Starting a home care business inherently carries risk with no guarantees which is why not all start up home care agencies are as successful as the owners dreamed. Today we discuss the most common reasons why home care agencies fail.
Statistically, the chances of success with a home care business (or any small business) are against you. According to the US SBA, of the small businesses created in the US, approximately 59 percent have a chance of survival for the first three years whereas there’s only 48 percent chance of survival by the fifth year. Those are staggering odds for many, and down right scary for those considering the start of their very first business.
In reality, the passion, energy and excitement that new business ownership brings does not automatically translate to business success. Underestimating what it takes to start any business is by far one of the largest – yet surmountable – obstacles that entrepreneurs face.
There are plenty of catalysts that, when considered during planning and execution, can improve your chances of success by helping you avoid fatal mistakes.
Here are the most common reasons why home care agencies fail:
Lack of Capital
Home Care agencies fail most because they run out of money. This is often a result of owners failing to recognize and plan properly for all the costs involved in starting up. To reduce the chances of running out of money before profitability, map out a realistic plan and timeline for profitability. Be sure to add enough for living expenses and reserve funds in addition to enough capital to cover the period of time planned to reach profitability. Once the plan is complete, FOLLOW THE PLAN!
Too Much Overhead Don’t “bite off more than you can chew.” Instead, let your revenue dictate your overhead and hiring practices. Before you add to your overhead expenses, increase your revenues. Basing your initial overhead on aggressive projections will soon deplete your capital.
Borrowed Funds Many businesses borrow too much money, mismanage the funds, and then don’t have enough income to repay the loans. These businesses fail.
Personal Use of Business Funds Don’t mingle personal funds with your business. The IRS hates it, and it leads to messy accounting practice and, ultimately, business failure.
Over Investing in Fixed Assets Start small. For example; rent a small office space that’s affordable instead of buying the big building you got a great deal on to grow into.
Poor or No Business Plan
Many who start businesses fail to consider the importance of a plan. You wouldn’t build a house without blueprints, would you? Creating a business plan requires that you think about the future of your business, the challenges you’ll face, and how you’ll accomplish your goals. Think through ALL the competition, financial needs, organizational structure, marketing strategy, and employment management plans. Doing so will keep you from asking why home care agencies fail.