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Starting and Managing a Business
From Your Home
by Lynne Waymon
Produced in cooperation with the American
Association of Community and Junior Colleges
Charles Liner, SBA Contracting Officer's Technical
Representative
Judy Nye, Project Director, AACJC
Martha McKemie, Senior Writer-Editor, SBA
Eugene Donaldson, Graphics, SBA
About the Author
Lynne Waymon designs and delivers continuing
education programs in the fields of small business management, management
skills, and personal development. She has worked with private
corporations, government agencies, and community groups to develop courses specially
designed for their employees. Programs under her direction at
Montgomery College in Maryland received awards from the Small Business
Administration for "outstanding performance providing consistently high quality
business management training of substantive value to the small
business community" in 1978 and in 1982.
Introduction: "There's No Place Like
Home"
The cottage industry, an old-fashioned enterprise,
is enjoying a revival so strong that it's difficult to find out just how
many Americans are now working at home. Estimates range from two to five
million and the numbers may double by 1990.
Because women now enter business at a rate five
times faster than men, the trend of operating from home is growing. A natural
starting place for many businesses seems to be the garage, basement, or
den. A recent Census Bureau study showed that over 300,000 women's businesses
are operated out of the home.
Homemakers, hobbyists, retirees, people interested
in a second income, and the disabled are just a few of the groups
attracted to home enterprises. A young mother's craft business began when she
started appliqueing decorations on her children's clothes. A retired
government worker bought 36 beehives and sold honey to local health food
stores and at craft fairs.
A teacher did typing and secretarial jobs for her
husband and friends until she realized the potential market and opened a
full-time secretarial service from her apartment. Others have become
home business owners by using their skills in catering, counseling,
teaching, day care, sewing, writing, photography, consulting, market research,
and landscape design. The list of services that have been successfully
operated from home is endless: chimney sweeping, maid services,
messenger services, wake-up and answering services, home nursing, mail order
businesses, party planning, dog grooming, kitchen and closet planning and
organizing, and others too numerous to mention. As you explore the questions
asked in the first chapter, "Home Entrepreneurship: Is It For
You," let your thoughts run freely through the possibilities until you can
target exactly the right type of business for your skills, your home space,
your market, and your part of the country.
Home Entrepreneurship: Is It For You?
The first step in deciding whether to start a
business is to ask yourself this important question: "Do I have what it
takes to be an entrepreneur?"
Studying the characteristics of successful
business owners will help you to tell whether your personality traits, experiences,
and values are similar to those who have succeeded. And assessing your
experience, skills, and life goals will also help you decide if you want
to invest the energy, time, and resources that successful
entrepreneurship requires.
Who is the "Typical" Entrepreneur?
What makes an entrepreneur successful is a hotly
debated and vigorously researched subject. In Success And Survival In The
Family-Owned Business, Pat B. Alcorn, an expert on entrepreneurial
problems, has developed the following questionnaire to help you determine your
"Entrepreneurial Quotient." Write your answers in the margin.
Then read on to discover what she believes characterizes the typical
entrepreneur:
Do you reconcile your bank account as soon as the
monthly statement comes in?
Entrepreneurs are careful about money. They
usually know how much money they have so they can seize opportunities on short
notice. They know what things cost, whether prices are going up or down,
and whether they are getting a bargain.
Did you earn money on your own from some source
other than your family before you were 10 years old?
Most people who are going to make money in
business show an affinity for making money at an early age--by babysitting,
selling lemonade, delivering newspapers, or some such strategy.
Do you get up early in the morning and find
yourself at work before others are out of bed?
Entrepreneurs sleep and eat enough to keep up
their strength, but they don't usually tarry at these pursuits.
Do you tend to trust your hunches rather than wait
until you have a lot of information on hand?
Hunches are judgments based on factors that cannot
be quantified, A big part of entrepreneurship seems to be risk-taking based
on these hunches.
Do you keep new ideas in your head instead of
writing them down?
Entrepreneurs keep a lot of things in their heads,
including their most creative ideas.
Do you remember people's names and faces well?
Ease in remembering names and faces is very
important in the business world.
Were you good in "hard"
subjects--mathematics, biology, engineering, accounting, and so forth--in school?
People who major in business administration in
college are more likely to be successful entrepreneurs than anyone else. They
prefer subjects in which the answers are conclusive rather than open-ended
conclusions full of contingencies.
In school, did you pretty much stay away from such
organizations as Scouts and student government?
