Sunday, October 3, 2010
5. Figure out the profit angle.
This is the litmus test for anyone wanting to start a home-based business. You may have a great talent for something and the skills that enable you to express it, but if people aren’t willing to pay you for the product or service, it won’t work as a business. For each home based business idea, you need to know the answer to two questions:
How much are people willing to pay me for this product or service?
Can I make a sufficient income from that?
Suppose that you, being a creative person, are able to make beautiful quilts. However, because of the time involved, you’re only able to make two quilts per month. You discover that people are willing to pay $200 for each quilt you produce. The math says that you would have, therefore, an income of $400 per month. (Actually less, as there will be expenses related to quilt production, such as cloth and thread, to deduct from this amount.)
An outrageous example, isn’t it? But many people put themselves in a very similar position by starting home-based businesses without considering the profit angle. Business is about profit, and without sufficient profit, you’ll never have enough income to even pay the bills, let alone generate wealth. (For more on creating a business that actually produces income, see Is Your Business Model Broken?)
Go back to your list of home business ideas and assess the profit-making potential of each. If the answer to either of the two questions above isn’t satisfactory, cross that idea for starting a home-based business off your list.
Note that you decide how much income is enough. Many people run part-time home-based businesses that supplement their income and are perfectly satisfied with that. If you are planning to start a home-based business that will provide all of your income, however, you have to research the profit-making ability of your business idea very seriously.
6. Do a business plan to assess the viability of your new home-based business.
Many people are under the impression that working through a business plan is only necessary if you’re going to be looking for a business loan. But the primary reason to do a business plan is to find out if your business idea has a chance of becoming a successful business.
So once you’ve chosen a home-based business idea you’re passionate about, start working through a business plan. My Business Plan Outline will lead you through the process. The research and thinking that you do as you work through the business plan will do more than anything else to ensure that the home-based business you start succeeds.
And if your work on the business plan shows you that your idea for starting a home-based business is not a good idea, shelve it, choose another home business idea and go through the process again. It’s not uncommon to work through part of at least three business plans before you find the business idea that will blossom into the thriving business you want to run.
So if you want to start a home business, ignore the home-business opportunity ads; there are no shortcuts to starting a successful home-based business. By following the six steps outlined above instead, you’ll end up with an idea for a home-based business that truly has the potential to succeed, bringing you the money and the satisfaction you’ve been dreaming of.
Friday, October 1, 2010
How do you start a successful home-based business? The secret of success is not to stop halfway through the business selection process as so many people do. Follow these six steps to start a home-based business that will succeed rather than just being a drain of your time and money.
1. Access your talents.
Think of your talents as the things you’re really good at. They’re like personality traits. For instance, you may be a very creative person, or a person who’s really good at attending to details or a person with a gift for communicating. Your talents are the base for any successful business venture, including a home-based business.
2. Examine your skills.
These are the things that you can do. The difference between talents and skills is that talents are passive and skills are active. Or, to put it another way, you’re born with talents but you develop skills over time as you learn. For instance, a creative person may have excellent skills for drawing or writing or design. A person who has a talent for attending to detail may have strong accounting or organizational skills.
3. Put your talents and skills together and generate business ideas.
The procedure I’m outlining here will work for starting any kind of business, but as we’re focusing on home-based businesses, the question is, “With these talents and skills, what kind of home-based business could I start?”
Suppose you’re one of those people who has accounting and organizational skills and the talents to back them. Some of the home business ideas you come up with could include:
- Tax preparation
- Business manager
- Professional organizer
And that’s just four ideas from our limited premise here. When you’re doing this exercise, you, of course, have more than one or two skills, so you’ll find that your list of possible home business ideas is much longer.
Don’t censor yourself as you list home business ideas. List all your ideas at this stage; crossing off choices comes later.
(If you’re having trouble coming up with business ideas, see 7 Sources of Business Ideas to help you get started thinking as an entrepreneur.)
4. Give your business ideas the home-based business test.
The fact is that not all businesses are going to work well as home-based businesses, and some won’t work at all. You are not going to be able to start a manufacturing business in a residential neighbourhood, for example, and any home-based business that involves a lot of clients coming and going is sure to upset the neighbours.
Go back over your list and cross off any business ideas that won’t work as home-based businesses.
If you are intent on starting a home-based business where you actually get to work at home, also cross off any business that could be operated as a home-based business but wouldn’t allow you to work at home. For example, in the short list of sample business ideas above, I would cross off “business manager”, as this would involve off-site work.
Many people who want to start home-based businesses stop here. They’ve come up with an idea for a home-based business that they like and feel they’ll be good at, so they plunge into it at this point.
Don’t make this mistake! If you do, you run an extremely high risk of investing months of your time, energy and money in a losing venture and seeing the home-based business you had such hopes for fail. As I said in the introduction, the secret to starting a home-based business that will succeed is to work through the entire business selection process. The next two steps are critical to your home-based business’s success.