Starting your home business can be inspiring and challenging at the same time. While it gives you the flexibility and income you want, it also presents obstacles that you need to tackle in order to succeed. Here are the five top drawbacks of a home business operation and ways to get over them…
1. You need to become a multi-task expert
Choosing to be an entrepreneur and starting a business is a multi-functional responsibility and comes with a large amount tasks. There are literally hundreds of things that you need to accomplish – all by yourself (unless you have the capital to subcontract some tasks or hire an assistant).
The process of starting a business means creating your product or services, from defining your business strategy to writing the business plan. It also entails seeking capital by looking for possible investors, contacting banks, negotiating for loan terms, and reviewing loan documents. Then you begin the process of choosing the legal structure, registering the business, and getting licenses, permits and tax numbers. Once you have the business set-up, the next step requires developing the marketing plan, doing the actual marketing, cold-calling clients and closing the sale, and preparing marketing materials. Then comes the part of managing the business, which includes keeping the cash flow positive, doing bookkeeping, and collecting receivables (if any). If you have a web site, you need to begin designing the site, keep it updated, reading all emails and responding to inquiries. And so on and so forth.
Running a one-person home business can be very overwhelming. You may feel burnt out and frustrated too early in the game. There are just too many things that need to be done and 24 hours is simply never enough. As a business owner some tasks may not even be part of your core competencies that you still need to learn and develop skills or even take lessons to be prepared for it.
HOME HACK: Try and outsource the tasks that you feel least accomplished at – look for small business owners like yourself that are experts in that field (marketing/accounting/legal) and get them to take a bit of pressure off, but be sure to stay close so that you can learn from the process – things are only hard when you don’t understand them.
2. Finding customers can be difficult
Going on your own is tough and one of the toughest challenges will be getting customers. If you are operating on the Web, looking at your site statistics and seeing that only five people have visited it so far can be very frustrating (probably you, your family members and a couple of friends). Hence, you may be tempted to use unethical Internet practices such as sending spam messages in the hope of getting people to visit your site and buy your products. This can add to your frustrations because many recipients of “Spam” retaliate by sending you flame messages or report you to your ISP. This could make your life a bit miserable during your early days online. Even if you put a sign in front of your house to announce your business to passers-by, you will find that it takes time for prospects to trust you and take your business seriously. The customers may not respond to your business in the timeframe that you think they should.
HOME HACK: To help solve the problem, you need to do your homework early on by researching who your customers are, identifying where they are located, and determining the most cost-effective ways they can be reached. Research has shown that the three most effective strategies for home-based businesses to get customers are through word-of-mouth advertising, referrals, and personal networking. You can also engage in various cost-effective strategies such as publicity campaigns, cold calling prospects, subcontracting for larger businesses, and others. Be patient, though: it takes time for any marketing strategy to bear fruit.
You can also try convincing your former employers to support your business by buying your products or contracting your services. A number of corporate workers-turned-home business entrepreneurs initially cater to their former employers, and then seek out other clients as they become more established.
3. Difficulty in getting financing and suppliers credit
When seeking financing from banks, getting suppliers credit, or even applying for a merchant account (account that allows you to accept credit cards for your business), you will find that most creditors and lending institutions stay away from home-based businesses. Banks, in particular, are too conservative and are often reluctant to provide start-up financing. In their book, a home business is too great a risk, more so if you have little or no experience in running any business.
Lending institutions, venture capitalists and creditors will not touch you with a 10-foot pole, unless they see that you have ample personal financial resources. The irony, of course, is that you will not have gone to the bank to request for a loan if you have the personal resources. Some creditors may lend you, but the terms could be so stiff and the loan amount too small. Vendors may extend some credit to you, but they are usually small at the start and you may have to promise future business in return for the extension of the immediate credit.
It can be very frustrating to discover that it is harder to get money from outside sources if you do not have any personal resources (assets and properties for collateral, access to high credit lines from credit card companies, etc.) to begin with. And much, much harder if you have some bad and negative remarks on your credit report.
HOME HACK: Do the research before you set out on this entrepreneurial adventure. Make sure that you have the funds for at least 6 months before you take the leap, whether it is a friend or relative that will invest or an access bond that you are going to tap into. Go into this with your eyes open and make sure that you have a plan. A good accountant will also go a long way to helping you understand your cash flow and will save you in the long run as they can show you the way the business is trending and what financial requirements are needed in order to succeed.
4. Tricky balancing acts between family life and home business
One of the primary reasons you may have started a home business is to be closer to your family while working in a business that fits your schedule. Alas, you may sometimes find that family obligations take up most of your time, and what little time you have left is insufficient to do any work at all.
If you have a new baby in the household, you may find that it is almost impossible to concentrate on finishing your business plan. If you have toddlers in the house, you may find it hard to cold-call clients and be heard amidst the screaming, crying and fighting. When your spouse arrives, they may expect you to drop everything that you are working on and demand that you spend some time with them.
Given that your home now performs the additional function of being your place of work, you must seek out consensus from all family members because of your work’s potential impact on their lives. Space previously reserved for family activities may now be taken over by the business. The spare room you once had may now be your home office. Personal calls during the day must be limited to allow customers to easily reach you. Family activities during mealtime or weekends may be disrupted with the visit of a customer.
HOME HACK: When thinking of starting a business, you must include in your planning how to cope with both family and work responsibilities. It would be easier if you have the resources to hire babysitters for your kids, or household help to assist in some of your domestic chores.
5. Pension, health and insurance to be financed from own pocket
An important drawback you will be facing as a home business entrepreneur is the high cost of insurance. If you quit your job, you lose not only your paycheck but also your employer’s contribution to your medical aid, pension fund and retirement annuity. Unless you are married and your spouse is employed, you can expect to shell out quite a bit of money every month to cover your own medical aid and other insurances.
HOME HACK: Do your homework on this and make sure that you are covered from the moment that you leave your job. It goes without saying that you need to hunt around for the best possible prices for the best possible cover you can afford. There might be a temptation to cancel this for a while until your business gets off the ground, but this is not responsible and these costs must certainly be factored in to your budgeted items per month.
These are just a couple of the things that you need to consider when taking the big leap of becoming a work-from-home entrepreneur. Also, go in eyes open – as romantic as it sounds to be working from your own space, it can be isolating and disruptive at the same time. Make sure that you set structured routines in place to sit at your desk daily for a set number of hours – prioritise your tasks and don’t let household admin encroach on your billable hours. It is not easy to be an efficient work from home entrepreneur but by putting these things in place and with a lot of discipline, it can be a very fulfilling work scenario.