At a time when employment and industry is in a constant state of unrest on account of forces beyond our control, owning a home business can turn out to be a real boon. Even if you do not yet have an established home business but have only just started out, the timing could not be better. All that being said, launching and maintaining a home business isn’t exactly as easy as it may sound. Some of the same problems that are plaguing the global industry in general are hampering home businesses as well, although the impact is not as bad for home-based businesses as it is for large scale operations.
More importantly, there are some common issues that most home business owners are going to have to deal with at some point or the other. Keep in mind that these are problems that have very little to do with covid restrictions, but they are more related to the business model of home-based establishments themselves. There are ways to solve them though, which we will explain in the following paragraphs.
The state rules do differ quite widely, depending on the kind of business in question. The same business that one state may not even allow to be conducted from home, could very well be a common home business in another. So, find out about the state regulations that your home-based business space and operations must be compliant with before making any investments.
Whether you transform your spare garage into a storehouse for eCommerce goods, or you decide to run a home-based food delivery business, making at least some investments to start will be necessary. If the necessary expenses are not particularly big, you might be tempted to pay for them from your own pocket and save on interest. However, paying for business expenses out of your pocket can land you in even greater debt down the line.
To avoid ever being in such a position, calculate the initial budget that you will need to pay for the following:
- Energy and utilities
- Business insurance
- Workers’ compensation insurance
- Employee wages
- Equipment & supplies
- Marketing costs
Being a home business, you should be able to save big on rent though. Unless you are absolutely sure about being able to pay for all that and more from your own pocket for as long as it takes to break even, take out a business loan. Even if the investment necessary is not huge, taking a small business loan helps keep your private finances separate from that of the company.
Logistics & Losses
Investments are not counted as losses, at least not right away. However, if you are failing to turn profits on a sale, that is indeed counted as a loss. MNCs willingly endure such losses to promote a primary product, but small companies and local home businesses do not have their level of buffer to play the long game from day one. To better explain the situation, let’s take the example of any local food business that offers home delivery.
If the place ends up taking, cooking, and parceling an expensive order only to discover that the customer’s address is undeliverable from their position, it’s a complete loss. Given that most online food delivery businesses have their system’s auto-accept turned on to improve conversion rates, that is a more common problem than you may believe it to be. Large businesses can take the hits and suffer a few losses even without letting them affect their bottom line in any significant way, but local businesses do not have that luxury.
Another common issue is when you may not even realize that the order has been placed from an undeliverable location before it has been accepted automatically. A manual check will allow you to cancel the order soon after of course but canceling orders after accepting them is not good for business reputation, especially when you are only just starting out.
Let’s take another example where the business deals in handcrafted products, which they can deliver across a much wider range. However, the business might be accepting orders from unverified locations with unsure addresses. Even if the order is genuine, the delivery might be late or fail because of this. That too does not bode well for the repudiation or future business opportunities for the business.
Thanks to digital tech, similar losses can be easily avoided nowadays with the help of an address validation API. The Lob address validation API eradicates any chances of a failed delivery by automatically verifying and validating addresses in terms of deliverability and accuracy. Consider the fact that Lob’s address validation API can find out missing unit info, auto-identify P.O. box details, and even correct the delivery location to a pinpoint with satellite coordinates (latitude and longitude).
There are several differences between a multimillion-dollar company and a small home business but there are a few similarities as well. Unfortunately for budding home entrepreneurs, the similarities pose more problems for the smaller establishments. While there is no doubt that larger companies must face more complicated issues at a much greater scale, they also have a lot more resources available to manage those problems. For a small business running on a shoestring budget, managing even a single unexpected problem can feel like a tumultuous task.
The best way to manage unforeseen trouble with limited resources is by keeping a tight control over the expanse of your business. Unplanned growth is synonymous to unsustainable growth, which will eventually ruin your venture. Avoid it by expanding at a controlled rate, never taking on more business than you have the resources to cover properly.
If doing so slows down the company’s rate of growth, keep in mind that sustained resource management is imperative for maintaining quality and growing with a solid foundation. Home businesses that grow fast cannot remain a home business anymore, so expand only when you are ready to take your business outside the home.
Open Business Council offers resources, Trade Finance, business advice, SME Finance and a forum and directory for businesses! Improve your business and use the best digital, financial and funding tools to grow ROI – return on investment and ROA – return on attention!