A lot of people dream of starting their own business. Everybody wants to be his or her own boss. There’s nothing better than to craft a plan without the constraints from other people, implement it with your own sense of deadline, and reap the fruits of your own labor. But there’s something better than that—implementing a business right in your home.
However, there are far too many considerations in starting your own home-based business. Even if the operation is right under your roof, there will be operational expenses involved. So you have to make sure that your business is making money. And once you start making money, you want to make more profit. Here are some of the ways and tips how to make more profit from your home-based business.
Pick Your Business Carefully
The goal of earning a profit starts before the business is implemented. The planning stage is just as important as the implementation. You have to think real hard and real long about what business you want to invest in. So you have to ask yourself some questions:
- Which business is best for me? This is an important question because this will make you examine not just the technical aspect of the business but also the personal side. There is a wide pool of business ideas, but you have to choose something that touches you.
- What are my skills? When you own a business, you will be its heart and mind. So a business opportunity should be at par with your skills set.
- What do I want to do? Aside from the skills, home-based business should be something that you really like and love. There is no sense doing something that you don’t even enjoy doing. Even if it makes a profit, it may not be as flourishing as when you really enjoy the business. When you love what you do, you are inspired to do good, to be better and to make more profit.
- How much can I invest? Money talks. So you have to consider how much capital you have, how much investment is needed for the business. And if you don’t have capital, you need to consider your fiscal options.
KNOW YOUR CLIENTS
Now that you’ve picked out the business carefully and have implemented it, it’s time to get to know your clients. One very important rule in starting a business: Know your target market.
With that, you have to study your clients. Go through that client list and find out how each of them is doing. Here are some questions you should be asking:
- What is your client’s financial standing? As mentioned, money talks. You have to make sure that your clients have the capability to pay your business for your services.
- Which of your clients have growth potential? Aside from the capability to pay, you should also look at where your client is going. You have to evaluate whether the company you are serving is growing. When the client has growth, it will affect your company as well.
- Which of your clients will be better for your company? Know the strengths and assets of all clients. Make sure that you can play of these strengths and assets for the benefit of your business.
- Who among your clients is dragging your company’s resources down? There are always monster clients—those who demand a lot from you—even when they are not your biggest source of profit. Some people are just entitled like that. But you have to prioritize your business. Don’t keep something that will drag you down anyway.
Every business owner knows this—actually, everybody knows this. But it’s an easy enough concept that is usually hard to practice. Having a home-based business is a form of cost-cutting anyway. Doing business at home means saving on office rent. However, there are other extenuating matters related to starting a business. And each one will cost some dollars.
According to business experts, a five percent reduction of operational cost has the same impact as a 30 percent increase in sales. Here are some ways to cut costs:
- Paperless system. Of course this means that you have to invest in information technology in the onset. But when you look at the long-term effect, the savings will be significant. Imagine no longer buying most of the paper supplies. Besides, a lot of transactions nowadays are done electronically. Even large corporations know the importance of going paperless. There are a couple of advantages to going paperless. Paper, for one, is a major fire hazard. Also, this means that we are helping preserve trees.
- Fewer employees. As a result of going paperless, the business may be able to forgo with a couple of administrative positions in the office. Having an electronic system also means work is streamlined and minimized.
- Forget traditional media. Social media is the trend and it’s free. We should be able to maximize the use of social media for our benefit. It is still great to invest in radio and television ads but we have to learn how to amplify what’s free.
- Eliminate waste. This is difficult to determine—which stuff is waste and which isn’t. But it is important that you do. You have to be able to know what things are just waste of money, which activities are a waste of effort and what projects are a waste of time.
- Outsource. There are certain jobs that don’t require an eight-hour-a-day attention. This means that it will be a waste of money to hire a person to handle such job. You can outsource. Most of the IT tasks can be outsourced to companies who are experts on the field. A businessman made an equitable comparison between the IT cost of a major company that keeps an IT department and a startup that outsourced the task. He found out the the latter only spends about 10 percent of the expense of the major company.