Most entrepreneurs tend to be loners rather than
joiners, unless joining is a useful tactic for making contacts and gathering
business information.
In courting the opposite sex, did you tend to go
for one person at a time as opposed to playing the field?
Most entrepreneurs preferred one person because to
play the field would have taken too much time away from business activities.
Do you close deals with a handshake rather than
insisting on written contracts and guarantees?
Good entrepreneurs are often comfortable with
something less binding than written contracts. When the only bond is a word,
it becomes a matter of honor, and no entrepreneur can afford to lose
honor.
Do you devote considerably more time and thought
to work than to other activities, such as hobbies?
Entrepreneurs may have some leisure time
activities, but their principal hobby is their work.
A similar test was developed by John Komives,
director of Milwaukee's Center for Venture Management. Again, write your
answers in the margin, then read on to see the expert's answers
Was your parent an entrepreneur?
Having a close relative who was an entrepreneur is
the single most telling indicator of a successful entrepreneur.
Are you an immigrant?
There is a high correlation between immigrants and
entrepreneurs. In this sense, "immigrant" includes not only
those who were born outside the United States, but also those who moved from farm to city
or from the Midwest to the West Coast.
Did you have a paper route?
The entrepreneurial streak shows up early in life.
Were you a good student?
Typical entrepreneurs were anything but model
students and often were expelled from school.
Do you have a favorite spectator sport?
The best answer is "no." Entrepreneurs
are poor spectators. They often excel at individual, fast-paced sports such as
skiing or sailing.
What size company do you now work for?
The typical entrepreneur comes from a medium-sized
company--30 to 500 employees.
Have you ever been fired?
Entrepreneurs make poor employees. That's why they
become entrepreneurs.
If you had a new business going, would you play
your cards close to the vest, or would you be willing to discuss problems
with your employees?
Typical entrepreneurs have a secretive streak. If
they confide in anyone, it is likely to be another entrepreneur.
Are you an inventor? A Ph.D.?
Not a positive indicator. Inventors fall in love
with their products, Ph.D.s with their research.
How old are your?
The typical age for starting a business seems to
be 32-35.
When do you plan to retire?
In still another study, Jeffry A. Timmons asserts
that entrepreneurs are people who have high energy, feel self-confident,
set long-term goals, and view money as a measure of accomplishment. They
persist in problem solving, take moderate risks, learn from failures, seek and
use feedback, take initiative, accept personal responsibility, and
use all available resources. They compete with themselves and
believe that success or failure lies within their personal control or influence.
They can tolerate ambiguity.
Are You Ready, Willing, and Able?
Now that you have studied the characteristics of
others who have succeeded, survey your reasons for wanting a home-based
business. Are you dissatisfied with your current job? What are your skills? What
is your business experience, especially in the business you want to
start? What are your life goals? What resources do you have that might
help?
Answering these questions will provide reality
testing for ideas that can sound incredibly glamorous when chatting with
friends or seductively attractive when you are irritated or bored by your
present job.
Order a copy of the SBA pamphlet Checklist For
Going Into Business, MA 2.016 (see For Further Information). Answer the
questions and discuss your reactions with friends and family. Or better yet,
ask several people close to you to think carefully about you and fill out
the checklist for you.
Have you underestimated your abilities?
Overestimated them? Sometimes an evaluation by a friend is more useful than a
self-evaluation.
How does your family react to the idea of a home
business? Will you expect them to help out? What changes would your business
use of the house mean for them? Will you have to remodel to create a
usable business space?
What resources are available to you? Will you
start by keeping your job and "moonlighting" for a while? Do you have
a small nest egg, inheritance, or retirement income to live on until you get the
business going? Do you already own tools or machines that will help (for
instance, a word processor for a secretarial business or
professional cameras and a darkroom for a commercial photography business)? Are you
able to go back to school for training if necessary? Have you built up a
network of contacts and possible customers through your previous lines of
work or will you be starting from scratch?
Answering these questions honestly and completely
will help you assess not only your chances for success but also which type
of home-based business to choose. For instance, if your past professional
life and contacts are all in the educational, teaching, child-oriented
school area, then you should have powerful reasons for leaving that and opening
a mail-order seed business. Possibly a tutoring business or a tot
exercise franchise would use more of your resources and networks. On the
other hand, if your assessment of your life goals and preferences
helps you realize that you are burned out from working with kids, then
perhaps a business planning birthday parties could later be built into a
general party planning and catering business. You would be using your old
contacts to build a long-range business plan that focuses on a service
business for adults.
