Most of us have at one time or another considered starting some form of home based business to bring in extra funds. For many of us that is as far as we get, thinking about it. But these days more and more people are beginning to find they have a need to generate extra income and often a home-based business is the ideal solution. The great mistake that is often made is to see a sales pitch for some type of “business opportunity” or other and rush into it without much serious thought or preparation. This usually leads to failure of the enterprise.

Step 1. Planning. There are a couple of old hackneyed sayings, which never the less are very true. Poor preparation precedes poor performance and fail to plan and you plan to fail. The points you need to consider are how much is it going to cost you to set up. Do you have the space, facilities and most importantly the time to run the business? How will it fit in with your current lifestyle and what if any sacrifices will you have to make in order to build your businesses and are you prepared to make those sacrifices? If you run any business you are going to need to devote some time to it. Time that you are currently using to do something else, what are those something else's and how important are they to you?

Step 2. Research. Do not plump for the first opportunity that you see. Hunt around and build yourself a list of three or four businesses that interest you. Search around your own local area, is there an opportunity just waiting to be exploited? Once you have your list of possible businesses start comparing them against each other and see which will best meet your requirements. At this stage accept nothing at face value. Just because it says in a sales letter “you can easily sell 30-50 bottles of vitamins a week” don't just accept it. Ask yourself questions, “Where and how are you going to find those 30 to 50 people each week.” If you cannot come up with a realistic answer to the question then that business may not be for you.

Step 3. Acquire Skills. Accept that there is no such thing as the perfect business. You are not looking for perfection just best choice. Some people spend a life time researching and in the end never actually take positive action. There does come a time when you have to make up your mind and make a choice. At this stage you can start deciding if there are any skills that you might need that at present you do not have. Perhaps you lack the skills to write convincing sales letters or to keep the books. None of us can naturally do all the tasks associated even with the simplest of businesses. Analyse your strengths and weaknesses and decide which are your weak areas and decide how you are going to deal with them. Really there are two options you can learn the skills for your self or pay someone else to do them instead.. For instance you may want a web site but it could take you many hours to learn how to build and upload one to the Internet and hiring a web builder could be a better option.

Step 4. Tell your Market. No business can survive without customers and customers need to know what you are selling. Whether you are using the Internet or the more traditional methods to advertise your business you need to get the word out. All businesses have to advertise in one form or another and the better you are at targeting your advertising the more your return will be. As a small home business you cannot afford the scattergun method used by multinational companies. All your advertising has to be highly targeted and hopefully cost effective. For this reasons you need to be able to track the effectiveness of all advertising that you use.

Step 5. Analyse. In any business some things will work better than others. In Pareto's Law it states that 80% of income will be generated from 20% of your customers. If you think about this it means that you will be spending 80% of your time to generate 20% of your income. The secret of a good business whether it be large or small is to identify your 20% of customers or potential customers and spend more time developing them. The more that you know about what is actually happening in your business, which advertisement are generating the most sales, which products are giving you the most profit the easier you will find it to point your home business in the right direction.