How To Start Up Your Own Small Business From Home – For your convenience, many of the products I link to are also affiliate links. So if you buy the products I recommend, I get paid.
A few years ago, Aaron and I made a very bad business decision that cost us $55,000 (yes, you read that right). We were incredibly stupid. I was cleaning up some old posts and thought you might be interested in my antics.
How To Start Up Your Own Small Business From Home
If you are looking to start your own business, I recommend reading this post which highlights the factors that contribute to business failure.
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PS. If you’re ready to start your first business, check out my new book How to Start Your First Business.
Aaron and I cleaned out the garage yesterday. We were supposed to spend the day at the lake. The reason I’m talking about this is because I had to clean out the garage.
About four years ago, Aaron and I were approached by a friend who was looking for an investor in eBay, a shoe resale company.
Our friend has extensive industry experience and has worked for eBay as a reseller for many years. I’m no business expert, but I know how to read financial statements and the numbers look good. Not inflated with huge profits, our friends tell us that this is an investment of at least 2-3 years.
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We were excited to try something new and decided to invest $15,000 (mistake 1) even though we were on track to reduce debt. We withdrew money from the reserve (error 2) and received it.
This stupid decision was also blamed on this post – 4 Questions to Ask Yourself Before Using Your Emergency Fund
It wasn’t what we had planned, but we decided to work on it and see what happens.
Our friend continued to run the company, hoping to be able to buy it from us in the future. Meanwhile, we created a profit-sharing system to balance the fact that we had to be his company.
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We understand that this is still his company, and on the rare occasion that he would ask for advice, we would step in, but most of the time we let him run things (mistake 3).
Fast forward a year ago and the numbers looked pretty decent. Sales are increasing every month with low profits and consistently high sales.
Our friend felt it was time to take the business to the next level: time to invest.
We looked at the historical figures and the proforma and decided to add another $25,000 (error 4). I also allowed him to max out his company credit card to $15,000 (error 5).
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Thanks to the line of credit, we owe about $55,000. After a while, our friend also invested 25,000 dollars.
Taking our business to the next level meant that our friends couldn’t run their business from home and needed storage space. We signed a lease and our monthly expenses suddenly skyrocketed (error 6) almost at the time of the cash injection.
This means that cash was used to buy groceries. On the other hand, expenses such as rent, utility bills, insurance premiums and salaries have increased.
The industry is highly cyclical and sales cycle time is critical. We have never been able to achieve high enough sales to pre-order and list and sell the product in time.
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At the same time, our friend had an emergency surgery and had some personal issues that needed attention. This meant no warehouse supervision and more staff and overhead.
Aaron and I had to step in and close the gap, but we were both dealing with our own work issues. Most importantly, we didn’t have the knowledge to help us when needed (mistake 7).
We closed our business six months ago and ended up with about 800 pairs of shoes in our garage.
My plastic Tupperware basket broke last week. It was at the bottom of a large pile of trash, causing all the containers to collapse. They hit a 50 liter water barrel (which was supposed to be full), then a bicycle and a pile of shoes.
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It was probably a good thing the trash can fell out because we had to clean out the garage.
There’s nothing worse than stacking shoes all Saturday knowing your $55,000 investment is down to 800 pairs. Unfortunately, the price per shoe doesn’t reach the $68 it needs to be.
At this point I’m looking to sell a set for $10-$20 just to get it out of the garage. Let me know if you are interested in purchasing more than one pair.
**Editor’s Note: I have been slowly selling shoes through Thredup. I don’t make a lot of money, but I still take off my shoes. If you have old clothes, this is a great way to earn extra money.
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I’ve been thinking all day about all the mistakes we’ve made in running our business. It was a long day and we had plenty of time to go over all the mistakes we made. I’ve read a lot about the root causes of business failure, and I’m frustrated that I’m making most of the same mistakes.
Ten Steps to a Successful Small Business: 1. Treat your business like a business from the start.
Our biggest mistake was assuming that our managers knew what they were doing because they had been in the industry for so long. He knew every nook and cranny of the industry, but that didn’t mean he knew how to run a business.
All of his business decisions were based on his proforma and what he thought would happen, not actual numbers. He was incredibly intelligent, but lacked the necessary knowledge and skills to make business decisions.
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I quickly realized that he lacked financial skills, but I didn’t take the time to teach him those skills or jump in and do it myself.
As the owner of the company, I had to be there every step of the way, giving direction and coaching. He would quickly master this skill.
If I had given him the business knowledge he needed along with the industry knowledge, this post could have been very different.
Aaron and I thought it was his company. If you own a company, you should treat it like your own, even if it happens accidentally.
Business Start Up Kit: Strauss, Steven D.: 9780793160273: Amazon.com: Books
My job was to run the company, not just bury it in the sand because I was busy.
We never spend time creating a formal budget. We had a proforma, but no system to turn the proforma into a budget.
Most importantly, there was no responsibility for form or budget. We look at the numbers and think everything is fine, but as any real business person knows, pro formas are just educated guesses (or idealistic aspirations).
Only when you compare actual sales to forecasts and make financial adjustments based on what actually happened will you get the real picture. Then adjust the proforma and repeat the process ad infinitum.
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I remember many years ago, my grandfather said that when you have a budget, you should double your expenses by half of your expected income and then look at the numbers.
A pro forma statement is only an assumption, and if you don’t base all your decisions on it and modify it as you gain real experience, you’re acting blind.
If you want to become a business owner, you need to know all the details of your company. You can delegate more, but most entrepreneurs do everything themselves.
Being deeply involved in the day-to-day management of your company gives you a sixth sense for potential problems.
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Of course, we never wanted to own the company, but we still needed to know all the details of what was going on.
When our friend had a family emergency, we were unable to step in and help. Aaron had a rough idea of how to manage day-to-day life, and I had no idea.
At that time I was working 50-60 hours a week and I really didn’t have time. I lost $55,000 by not bothering to find the time, but it was not a good decision.
If you are thinking of starting a business, do your research. When I say research, I mean deep research. Read all available resources, listen to podcasts and connect with industry experts. Learn not only what a business does, but how to run a business.
Infographic: How Do I Start My Own Small Business?
When I was first approached about this investment opportunity, I spent a lot of time learning about eBay’s business and how it works. I asked a lot of questions and actually looked for numbers.
Which I didn’t do
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Hi, I am Erick Norman. A blogger specialist in Kitchen Design.