The Advantages of Home-Based Business
Why have millions of Americans chosen to work and
live in the same place?
Why are cottage industries sprouting faster than
we can count them? Some home-based businesses start by accident rather
than by conscious design. Secretarial services, day-care centers, craft
ventures, and the like may start out as weekend activities in the recreation
room. After a while their owners are surprised to see how profitable or
enjoyable the venture has become. The glimpse of a healthy market lures them
into a full-time venture. This low-risk, low-overhead, gradual kind
of start-up is very attractive to new business people.
Many home-based business people cite decreased
commuting time and other lessened business expenses as advantages for
working at home. If your place of work is just 30 minutes away, that's five hours
a week in commuting time, many dollars in gasoline and car maintenance
or transit fares, and untold stress fighting traffic. Getting out of the
high-fashion rat race is a plus for many who dislike having to dress up and
continually buy new clothes to feel comfortable in settings outside
the home.
Homemakers--mostly women but also an increasing
number of men--are choosing a home-based business in order to have a more
flexible lifestyle and to be closer to family. A parent who has a home office
can eat lunch with the children or more easily attend special school or
sports events. The home-based business person has more control over
work hours than someone with a 9 to 5 job. Night owls who like to work
until 3 a.m. can then sleep late (remembering, of course, to turn on the
answering machine and let customers know the business hours). On the other
hand, early birds can work without the usual disturbance from the telephones.
The tax advantages of operating a business from
home are numerous but sometimes complicated. Wise business owners keep
careful records and work with accountants, attorneys, and financial
planners to make sure they are filing for the legal maximum write-offs and
benefits.
The Disadvantages of a Home-Based Business
If you were hard at work in an office downtown, it
is unlikely that three children would come storming in to ask for snacks
or that you would end up using the ironing board for a bookshelf or have to
think twice about hiring others because they might resent working at your
kitchen table. These are just a few of the problems that make the glamour
of working at home fade fast. Some disadvantages of working at home can be
minimized by self-discipline, by setting clear limits with
family and friends, and by projecting a professional image. Other
disadvantages "come with the turf" and just have to be lived with. If a delivery man
comes to the door, you will probably be the one to interrupt your work
and sign for the package.
It takes time and discipline to establish steady,
at-home work patterns.
Often it seems easier to water the plants or do
the laundry than to call a client, design a new brochure, or prepare bills
for customers whose work you've completed. Without the deadlines imposed by
supervisors or peers, it can be hard to do the least appealing jobs on your
list. To make matters worse, others may not take you seriously.
Neighbors may stop by to chat or friends may call your business number knowing you
will answer. Without supervisors or managers, you are the one who must
set limits and plan your time. There also is the problem of isolation.
While you are now your own boss, you won't have the chats, the parties, the
companionship of fellow workers. Losing such social contact requires
adjustments.
As the business grows and changes, the home
entrepreneur has to put up with cramped or inappropriate space. No more simply
putting in a request for a bigger file cabinet or a new copy machine; now you
must visit showrooms or garage sales, evaluate features, compare prices,
and probably pick the item up yourself.
Your teenager may resent having to keep the stereo
low because you're meeting with a client in the next room. Your
spouse may be irritated by having to fry that freshly caught trout on the
backyard grill so your office won't smell of fish. Your son may not want
to give up the recreation room pool table so you can cut out 100 doll
patterns this weekend.
Neighbors may comment on the extra traffic your
customers create on their quiet street. Family privacy and lifestyle
patterns may be disturbed. And you will probably find yourself wrestling with
laws and regulations you never dreamed could exist before you went into
business.
Your Professional Image
Developing a professional image may be hard if you
work out of your home.
Projecting a businesslike image is an important
part of building credibility with your customers and contributes to
your own professional self-image. Design a logo or have one designed;
order business cards and stationery. Set regular business hours. Use an
answering machine or answering service. If other members of the family
also answer the phone,
make sure they know what to say. Have a
businesslike office or "showroom" if you meet customers face to face. Consider
referring to your apartment number as your "suite number" or rent a
post office box rather than using your street address. Such practices might improve
your chances of doing business with potential customers.
Your Next Steps
Now that you have reflected on the characteristics
of successful entrepreneurship and assessed your skills,
experience, and life goals, it's time to plan your next steps. Ask yourself: Given
the disadvantages of working out of my home, do I still want to? Now
that I know more about what's involved in starting a business, is it
still for me? Do I need further training or experience? Should I begin
part-time in order to test the waters, check out market potential, or refine
my product or service? Do I need more time to research possible products or
services? Have I decided on a particular business? The next chapter will
help you define your business, the market, and the price to charge for
your product or service.
