, we will burn out.
- Ask the next question, “Do I have what it takes?” An easy way to answer that is to take a simple entrepreneurial quiz. The quiz will identify which entrepreneurial skills are lacking.
- Fix it. If there is passion, then we should be willing to learn what we need to know before taking the next step.
- Get help. Find a business advisor like women business centers (WESST), SBDC’s, or SCORE’s. What training or advice do they offer? Take classes.
- Research everything (see our research worksheets). These worksheets are guides for the business plan. Be honest. Anyone can sit in a living room and make guesses. The importance of research is to find facts. Without the exact numbers of competitors, knowing the customer (where, when, why, and how do they buy), calculating costs in delivering the product or service, or finding the businesses’ break even point, the business will be lacking critical information for survival.
- How will products and/or services be delivered? Product/service pricing is the key in making a profit and all hidden costs need to be identified (gas, packaging, bar codes, labeling, tools, and other essentials).
- Operating necessities include licenses, permits (code issues), gross receipts, insurance (liability, bonds, and worker’s compensation), phone lines, signs, and state/federal ID’s. Be sure to check on everything. Some states don’t allow home-based businesses in the city limits, others allow them but with no signage, and some will not allow more than one person parking on the street at a time. Check on local codes.
- Write a business plan. (Here’s a business plan sample.)Get help with calculating a year’s worth of financial projections on the business (Cash Flow and Profit and Loss). How many sales must we make before taking a draw? Can we survive those months without a draw? Will I need a loan to start the business? How is my credit? Do I have collateral for the loan?
Check back soon for Part 2 of this series: “Ready, Set, Start Up” (opening the doors for the first time.)