Top 10 Mistakes Home-Based Business Owners Make

While it may be true that there is no place like home, it is also true that running a home business may not be as easy as it looks. Dividing your home in order to create a suitable location for your business — while keeping the remaining space comfortable for those living in the house — will take some careful planning.

1. Trying to fit a round business into a square house. Not all businesses can realistically succeed in a home-based location. Take a look at your needs for equipment, work space, storage, inventory, and employees to determine if it is simply too difficult to run your business from your home. Service-based businesses are typically easier to fit comfortably into a home than retail or manufacturing businesses. Many people learn the hard way by not being realistic upfront.
2. Lack of motivation. It is easy to become distracted. A home business should be run in the same manner as an office-based business. You need to motivate yourself to go to work in the morning and maintain that motivation during the course of the day in order to succeed. For tips on remaining focused, see Avoiding Distractions in a Home-Based Business.
3. No room to grow. If you are fortunate and your home-based business is successful, you may need to expand. This may simply mean purchasing another computer or printer, or making space for an employee. It is important while setting up a home business environment to anticipate growth. How do you know if it is time to expand beyond your home into a real office? See 10 Signs You Have Outgrown Your Home Office.
4. Over spending what you are saving on overhead. Too many business owners justify spending money on all sorts of equipment by not paying overhead. In the end they overspend. Watch your budget.
5. Forgetting to promote your company. It is not uncommon for home-based business owners to get a little too comfortable working in a relaxed environment. Too often this means not getting out and promoting the business. Email newsletters are a valuable means of promotion. Conferences, industry events, and even local chamber of commerce gatherings can help you build your customer base. For tips on marketing your home-based business, check out 10 Marketing Tools for Home-Based Businesses.
6. Not having a client-friendly environment. You may need to have clients come to your home. Too many home business owners have had to make excuses for their house, kids, dog, and the lawn sprinklers before sitting down with their clients. Set up the office portion of the house for business only.
7. Technical insufficiencies. Many home-based businesses are not dedicated or up-to-date. Your business computers should not be networked to the home computer where your children are hogging valuable bandwidth downloading games. And your technical equipment should be as state-of-the-art as you need and can afford. Check out Technology and Equipment for Home-Based Businesses.
8. Zoning nightmares. You may not know the zoning laws for your neighborhood, but your neighbors may be able to recite them. There are many stories of home business nightmares because of zoning laws. The more discrete your business is, the less likely you will have problems. However, read the zoning laws regardless. For a primer on dealing with zoning issues, see Dealing with Zoning Issues for Your Home-Based Business.
9. Overlapping home and office. One of the advantages of working from a home-based office is that you can spend more time with your family. However, as much you love them, you need to have a separate office space and set some ground rules so you can work while other activities are taking place at home. For advice on balancing life and work, check out 9 Tips for Separating Your Home from Your Business.
10. Lack of a business plan. Just because it is a home-based business does not mean you do not need a business plan. You should be taking your business just as seriously as if you were heading into any other type of business. Take a look at How Do Business Plans for Home-Based Businesses Differ?.

For more information on setting up and managing a home-based business, check out the AllBusiness.com Home-Based Business Center.

Proving the financial health of your home-based business — or of your business plan — requires an understanding of your business cash flow. Our plain-English guide to cash flow management tools explains which numbers you'll need to watch, and it also recommends programs that can help you analyze those numbers.