Others Have Succeeded--Why Not You?
A former teacher tells how she started her own
tutoring business:
I taught languages in high school for seven years.
Whenever I needed a little extra money, or during summer vacations, I
tutored individual students. As my reputation grew, people began to
ask me if I could recommend tutors in other subjects.
As my enthusiasm for teaching in public schools
waned, I began to research the possibility of a tutoring business. I started
one summer by turning my second bedroom into an office and having
stationery printed. Summer is a peak time because parents hire tutors to help
their kids catch up on subjects. By the end of that summer I was managing
48 tutors in 23 different subjects or grade levels all over the
metropolitan area. I hired a part-time assistant who worked at the kitchen
table. We added other services, such as classes to help high-school
students prepare for national exams. Operating from home was perfect for me
since I needed to keep my overhead low and keep a good cash flow to be able
to pay my tutors.
A computer programmer tells his story:
I longed to get enough work doing computer
programming so that I could avoid the long commute to work and be closer to my
two young boys as they grew up. I started working in an office I built in
the basement doing small jobs and working for friends in the business who
were up against tight deadlines. When I got my first big contract, I
took the leap and gave notice. Now, two years later I've established a
good track record with clients and have hired two others who work at
terminals in my recreation room. I like being able to work late at night
after the family is asleep.
And I enjoy being around when the kids get home
from school. I don't need a fancy downtown office. If I meet with a client. I
make sure it's at his office, not mine.
Answering The Big Question: What? Who? Where? How?
and How Much?
What's the perfect home business for you? You've
listed your skills. You've outlined your interests. You've described your
family's preferred lifestyle. You've come up with a business idea.
Next, consider such questions as: Are there customers for my product
or service? How do I know?
How will I find them? Who are my competitors? What
will I charge? How will I promote my product or service? Finding the
answers to these questions is the challenging and sometimes tedious homework
that will help you determine your chances for success, and whether you should
look for another more marketable idea.
What Is My Product?
"I bathe and groom poodles and small
dogs." "I design, construct, and sell roll-top desks." "I provide accounting
services to small business clients."
"I make dried flower arrangements."
"I teach intermediate and advanced piano to children." "I design and
implement direct mail advertising campaigns for small businesses and nonprofit
organizations."
The first step in creating a business is to decide
what your product is. What are you selling? Practice writing a short,
specific statement describing your product or service. Getting a
clear idea of a business concept is one of the most difficult tasks in
creating a business. Your statement may change several times as you
experiment with the market and test your skills. Instead of "I make
toys," you may want to narrow your product line to "I make wooden dolls."
Instead of "I write software programs for small business needs," you may
decide to tap into a big market and "provide training for employees of small
businesses in the use of accounting packages." See how it feels to
describe your product or service to family, friends, potential customers, and
fellow business people. Is your description clear and brief? Can you say it
with confidence and enthusiasm?
Who Will Buy It?
To develop and test your business idea, answer the
question "Who will buy my product or service?" Make a list of
potential customers: individuals, groups, segments of the population, or other
businesses that need your product or service. If you are making
fabric-covered lap boards for people confined to bed, how will you quickly and
inexpensively find a market?
Through hospitals or home nursing care
organizations? Through craft stores by displaying them as gift items? In mail order
catalogues? Is there a market avenue that will reach children? Ask
friends and colleagues for help in brainstorming all the possible markets
(customers) and uses for your product or service.
Who Is the Competition?
Your business planning must also include an
up-to-date analysis of your competition. Why? Because you need to plan your
market position--how you will fit into the marketplace. Will your product
or service be cheaper or more expensive than that of the major
competitions? Will it be more durable? Will you be open during hours that your
competitors are closed?
What benefits can you build into your product or
service that your competitors don't offer? Will you do rush jobs?
In planning your business, look for a unique niche
that will give you freedom from strong competition or that will make
your product or service more valuable than others in the market. If you
plan to open a day-care center and find that none in your area is open
before school, early opening might make your service more competitive. If you
discover that local caterers have overlooked the office party market,
you might highlight that in your brochure. The more you can learn about
your competition, the better you'll be able to decide how to position yourself
in the market.
Newspaper ads and trade magazines are other good
sources of market information. Check also with the Chamber of
Commerce, your county office of economic development, the Census Bureau, and
business and professional organizations to gather market and pricing data.
