Do you want to start your own online home based business but do not know what to do? In this article I am going to share with you some of the most important steps to a successful online home based business. During this time of economic crisis, and the current shift in global business models, having a business that is home based and online will help you to prosper in the new world economy. Below are a few of the main steps you need to follow in order to succeed in the online business industry.- Research your niche
Before you start any online business, especially if it’s home based, researching your niche is very important. You don’t want to sell or promote products in a niche that you know nothing about or cannot learn about through online business training and support. I recommend that you learn about the niche you are interested in or want to promote, then partner up with a company that has a proven system in place, along with training and support to ensure that you are successful in your new online home business.- List of targeted leads
One of the most important tools for online home business is having a list of targeted leads that you think will be interested in your product or services. You can do this by using social media sites, creating videos and the most powerful one is through article marketing. List anything that will drive leads to your opt-in-page.- Contact & cultivate targeted leads
One you have your list of targeted leads, the next step is to contact them and introduce them to your product, service, or company that you are working with, etc. You never want to be pushy or try to sell someone on something that is not of value. You always want to stand by your morals and only represent products, services or companies that you truly believe in. You want to offer your leads a great product, or a legitimate home based online business or high value educational products that can be delivered electronically over the Internet.Follow the basic steps mentioned above and this will put you on the right path to creating a legitimate home based business. Before you know it you will be making a great income from the comfort of your own home or from your favorite resort, wondering why you haven’t always been in the world of online home based business. With the right tools, right training and right business model, you will be on your way to success. Always stay determined!
Steps on How to Become Successful in Online Home Based Business
Why Is It So Difficult To Lend To Small Businesses
Small business have always had a hard time finding and securing financing – regardless of the state of the economy. But, why is this so?
There are several reasons:
There are mainly two types of organizations that provide small business loans.
First – Funds:
1) Your typical bank or traditional financial institution. These organizations normally get the money that they lend out to businesses from depositors – individual and businesses that expect their money to be there when they need it. Thus, these organizations have a further fiduciary duty to protect those funds from any harm.
2) Private Lenders. These organizations typically get the money that they lend out from investors. Now, these investors know (or should know) that there is always risk in any lending or investment activity. And, for that risk, they expect higher than average returns on those investments. Those who manage those funds (the private lenders), in order to stay in business and continue to receive those investment dollars, know that they have to both lower any risk as well as meet return expectations.
Why this matters: Banks have to ensure that they are not taking undue risk with other peoples money. If they fail in this duty, they can be fined, regulated or closed. Thus, they are really tight about risk.
Private lenders are essentially in the same boat. While they want to take more risk (in hopes of getting more reward for it) they just can’t really pull it off out of fear of losing too much on that risk and thus losing their investors – no investors, no business.
As a side note – all these organizations are in business to make money – not lose it.
Second – Regulation:
The financial industry is one of the highest regulated industries in the world. Banks bare the brunt of these regulations (has to do with the other people’s money aspect).
One of the most detrimental regulations to banks, when it comes to lending, is the Allowance for Loan Losses (ALL) Accounts that these organizations have to reserve for.
In a nutshell, a bank has to typically reserve up to 10% of all outstanding loan balances in a separate ALL account. Thus, if a bank puts out a $1 million loan, they also have to reserve in their ALL account 10% or $100,000 – money that they have to hold back and can’t put out in other loans.
Now, history has shown that small businesses tend to be more risky. In fact, according to the SBA, small businesses have averages between 12% to 18% default rates – and, up to 60% for some of the SBA’s more risky loan programs like micro loans.
Further, when the regulators come to visit these banks and see a higher than average level of small business loans, the regulators can require these banks to increase their reserve amounts to 15%, 20% or higher to cover the potential risk.
Banks tend to frown upon these reserve requirements as it takes money out of their lending coffers – money that they can’t put out in any loan type and thus can’t earn any revenue (interest and fee) from. Thus, they tend to do all they can to avoid having their reserve requirements increased and, in some cases like our current economy, tend to pull back all loans as not to have to fund these ALL accounts at all.
