7 Home Business Mistakes to Avoid

Are you guilty of making these home business mistakes? Take a look in the mirror – I know I have been guilty of at least one (or 2 or 4) of these. The truth is all is not lost. You can easily recover from these mistakes and still put your home business on the fast track to success.

Let’s get right into it.

Failure to Plan Properly

One of the bigger home business mistakes to make is a failure to plan appropriately, or in some cases, a failure to plan in general. Too many people rush into a home-based business without understanding some very basic information about the business.

Who are your customers? What do they want? How do they want it? What problem are you trying to solve for them? These are all important questions that you have to ask not only yourself, but your prospective customers as well.

You also need a good business plan. A business plan doesn’t have to be too formal – especially if you aren’t applying for funding from someplace like a bank or other financial institution. It should serve almost as a contract with yourself. This plan should outline, at a minimum these aspects.

Business Goals

Yes, you want to make money. Duh. Thats the goal of all businesses. Be more specific. What are you trying to achieve? What is your mission statement? This sounds corporate, I know. Are you looking to provide a stable second income? Are you looking to make enough to save for your kid’s college fund? What does that look like? What do you have in mind, exactly.

You can also focus on goals for your customers as well. Do you want to help middle aged parents be better parents? Helping busy professionals take of their lawns and gardens?

Target Market

Who is your target market? Who are you trying to reach with your product or service? Be as specific as possible and do your research. Try to include age, where they live, where they gather, and other demographics. You can also build personas if needed. (Personas are a great way to personify target audiences and make them more real.)


Don’t ignore them or hide them under a rock and pretend they don’t exist. Who are your biggest competitors? What are they doing that makes them successful? Once you understand how they operate and do business, you can come up with a plan to differentiate yourself and your business from them.

Marketing Strategies

This outlines how you plan to market your goods, products or services to your target audience. To do this, you have to understand them and what mediums they are most receptive to. Perhaps its Facebook, maybe its traditional print ads, or even face to face communication. Look to your competitors. What are they doing to market to the audience? How are they reaching their target market? Don’t be afraid to experiment with different methods and track the results.

Financial Projections

What is the financial outlook of your business? (Be honest!) Namely, how much money do you realistically expect to make vs how much money you think you will need to spend. Try to project out as far as possible, and don’t be afraid to be wrong. One of the more common home business mistakes is assuming you will not need to spend anything, or at least very little, to get a home business started. This is not always the case. Be realistic about this. Otherwise, you are only fooling yourself.

Mixing Personal & Business Finances

Even if you are the sole proprietor of your home-based business and have no employees, you should still maintain separate accounting for your business. Yes, I know – home business accounting sucks but it’s a necessary evil and an absolute necessity if you are going to be successful in business.

What can happen if you mix personal finance together with business expenses and finance? A whole host of financial and potential legal or tax issues.

First, there’s confusion. Home businesses mistakes and accounting errors can creep into your personal accounts, and vice versa. Was this purchase I made on my personal account for a business purpose? Did I buy something on my business card for personal use? When reviewing the books at the end of the fiscal or tax year, trying to remember why you bought something in January might not be immediately obvious.

We’ve all heard about a company having “two sets of books” which is incredibly shady. But in the case of home-based business, it’s pretty much expected that you have two sets of books – one for personal use and one for your business. For me personally, I do not keep a personal book so to speak. I only keep a set of business books. Is that wrong? There are some who would argue that, sure. But its important to find a system and stick to it.

You should, at a minimum, setup a separate checking account for business and personal use. If the time comes to apply for a credit card for your business, make sure that is separate as well.

It is generally okay to use your personal credit for business AS LONG AS YOU TRACK IT and account for it correctly. What I tend to do is track these purchases as owner equity in my accounting program. This shows that I essentially gave my business funding to make a purchase and the business is indebted in a way to me – even though I never really expect the money to be paid back.

Of course, if you have any questions, consult a tax or accounting professional.

Ignoring Legal & Regulatory Requirements

Starting a home-based business is more than just announcing you have started a business. You should do your homework ahead of time and make sure your business adheres to the laws and regulations of your area and state, not to mention any federal laws. Treat the business like a business and not a hobby. Not doing so opens your business to a host of legal and regulatory risks. You also risk fines and penalties which can range from paying extra money to having the right to operate your business revoked.

Here’s some things to check for at a minimum.

Registering your business

Mak e sure the name you want for your business is not taken, and properly register the business with the county or department of state (or department of corporations). Follow the guidelines prescribed by the region. This might include registering an LLC or sole proprietorship. Again, there are numerous pros and cons to each. Registering an LLC is recommended because it gives you some protections that a normal sole proprietorship might not. Registering an LLC can be done online using numerous services like Legal Zoom and Northwest Registered Agents, to name just a few.

Obtaining Permits & Licenses

Depending on the nature of your business, you may need special licenses or permits to operate. Your region or town might also have restrictions on the types of business you can do out of your home. You’ll want to check on all of these and obtain the necessary paperwork so everything will be in order BEFORE you open your doors.

