Why a Home-Based Business?
The S&P 500 has declined 38% in the previous 12 months producing mass layoffs and causing six million new people to be added to the unemployment rolls in the United States.  Highly educated people desperate to bring some money into the family coffers are filling even minimum wage jobs.  The current economy has produced thousands of individuals realizing the need to create their own income opportunity.  But with so many home-based business opportunities, how can you tell if an opportunity is a good one?
     
What is a Good Opportunity?
New home-based business opportunities are becoming available each month.  Unfortunately, these companies are going out of business at an alarming rate.  The reason why most of these companies fail boils down to two reasons, undercapitalization and mismanagement.  Even though home-based businesses do not require expensive franchising fees, to be successful, you will still need to invest your valuable time and emotional and physical energy.  Many people work very hard to create a sales organization that can produce a part-time or full-time income, only to have it yanked out from underneath them when the company goes out of business. 

What Metrics Should I Use?
Stock market analysts use sophisticated metrics to make educated projections about which stocks will yield the desired returns on investment. Anyone considering a home-based business should also carefully evaluate the business before investing his or her valuable resources.  They should carefully research several factors listed below that I call the four Ps; People, Product, Profit and Process.  Do quantifiable research and don’t believe everything you hear, especially from a salesperson.
  
Who Are the People?
The people managing the business are the most important consideration.  Find out who the top executives are and do a thorough background check on each one, especially the founder.  The Internet is a good source of information, although be careful to confirm that the source is unbiased, authentic and respected.  There are only two attributes that are important to evaluate – Are they trustworthy?  Are they competent?  Trustworthiness is absolutely mandatory.  Nothing else matters if the management cannot be trusted in their business and personal relationships.  If they are trustworthy, confirm that they have sufficient experience and a successful track record for the responsibility they have in the company.  Many good honest people have failed because they don’t know how to do their job.  Most inexperienced managers also don’t know what they don’t know.

What is the Product?
After confirming that the people are trustworthy and competent the next question is about the product.  Most importantly, does the product have real retailable value?  Does the product stand on its own outside of any income opportunity?  Would consumers purchase the product without expecting any financial kickback?  Is the company justifying the price with earnings from recruiting others who then need to repeat the process?  Is the product in high broad demand and is it consumed regularly?  A highly specialized product may limit your potential market of customers and recruits.  If the product is a durable good sold once then your income will be based on new sales every month, which will be more volatile that a consistent revenue stream from the same customers consuming the product every month.  Also be aware of commodity products that don’t have sufficient margins for significant earnings.  Companies with these products typically pay most their commissions on subscription-based tools, like websites, rather than the actual product (e.g. phone service, energy, travel, shopping clubs). 

How Do I Make a Profit?
One of the first financial questions in any business is how quickly do I break-even?  In a home-based business that means how quickly will I recover my initial investment?  How quickly will I earn enough to pay for my product consumption?  And how quickly will I earn enough to pay for my monthly business expenses?  The Direct Selling Association (DSA) reports that 90% of all people who get involved in a home-based business do so to earn an extra $500 a month.  How easily can you get to $500 per month?  How many people do you need on your sales team to earn $500 monthly?  Some plans purport high payout percentages, but have hidden breakage that never gets paid out.  Is the compensation plan easy to understand?  Can you easily explain it to others?  Can you easily calculate your earnings manually?  Some plans are designed to only reward the big dogs at the top.  The good plans recognize that the stability of a company is based on the number of $500 checks it writes.  In the long run this stability provides the dream income for the top earners.

Is There a Simple Duplicatable Process?
According to Entrepreneur Magazine, 80% of independent businesses fail in five years; conversely, franchised businesses with a proven system have a success rate of 91% for the same time period.  Does the company provide a proven system to build and retain a successful sales force?  Many companies provide recruiting tools like lead generation pages and contact managers.  The real question is not only how quickly you can recruit others, but also how well you keep them and help them become successful.  The most successful companies also provide support and self-help systems, complete training and certification systems, and leadership and mentoring systems.

About Pinnacle Performance Institute
Founded in 2004 and headquartered in Plano, Texas, Pinnacle provides sales organizations with an affordable solution to build a successful sales force with professional and innovative sales and marketing tools; and to retain them with the necessary support, training and leadership tools.