It was this time last year when I had an idea for another stream of income in my home business. I hate the term ‘home business,’ but it’s what I do – I work out of my home doing a variety of different things.
Of course, my variety may have something to do with my undiagnosed ADD for which I self-medicate with dark chocolate and consistent change. I must be the only person I know who actually ENJOYS change.
I like changing jobs, learning new things, and having unexpected days. Of course, too much of anything can get overwhelming – but for me, my tolerance level is pretty low for consistent work.
Hence, new line of income and all the planning that comes with it.
Sometimes, the planning is even more fun for me than the execution, which is why my work friends call me the Idea Generator. I have a notebook of ideas, things to consider in the future and plans that I might incorporate into my business as time goes by.
That’s the first hole you can easily sink into as you plan a new business. Once the idea floodgate opens, it’s hard to stop it. You can get caught up in purchasing software you “might” need in a couple months if everything went according to plan. The problem is that it never does go according to plan.
Instead, months down the road you’re in a different place than you thought you’d be, based on changes you had to make because of your customers, market or marketing.
The idea you have must be tested. Are there other people doing something similar? If you have an idea for a book, a product or service . . . has it been done before? If it has, and it’s successful, then there is likely a place in the market for you as well – as long as you can fine tune your marketing and attract the right customers.
If there isn’t a similar product or service, it doesn’t mean you shouldn’t try – but it does mean you’ll be the trailblazer – and trailblazers don’t always make the most money from the business idea. The trailblazer establishes the market and convinces the customers they need the product or service and the next people who come along utilize the work you did.
That’s the position I’m in now.
I’m going to be doing something I haven’t seen done before. But, because it’s a market with money and the product/service is one that makes sense for the customer, I’m willing to take that chance. The entry cost for the customer is minor and the ROI for me is more than adequate, so the projections look promising.
When you’re thinking about starting to offer a product or service, it’s important you also do some projections to determine how long and how much effort it will take before you’re in the black. This isn’t always easy if you’re going to be doing something you’ve not done before.
For instance, you’ll likely need to sell your product or service. If you’ve never done sales or aren’t comfortable learning, you may have to hire someone to do the work – which must be included in your projections.
If you aren’t sure how to determine if you could be profitable, fill in this simple table before moving further forward in your plans. While it is simple, it will help you determine if you could be profitable and where you might want to trim costs to get there.
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In the Time column enter the amount of money you’ll be losing by working on this project and not something that’s already making money – unless you are working in your free time, then enter zero.
Under anticipated profits enter the amount of money you project making in the first three months and then multiply it by 0.66. It’s likely you’ll make ⅓ less than you anticipate.
Total the amount of money you anticipate spending and multiply it by 1.3 because unless you are spot on, you’ll likely spend ⅓ more than you think.
If the numbers are close it’s time to make more detailed projections to see how long you’ll need to be in business before you make a profit. Be realistic about your idea and how much you want to invest before seeing your business in the black.
I’ve worked with business people who were so enamored of their idea that they couldn’t get it off the ground. It became a baby to them and it was too difficult to ‘put it out there’ to their customer base. Others were so in love with their idea they didn’t realize it wasn’t a good one, and they lost too much money before stopping.
Starting a new business, or a new arm to an old business . . .
. . . can be exciting and fun for you and the people you work with. It is a little like birthing a baby. It takes months for incubation and preparation and then a LOT of hard work in a short time to get it moving in a forward direction.
There are resources in your area to help you get off the ground – and one of the easiest to access is the Small Business Association. They have retired business men and women who enjoy helping new businesses and want to act as a mentor so you don’t make some of the simple mistakes many new business owners make.
Mistakes like. . . hiring people before you need them, buying software and hardware you don’t need immediately, poor planning, not considering investors and not understanding how to find good investors. . . these are the potholes mentors can help you avoid.
Your own business offers you the opportunity to make good money – your money, based on your efforts. When you go to the office, you’re paid whether you make money for the company that day or not. But, you don’t get 20% raises in one year and don’t have the potential for losing all your clients in one month.
Because working for yourself is often frightening, exciting and overwhelming, it’s important you do it part-time first until you have enough savings built up that you don’t panic when your clients disappear or your product or service isn’t as successful as you’d hoped.