Complying with Taxes

As a business owner, you are responsible for orderly and timely tax filings at all levels – including local, state and federal. As tax regulations vary from state to state, the best bet is to do a little online research and find what taxes need to be filed, when/how often, and mark them on a calendar. If you have any questions, consult an attorney or tax professional in your area that specializes in small or home-based business tax filings.

Underestimating Costs & Expenses

Many new home business owners tend to underestimate their costs or expenses when first starting out. While this is not damaging long term, and you will learn as you proceed in business, it is something to keep in mind when planning.

The key to do some research to avoid this common business mistake. Not only research all your potential costs and expenses but consider items that you might not have thought about before. Equipment, licenses, supplies, marketing, higher utility payments, insurances, taxes and professional service fees are all items that might not make your initial cost list.

I would keep a running list of expenses, or predicted expenses in a spreadsheet that constantly gets modified. I have formulas setup that add up all the predicted expenses, categorize it, and break it down for me so I can see what I think the business will cost. These operating expenses are important to predict and track out. I also leave myself a “fudge factor” to allow for inflation and future price increases, usually about 10% – 25% depending on the category. In other words, if I think a service will cost $100, I usually estimate $125. If I predict paper will cost me $50, I usually will put $55.

Lack of a Marketing Strategy

Even though this should be included in your business plan, many people tend to skip over marketing strategy. This is an important element of any business, but especially home business as it details how you are going to communicate and get the word out to your prospective clients or customers about your goods, services or other offerings. And the marketing has to be on target to attract customers and generate sales. Without revenue generation, your home business is just a hobby. And that is an important distinction for the IRS. If you tend to show a business loss year after year with no sales, the IRS will consider your business a hobby and you will lose your deductions – making your tax burden higher.

So marketing it absolutely necessary to generate sales and bring revenue in. One of the common home business mistakes I hear when it comes to marketing is “Oh, I will let word of mouth of customers be my marketing strategy.” While this is valuable, you cannot rely on it solely to run your business. And when you are starting out, you don’t really have any customers to begin with – so who is going to tell who?

This is also not a sustainable business model for growth. Word of mouth and referrals are good, but they won’t explode your business like you might hope. Solely relying on the “influencer” effect isn’t a good overall strategy either because this is very hit or miss. Sure, you might catch lightning in a bottle and get an influencer to give a positive review and this could spike your sales short term. But relying on this as your core marketing strategy is not a smart business move.

Investing time in researching where your customers area, what they want, and how they want to be approached is an important piece of successful home business. For this you could turn to social media, traditional print ads, online ads targeting specific platforms or demographics, or more traditional media ads. There are no right or wrong answers – but the ones you use should be affordable and also appropriate for your target audience. That is why research is so important.

Failing to Set Boundaries

Working from home on a home based business is probably going to blur the lines between home (personal) and work life. The great draw of working from home, the comfort and convenience, could also be its biggest challenge. The distractions of your home are there in front of you. You might be tempted to do laundry in between client calls, rather than focusing on your business planning or accounting (as an example).

Establish working hours where you focus exclusively on your business. Don’t allow anything personal or home based that isn’t work related to get in the way. These items can be done on your lunch break, or off hours. As a home-based business owner, you will find that setting your own hours can be both your biggest blessing and worst curse at the same time. And you will find that as your business starts out, you will need to dedicate more time to it in order to make it successful.

Creating a designated workspace is vital for your home business and is one of the more common home business mistakes you can make. Working at your kitchen table isn’t sustainable long term. Use an extra room or repurpose an area of your house for your business. Treat it as such and don’t let your home “clutter” invade the space.

Finally, communicate the boundaries with your family and other people who you live with. Make them understand that when you are in this space, you are working. Think of it as a normal “job” because that is what it should be. Get their buy in and commitment to minimize interruptions. Obviously, there are going to be exceptions, but these should not be the norm.

Not establishing boundaries with your family is one of the biggest home business mistakes you can make.
Running a business is hard enough – make sure you establish boundaries with your family and create a dedicated workspace for your home business.

Not Seeking Help

Starting and running a home-based business is hard work. You will have questions. One of the biggest and most common home business mistakes you can make is not realizing this and not reaching out for help. It doesn’t always have to be professional help that will cost you money either. Sometimes it could be simple phone calls or messages of encouragement from colleagues or others that have gone through what you are.

If you have extra tasks, you can consider outsourcing to freelancers. Don;t feel like you have to do everything. Lets say that building a website isn’t your forte, or something you are comfortable with. Leverage freelancer sites to get the tasks done. Yes, it will cost some money, but it will be done quicker than if you had to go it alone. Sites like fiverr are great for this.

Its important to recognize your own limitations as well. You can’t be good at everything. You can seek help on small business or home business forums or sites (in addition to using this site as a reference of course. After all, that’s why Wistless was created – home business for clueless people lol.)

Wrapping Up Home Business Mistakes

I admit that I am guilty of some of these home business mistakes. There is no shame in that. The key is to learn from them. If you can avoid these altogether, your business will be on more solid footing starting out.

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