Private lenders on the other hand, do not face many of these same government regulations but do face scrutiny from their investors – which can result in the same type of pulling back loans to small firms. Also, these private lenders are regulated in how much they can charge in interest rates which puts a floor on the level of loans they are willing to underwrite and fund.
Example: A bank might be able to charge say on average 8% for a loan. This 8% covers their cost of funds (2%), their overhead (3%) and their profit margins (3%). Private lenders also have the same overhead costs (3%) and profit requirements (3%) but have to return some 10% or more to their investors – their cost of funds.
This means that they have to charge higher rates – which could be capped by regulations. Thus, many of these lenders will try to work around these higher rates by focusing on larger loans from less risky borrowers – not to essential earn more but to reduce their level of defaults.
Why does this matter? It is hard to lend outside the box when the walls of the box keeps getting higher and higher to overcome.
Third – Cost:
Most businesses that bring in more customers can achieve an economies of scale by spreading overhead costs over more customers. But, it’s not so in banking or private lending.
Let say that it takes 10 man hours to underwrite a loan – regardless of size. Man hours used to meet with borrowers, collect documentation, perform analysis, create documentation and manage the loan process. Thus, a lender can underwrite 10 small business loans of $100,000 each and spend some 100 man hours doing it. Or, they can underwrite a $1 million loan and only spend 10 man hours. Both would provide the same return (provided they both had the same rate and term) yet, the 10 loans would cost 10 times as much – eating into the lenders profit or investors returns.
Why does this matter? Because managing costs is a great way to improve a business’s profits (and, that is what they are in business for).
Thus, why it is so difficult to lend to small businesses is due to the trade-off between risk and reward. Small businesses have too much risk for such little reward potential.
Why, you might ask, do I bring this up? Because I am seeking input from others on new, innovative ways in which we can change lending to small businesses – ways that may take away or mitigate the risks involved and to help ensure adequate returns on these loans.
How Not to Lose Money With Free Home Based Business Opportunities
If you are looking for a free business opportunity, you are on the same track that millions of others are on searching for financial independence. It seems that everyone is looking for new ways to make some extra money and the first thing they think of is, “How do I find free business opportunities?” Whether it is with a part time job from home or starting your own home business from scratch, there are numerous ways to make money, so long as you have a grasp of how to go about it.
The Best Home Based Business is…
The best home business is a free one. However, free home based business opportunities are difficult to come by, especially if you are looking for legitimate ones from that you can make money with instead of losing money. While legitimate companies to partner with can be found, it usually take s a few tries to find one that will not try to defraud you of your earnings or give you a runaround story as to why you aren’t working correctly to earn the money that they have claimed.
Too good to be True?
Some of the better opportunities for a free work from home jobs and businesses include two characteristics from which you can determine if it is a “problem” opportunity or a good one such as:
- No start up costs. Many “free” home based businesses claim you can make a lot of money if you put out from $50 to $1,000 of “start up money”; money you will never see again. These “start up costs” are what make the people running these frauds rich, and they play you like a puppet on a string because they know you are willing to do anything once you give them the initial payment.
- Monthly fees after the initial “free trial” are a sure sign that your free opportunity is anything but free. If the company’s promotional material for the new business is labeled “free”, then it should be free – not free for a day, free for two weeks or even free for a month. These “free trials’ do almost nothing but lure people into contracts that are nearly impossible to break; all the while they have your credit card number and continue to charge you monthly fees because you did not follow their “cancellation procedures” properly. These types of programs make their procedures difficult to navigate hoping you will not figure them out and remain enrolled until you report them, but by then it is too late to get your money back.
Many people try their hands in anything just to make a few dollars, including survey sites, cash mail order clubs, etc. – you name it, they will try it. This is because many people do not realize how easy it is to get trapped into thinking someone who is trying to help you is only trying to get rich themselves instead. Any time you think that you have found the perfect free home based business opportunity, always read the fine print to see what you are really getting into.