Beyond Startup - Are You Stunting Growth of Your Home-Based Business?
© 2002 Elena Fawkner
If youíve left corporate world to strike out on your own in your own home-based business, you'll be acutely aware that your financial success is up to you and you alone, perhaps for first time in your life. For obvious reasons, therefore, your home-based business is probably run on a shoestring.
This means, of course, that you do everything. Although you are now CEO, you are also secretary, marketing director, receptionist and gopher. But hey, thatís way you like it, right? Just as well too since when youíre just starting out you donít have much of a choice anyway.
But sooner or later, if you keep doing everything yourself youíll necessarily curtail growth of your business. It will grow to a certain point but no further because youíre only one person and there are, after all, only 24 hours in a day.
Now, if youíre satisfied with making a little money on side, thatís fine. But if your business is your only source of income, you must move beyond start-up if you are to become financially successful and avoid stunting growth of your business.
This article looks at growth stages of a typical one-person home-based business and how to gradually grow your business without being run over in process.
=> One-(Wo)Man Band
As already stated, when you first start out, you do everything yourself. Youíre both chief cook and bottle-washer. And you can continue like this for quite some time because, initially, you are unlikely to be fully stretched. This is exactly what you should be doing.
This is NOT time to go out and spend money with advertising agencies and hiring employees. For so long as you CAN do everything yourself and everything that needs to be done is getting done, this is most efficient use of your current resources.
=> Donít Overcommit Yourself
During this stage, however, it is important to be careful not to overcommit yourself. You are a fledgling. You must learn to fly like a sparrow before you can soar like an eagle. So, when you first start out, underpromise and overdeliver.
Also, donít embark on an aggressive marketing campaign until you have business resources to satisfy demand you will create. Let your advertising grow in line with growth of your business, addition of employees and increased financial capacity.
=> Pay Yourself
Be extremely careful with your pricing during this stage also. Make sure you include a wage for yourself in your overhead costs and add a realistic profit margin (say 15-20%).
Remember, price equals costs plus profit margin. Costs include direct, indirect and overhead costs. For a more detailed treatment on pricing, read ďPricing Yourself to Get, and Stay In, BusinessĒ at http://www.ahbbo.com/pricing.html .
=> Profits Belong to Your Business
Plough your profit back into your business. This is most important. This is where your funds for expansion during next growth phase of your business come from. NEVER use your businessís profits to pay personal expenses. This is what you pay yourself a wage for. Your businessís profit does not belong to you. It belongs to your business. There IS a difference!
=> Avoid Premature Expenditure
During your shoestring days, look for lower-cost substitutes before incurring substantial expenditure. For example, donít go out and buy a new fax machine, a new answering machine, a new photocopier. Get one of those three in one jobs that sits on your desktop and only costs a few hundred dollars.
Use a good accounting software program rather than hiring an accountant and hire from your family first if you need temporary help. Another good idea is to negotiate with family members to take over some household chores you would normally do yourself to free your time to work on your business. This works especially well with pocket-money age children and teenagers.
During times of temporary overload, hire temporary staff from a staffing agency if no family members or members of your social circle can do job.
=> The Glass Ceiling
After a while, somewhere between two year and five year mark, you will notice that your business is beginning to stagnate. At this point, you've stretched yourself and your resources as far as they can go. You've hit glass ceiling, in other words.
At this point, if you want your business to grow further, you'll have to grow it. It won't happen as part of an evolutionary process beyond this point.
BEYOND THE GLASS CEILING
=> Hire Permanent Employees
The time to hire permanent employees is when you reach point that you canít complete all tasks alone (or with help of family members) and/or your time is worth more than it would cost to hire someone to complete your less complicated tasks.