Where Are the Buyers? How Can I Find Them?
As you become more familiar with the competition,
you will also be discovering where and how to find buyers. Whatever
the type of home business you want to open, you will need to do
market research to determine if there are buyers for your idea, where they are,
and how to find them.
(And in the process, you will also be gathering
information on pricing.)
Visit your local library to compile local and
county statistics on the size and makeup of your market. (While you are at the
library, check out some books on marketing research so you will know what
you are getting into.)
Also, check those of the following resources that
might have data about your product or service or the people who would
use it:
Encyclopedia of Associates. 17th Edition. Gale
Research Company, Book Tower, Detroit, MI 48226.
Ayer Directory of Publications. Lists trade
publications by subject matter.
Contact the sales, marketing, or research
departments for buying patterns among their readers.
"Survey of Buying Power." Sales,
Marketing, Management Magazine. July issue each year.
Thomas' Register. Lists companies by product and
service line, organized geographically and alphabetically.
Directory of Business, Trade, and Public Policy
Organizations. U.S. Small Business Administration, Office of Advocacy.
Department of Commerce Publications. Data User
Series Division, Bureau of the Census, Washington, D.C. 20233.
County Business Patterns. U.S. Department of
Commerce, Bureau of the Census. Available for each state.
When your marketing research is completed you will
have 1) identified your potential customers; 2) found out all you can
about their habits, needs, preferences, and buying cycles; and 3) decided how
to reach them to generate sales.
How Much Shall I Charge?
Four main factors will help you decide what to
charge for your product or service: 1) your direct and indirect costs; 2) the
profit you want to make; 3) your market research data on competitors'
prices; and 4) the urgency of the market demand. There is rarely an exact
"right" price but rather an acceptable price range within which you will want
to fall. Avoid the common mistakes made by many new business
owners--charging too much or too little. Use several approaches to arrive at a cost and
"test" the price. If your ego is too involved, your price may be too high.
On the other hand, if you have the attitude that "this is just a little
something I do in my spare time" or "anybody could do this,"
then your price may be too low. Here is a formula for setting a fair price.
Calculate your price using other approaches, too, before you make a final
decision on price:
Typical Pricing Formula
1. Direct Material Costs--Figure the total cost of
the raw materials you have to use to make up your item. Figure the cost
of a group of items and then divide by the number of items to find the
cost per item. If you can easily and immediately determine the material cost
of a single item, fine.
Some items are produced in batches, however, and
it is easier to get an item cost by dividing the cost of a batch by the
number of items eventually produced.
2. Direct Labor Costs--Figure what you pay to
employees to produce the item (whether or not you have employees now). You must
assign a wage figure, even if you are the only one producing the item.
Take the weekly salary you pay someone to produce the necessary number of
items and divide it by the number of items. Add this figure to the Direct
Material Costs total.
Materials + Labor = $__________.
3. Overhead Expenses--These expenses include rent,
gas and electricity, business telephone calls, packing and shipping
supplies, delivery and freight charges, cleaning, insurance, office
supplies, postage, payroll taxes, repairs, and maintenance. The accuracy of
your costing depends on estimating logical amounts for all categories of
expenses. If you are working at home, figure a portion of your total
rent or mortgage payment (in proportion to your work space and storage
areas), or assign a reasonable, competitive rent figure for the same
amount and type of space.
List all overhead expense items and total them.
Divide the total overhead figure by the number of items per month (or time
period you used above).
The answer is your overhead per item.
Overhead + Materials + Labor = Total Cost/Item
4. Profit--Include an amount added to the cost of
each item so you won't end up just breaking even or making the employees'
wages. Check your competition and see what they are charging.
(Retailers generally double the wholesale price.) If your product is a little
better than the competition, charge a little more. If your product is
comparable, price it similarly.
Remember, you will get the profit from each sale,
in addition to the salary figure. Add the profit figure you have chosen to
the total cost per item to get your total price per item.
Profit + Total Cost/Item = Total Price/Item
Remember, the main purpose in operating a business
is to make a profit. Don't undersell your product or service just
because "I'd be baking cakes anyway" or "I'm just starting out"
or "I work out of my home." If you have a new, rare, handmade product or personalized
service, the demand may be so high that customers are willing to pay a little
more.
Promotion
Promotion is an overall, long-range plan designed
to inform potential customers about what you have to sell. Advertising
is usually thought of as the paid communication part of the promotion
program.
