7 Home-based Business Mistakes to Avoid
Most people who launch a home-based business worry about succeeding, and there are valid reasons for their anxiety. There are many ways to sink a new business, so they often spend a great deal of time and effort to make sure that they avoid critical mistakes. With hard work, perseverance, and a little luck, the business grows, and it may grow substantially and quickly. This may sound like a good problem to have, but it can turn into a bad problem if they are not careful. If your business is experiencing a boom, here are seven mistakes to avoid so that you can keep your business moving down the right road.
Assuming That Success Is a Permanent Condition
To paraphrase an old saying, all you can be sure of is that things will change. Sales may rise and fall, the economy may boom or contract, or legal regulations may become stricter or more lenient. Your most profitable product could decrease in demand, be made obsolete by an improved technology, or be replaced by an innovative product that offers greater functionality at a drastically cheaper price. Although there is no reason to lose sleep over every possible change that could impact your success, you should not put your business plan on autopilot and rest on your laurels. Keep looking for ways to attract more customers, diversify your offerings, and improve your procedures.
Ignoring Cash Flow
When you first started out, you were likely very concerned with your cash flow. You probably went to great lengths to make sure that you could purchase your raw materials, keep your website going, pay your utility bills, and have enough cash to keep your business open. As you see your bank account grow, you may feel that you can ignore your cash flow forecasts. This would be a big mistake. Keep in mind that there is a direct correlation between increased revenue and increased costs. To keep selling more products, you will need to purchase more products or raw materials. The costs for packaging materials and shipping charges will also increase. You may need to hire help to keep up with the demand, so you will need to pay wages and payroll taxes, and you should not forget about the income taxes that you could owe.
Failing to Manage Inventory Levels Properly
Good inventory management is a balancing act. If your inventory drops too low, you may be unable to fulfill orders in a timely manner, resulting in angry, disappointed, or lost customers. If your inventory levels are too high, you are keeping funds and space tied up that could be utilized in ways that are more beneficial to your business. Whether you track your inventory by hand or purchase a software program, you need to keep a watchful eye on your stock by analyzing sales patterns, improving your sales forecasts, and analyzing your lead times.
Failing to Nurture Vendor Relationships
Supply chain disruptions can have a dramatic impact on the success of your business. You want to nurture relationships with your existing vendors by maintaining open communications with them. They need to know what is happening with your business, the kind of help you are likely to need from them, and the volume of business that you expect to give them over the next few months. At the same time, you want to explore your options to diversify your supply chain. If possible, consider finding local vendors to supplement your supply chain. Local vendors can make securing your products easier, faster, and cheaper. If buying locally is impossible, you want to find alternative suppliers that are in different parts of the country so that a blizzard in North Dakota, for example, or a hurricane in Florida will not prevent you from getting what you need to keep your business in Texas operating.
Failing to Make Important Investments
If you are like most home-based business owners, you have a long list of things you have always wanted to do to help your company grow. You may have wanted to invest in a new technology that could speed up your production line, or you may have wanted to acquire the business that manufactures a critical part that you use to make your products. Perhaps you have always wanted to update your computer system, provide your employees with more training or better benefits, or launch a new product line. Maybe you have been thinking about forming a limited liability company, deciding on a registered agent, getting a virtual business address, securing a virtual mailbox, and expanding to another state. Although you want to build an emergency fund to carry you through any lean times that may occur in the future, you should consider investing what you can in strategies that can help you increase your market share, position your company for continued growth, enhance your productivity, or attract or retain high-quality employees.
Failing to Execute a Reasonable Pricing Strategy
When people are clamoring for your product, it can be tempting to raise its price significantly. However, this may be a shortsighted approach, especially if the move could be construed as price gouging. If you think back to the early days of the COVID-19 pandemic, you will probably recall the public outcry and anger directed at companies or individuals who offered hand sanitizers, face masks, disinfecting wipes, and even toilet paper at exorbitant prices. You do not want your price increase to be considered gouging, so make sure that you consider the timing and the amount of the increase if you are interested in building long-lasting relationships with your customers. On the flip side, you do not want to slash your prices just because a competitor has cut theirs. A huge price reduction could be the last straw to cling to that a failing business has, and you do not want to put your own business in a similar dire situation. Think through your pricing strategy carefully. Price changes should be based on a thorough understanding of your costs, your product’s value, and your customers. If you find that you need to raise your prices to compensate for inflation, increases from your suppliers, or increases in shipping charges, be sure to communicate your reasons to your customers. If you want to drop your prices to attract even more customers, it is usually a better idea to offer a discount or sale for a limited time than to make sweeping reductions that you will likely need to roll back in the future.
Failing to Maintain Your Marketing Strategy
A marketing strategy is a long-range plan that integrates different channels, methods, and goals. Even when things are booming, you do not want to put your entire marketing strategy on hold. For example, if you have been using social media posts to interact with your customers, keep posting; if you suddenly fall silent, they might assume that you have closed your business, and they may never find you again. You may not need to pay for ads during a boom, but you still need to keep your brand and product in the public eye. Furthermore, since prompt, professional customer service should be part of your marketing strategy, you do not want to neglect this part of your business. If necessary, use part of your profits to hire a part-time or full-time employee to help you respond to questions or complaints from current or potential customers.