- Negotiate with manufacturers and service partners. If you are a product-based business, you need to have a meeting with your suppliers. Get a great deal. Invest in bulk purchase so that you can save money. If you are a service-based company, chances are you still have partners in terms of the products you use in the business. So meet with your vendors, negotiate and renegotiate terms until you get the best deal. The key here is to negotiate. Don’t choose a manufacturer just because it has the cheapest price. Find an efficient and trustworthy partner and just negotiate.
Whatever business you start, marketing is an essential part of it. If it isn’t your forte, you better seek professional help because marketing is like 50 percent of the entire business. There is no business if there are no clients. A lot of business owners bank on their passion and creativity. But if the business is not out there, no one will know about it. According to a business website, owners of home-based businesses spend 50 percent of their time doing marketing. They have to spend a lot of time on it because unlike corporations, home-based businesses don’t have their own departments that do actual marketing.
A lot of successful businessmen have said that the number one way for small business owners to increase their profit margin is by increasing prices. While most of them would say this is a bold move, sometimes it is a necessity. This is the simplest way to make more profit. But this is very difficult for business owners to manage. Owners don’t like increasing prices because they think they will lose their customers if they do. But here’s a thought to ponder: customers buy because of value, not because of price. In fact, less than 20 percent of people buy because of price—because the product or service is cheap. This means that majority of the people really buy because of value or quality.
Here are some tips on how to increase prices without losing customers:
- Timing. The right time to increase the price of a product or service is when you already have a loyal following. Loyalty comes with satisfaction. So when you determine that the business has already satisfied a good number of people, then it might be time to increase the price.
- Freebies. Customers are more open to paying more if they also get more. So throw in something that will pique the client’s paying power. Say, if you’re selling clothes, you might want to throw in comes accessories as freebie. Or if your business is a home massage service, you might want to give customer a spa balm after a stimulating experience. If you sell bags, a keychain might be in order.
- Size reduction. This is a trick that a lot of business owners employ. They don’t increase prices but they reduce the size, hence, reducing production cost.
- Package deal. You can offer products at a lower per-item cost when they are bought in bulk—a common practice among business owners. Even if you are just a start-up home-based business, you can afford to do this. When you manufacture items in bulk, you can actually save on production cost.
- Discounts. So while you are hitting your customers with a price increase, you will also shower them with discounts. You can offer discounts on special occasions: Valentine’s Day, Halloween, Thanksgiving, Christmas, Anniversary, among others. You can also create an occasion just so you can give discounts. Everybody loves discounts.
- Target a new set of customers. Remember that about 20 percent of people buy products or services because of the price. This means that you are bound to lose some customers when you increase price. So you have to market your product or services to another set of customers, preferably the more affluent ones who can afford the new prices.
- Explain. Price increase is usually always justifiable because of regular inflation. People feel it all around them so they will definitely understand an increase. But what irks people sometimes is when you go to a place, buy an item, prepare the amount you are used to paying for such an item only to be told that the money you gave them is not enough. You have to be able to explain it beforehand. Send a text blast or post on social media why you have to increase prices.
BE THE BEST
This is probably the most important tip on how to make more profit for your home-based business. People will always look for the best product and the best service, and if you have it, then you will have customers and you will get to keep them too. And when you have the best service, your satisfied customers will talk about your business to their friends and colleagues. Good products and great service will go a long way.
Being the best also means employing the best employees. Remember: it’s not about quantity, it’s about quality. Keep only a number of key employees and outsource tasks that don’t need to be given attention eight hours a day. When you have a skeletal force, you can afford to give these employees the best benefits. Happy and satisfied employees tend to be more productive. This, coupled with happy and satisfied customers, makes a profitable home-based business.
STRATEGIC TAX PLANNING
Uncle Sam is always breathing down the necks of business owners, reminding people of their responsibility to the government. Business owners can manipulate the law in order get tax breaks. Manipulation doesn’t mean that you do something illegal. It only means that you are able to identify which provisions of the tax law will be in your favor. Home-based business owners can utilize a number of exemptions when they file their tax returns to the IRS. This is why it is essential that when you do your tax return, you have time to think about it. You should be able to spend a certain amount of time strategizing your tax report.
We have Do-it-yourself tax resolution program and coaching program for tax planning