10 Things To Look For When Choosing A Home Business
By David Lazear
In the United States alone, more than 600 people get started in home businesses EVERY SINGLE DAY, and this number is growing as the economy continues to experience difficult times.
You can get into everything from your own home-based travel business, to online stores, to designing websites for others, to network marketing companies, selling phone services, data-processing and data entry, marketing low APR credit cards, buying real estate for nothing down, different programs of stock market investing, buying and selling mortgage notes, to filing out legal briefs, to________________. (fill in the blank!)
So how do we sort through all of the opportunities to “separate the wheat from the chaff”? I”ve developed a screening system involving 10 key factors which I use myself and I teach them to my business partners and clients whom I coach. It’’s not an exhaustive list by any means, but it’’s a start.
1. LONGEVITY. You want to look at the company’’s track record. How long have they been in business? You do do not want to become involved with a company that is “here today, gone tomorrow”. The number of new companies that go out of business in just a matter of years is staggering.
Check out when they got started. What has their growth been since their start? How does this compare with the industry of which they are a part?
2. TAPPED INTO FUTURIC TRENDS. Spend some time researching who the company’’s target market is. Then look at current “market trends”. A market trend is an economic movement where large numbers of people are moving in the same direction.
History shows that those who were first able to identity those trends and found ways to meet the needs of those trends, were able to create huge profits for themselves and others involved with them. They were able to get in front of the huge economic wave and ride it to financial freedom!
3. CONSUMABLE PRODUCTS OR SERVICES. You want a company that sells A product (or products) services that people want and need and that they will consume or use up in some manner and then want more!
This creates a continual stream of customers who are reordering your products or services. If you”re selling something like vacuum cleaners or camcorders, you”ll make some good money on the initial, front-end sale, but the likelihood of reorders is pretty remote, at least in the near future.
4. COMPANY FINANCIALS. Check out the annual financial reports of any company with which you”re considering getting involved. You”re looking for strong, upward trends in its profitability.
Is it a publicly traded company? This is another strong indicator of its financial viability (although by no means the only such indicator). A publicly traded company is heavily regulated in how it conducts its business. They also have stockholders and a board of directors which holds them accountable.
5. INITIAL INVESTMENT (a.k.a. start-up capital). Let’’s compare what it takes to get involved in a typical franchise business, such as a McDonald’’s franchise, with the requirements for a home business. Here are some figures you”ll find interesting:
– What It Takes To Build A McDonald’’s Franchise:
* 1-week training at McDonald’’s University
* Hands-on management — you must run the restaurant yourself
* McDonald’’s requires a 20-year agreement
– Initial Start-up Costs: $905,200–$1,746,000 (Source: McDonald’’s website)
* Additional Start-up Costs:
- $45,000 franchise fee ($45,000 renewal fee after required 20 years)
- 12.5% ongoing royalty fees
- $100,000–$150,000 in miscellaneous start-up costs, such as initial equipment, inventory, accounts receivables, payroll and insurance
– Total Additional Start-up Costs: $145,000–$195,000
While I”m not able to share the initial business investment specifics of any home business but my own, I can assure you that it’’s significantly lower than the figures above! Typically this ranges from $199 - $2600 depending on your goals and what you want out of your business.
There will always be some start-up costs as well which typically are between $200- $500. Again compare this with the “total additional costs” in the McDonald’’s example above.
6. MARKETING SYSTEM. I my experience, this is one of the most important things to investigate (if not THE most important!). The key here is a system or process that generates serious, highly qualified prospects for your business and its products or services.
A company that primarily relies on your “warm market” (family and friends) has very limited potential for growth. After all, once you”ve “hit up” all of these people, where do you go next?
The marketing system should bring highly qualified leads to you, who are excited about your products and opportunity, AND who really want to talk to you! If you”re having to convince them of the value of what you”re offering or forcing them to talk with you, you”ve already lost.
7. SUCCESS RATIOS. Every home business will have some kind of disclaimer on their website, or in their materials letting you know that any figures reported on their site or in their materials are not guaranteed.
A person’’s success totally depends on their own motivation, skills, commitment, and work ethic. This is true with anything in life: getting an education, succeeding in a marriage, raising children, etc.
Nevertheless, every business has gauges whereby they monitor and forecast their success. They can also predict the success a new business partner can anticipate when all of other things mentioned above (motivation, skills, work ethic, etc.) are in place and if someone is serious, teachable, willing to work, and willing to follow the business building system the company has.
Study these then study yourself to see if you”re willing to do what it takes to succeed.
8. EASE OF OPERATION. You want a business that is “turn key”, meaning you want to be able to start working the business day one.
Part of what you”re paying for with your initial investment is a proven, step-by-step system. You don”t what to have to “reinvent the wheel”, so to speak.
You”ll always want to tweak things a bit to make them your own and to give them your unique stamp so you stand out from the crowd and people want to work with you; but you don”t want to have to create the basic business systems on your own.
9. INDIVIDUAL GROWTH POTENTIAL. I”ve already covered this somewhat when I was discussing “Success Ratios” above; but I want to hit it one more time with a slightly different emphasis.
You should be able to map out over time, when you”re going to meet the income goals and lifestyle dreams that made you purse a home business in the first place.
In a traditional job, you can more or less figure out your lifetime value: how much you”ll make during your employment (including raises and bonuses), what your retirement benefits will be (including social security, IRAs, 401K plans, etc.), and what interest on savings or investments you have are likely to produce. (This of course assumes that you”re not laid off and that your company will still be in business!)
It’’s no different in a home-based business. You need to be clear on what can happen for you IF you are serious about your business and you truly work it as a business, not just a side hobby that you do when it’’s convenient.
It’’s very important to look beyond the hype, because they all claim to be the best opportunity since the invention of wheel. Get your dreams and goals firmly in your mind, then ask “Can this business take me where I want to go?, assuming I”m serious and willing do to the work.
10. TRAINING, COACHING, & MENTORING. Finally, you want to understand as fully as possible what kind of training, coaching, and mentoring you”ll be receiving in how to build and operate your business.
One of the keys I always look for is who’’s doing the training, coaching, and mentoring. Are they people who are themselves working the business and having success in the business?
I want my training, coaching, and mentoring to come from the trenches. I want people to share, from their own experience, what works and what doesn”t.
I don”t want theory. You shouldn”t either.
Getting involved in a home-based business is a fantastic adventure. It can totally change your life.
Just make sure you don”t jump at every opportunity that comes along. Take time to carefully evaluate each opportunity and I guarantee that you”ll find one that’’s just right for you.
About The Author
David Lazear, author, trainer and business coach, provides a wide range of training resources and services for home business entrepreneurs, coaches, and trainers. Find out how to turbo-charge any training, mentoring, or coaching you provide @ Home Business Smarts.
