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Reasons Why Home Businesses Fail

Aug 17, 2007
The decision to start a home business can often be one of excitement and promise. There are many reasons why people start a home based business but to fail is not one of them. The statistic on new startups failing within the first year is staggering. Many small business owners just aren't aware of the risks and the mind fields that are out there that can potentially end their dream of the freedom and flexibility of having a business of their own. To find out some of the reasons why home businesses fail hopefully you can be in a position to be better prepared to avoid them.

1. Lack of funds. Many small business owners in their haste to follow their dream of starting up a business fail to fully fathom the unexpected costs and expenses incurred in running a business. Often times their original financial expectations in their loosely researched business plan are well off their mark which creates a whole burden on the business with expenses out pacing income. When starting up a business it is important to be conservative with your income expectations. Do your research thoroughly on the market. Often times business owners will guess a percentage of the market share they will get and then work out what that represents by dividing that percentage against their largest competitor in the industry. Don't expect to be eating away at your largest competitor straight away and to do an income projection based on a competitors earnings are far from realistic. You should also be realistic about your expenses. The general rule of thumb when estimating your startup expenses is to double them. Work out your numbers and what income you are going to live on while your business is getting established. You need to factor in the possibility of not being able to earn an income for up to 6 months and you need to know who is going to support you and discuss this upfront.

2. Not enough skills. Many business owners start a business without realizing the amount of tasks they will be required to do. Especially if you are going into a business field where you may have the technical skills to do the work, as a small business owner you are also going to need to develop skills in sales/marketing, accounting, administration and the list goes on. If you aren't prepared to develop the necessary skills to keep your business in order then you are going to have to work out if you are willing and able to pay for someone to do them. To neglect important areas of your business would be a recipe for disaster and not keeping your financial records in order is an all to common reason why business fail.

3. Unrealistic Expectations. When you are on the verge of getting your business idea of the ground you tend to only see the positive. It's fine to be thinking positive but you need to also create realistic expectations. You aren't going to become Richard Branson overnight and you aren't going to be able to get away with doing two hours work and spending the rest of the day lounging around or shopping. The fact is most small business owners spend considerably more hours working then the average employee and often times they are doing tasks that they don't necessarily find enjoyable like administration. By having more realistic expectations of your business you will find that you wont be as disillusioned once your business gets of the ground.

Starting any business venture can be both rewarding and frustrating. The key to your success in business is to do as much preparation before you begin to ensure your odds of success.
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