To develop a total promotional campaign you must
answer these questions: 1) What image or message do I want to promote? 2)
What are the best media and activities for reaching my potential customers? 3)
How much time and money can I spend on the effort?
Develop a long-range, consistent program for
building image and reaching customers. Your image should be reflected in your
business card, logo,
stationery, brochure, newsletter, telephone
answering service, signs, paid ads, and promotional activities.
Word-of-mouth recommendations from satisfied
customers are the very best promotion any business can have. Consider which
promotional tactics will build the confidence and image you are looking
for--giving speeches and interviews (often good for counselors, teachers,
lawyers, consultants), having an open house or holiday home sale (for
craftspeople), holiday recitals or shows (for music and dance teachers or
day-care operators), free demonstrations and samples (for retailers,
decorators, caterers).
Several small ads may have more impact than one
large, splashy ad. Conduct a campaign rather than having a one-shot ad or
event. If you hire a public relations firm, look for one that can give you
personal attention and develop a total marketing plan for you, not just a
couple of ads. The plan Managing Your Business: Structure, Recordkeeping,
Taxes, and Insurance.
You're The Boss.
A telling sign on a new businessowner's desk read:
"Yesterday I didn't even know how to spell ENTREPRENEUR and now I are
one!" Now that you have decided to open a home-based business, all
decisions will be your responsibility, not just those you previously
enjoyed because they involved your area of expertise. Of course, as a day-care
operator you already knew how to soothe an upset child, but as the owner of
that business, do you know when to file your taxes? As a consultant you
have over 20 years' experience advising organizations on personnel
matters, but do you know if it's to your advantage to incorporate?
You are an
expert at word processing, but do you know how to develop an
efficient recordkeeping and billing system? You are the boss now and the good
health of your business depends on your management skills.
Choosing Your Form Of Business Organization
One of the most important decisions you will make
is how to set up the business as a 1) sole proprietorship, 2)
partnership, or 3) corporation.
Remember, the small business owner risks it all,
no matter what form of organization.
The forming of a business organization depends on
the following factors:
* Legal restrictions
* Need for capital
* Liabilities assumed
* Number of people associated in the venture
* Kind of business or operation
* Tax advantages or disadvantages
* Intended division of earnings
* Perpetuation of the business
Most home-based businesses are sole
proprietorships or partnerships, but a comparison of the advantages and disadvantages of
each type of organization follows:
A sole proprietorship is the least costly way of
starting a business. You can form a sole proprietorship by finding a
location and opening the door for business. There are the usual fees for
registering your business name and for legal work in changing zoning restrictions
and obtaining necessary licenses. Attorney's fees for starting your
business will be less than for the other forms because less document preparation
is required.
Sole Proprietorship
Advantages Disadvantages
* Easiest to get started * Unlimited liability
* Greatest freedom of action * Death or illness
endanger business
* Maximum authority * Growth limited to personal
energies
* Income tax advantages in * Personal affairs
easily very small firms mixed with business
* Social Security advantage to owner
A partnership can be formed by simply making an
oral agreement between two or more persons, but such informality is not
recommended. Legal fees for drawing up a partnership agreement are higher than
those for a sole proprietorship, but may be lower than
incorporating. You would be wise, however, to consult an attorney to have a
partnership agreement drawn up to help resolve future disputes.
Partnership
Advantages Disadvantages
* Two heads better than one * Death, withdrawal,
or bankruptcy of one partner
* Additional sources of endangers business
venture capital
* Better credit rating than * Difficult to get rid
of bad corporation of similar size partner
* Hazy line of authority
You can incorporate without an attorney, but you
would be unwise to do so.
You may think a small family corporation does not
need an attorney, but an attorney can save members of a family corporation
from hard feelings and family squabbles. Attorney's fees may run high if
organization problems are complex. The corporate form is usually the most
costly to organize.
Corporation
Advantages Disadvantages
* Limited liability for stockholders (while true
for big business, may not be for small business)
* Gives owner a false sense of security
* Heavier taxes
* Continuity
* Power limited by Charter
* Transfer of shares
* Less freedom of activity
* Easier to raise capital
* Legal formalities
* Possible to separate business functions into
different corporations
* Expensive to launch
Recordkeeping
Keeping accurate and up-to-date business records
is, for many people, the most difficult and uninteresting aspect of
operating a home-based business.
If this area of business management is one that
you anticipate will be hard for you, plan now how you will cope. Don't wait
until tax time or until you are totally confused. Take a course at the local
community college, ask a volunteer SCORE (Service Corps of Retired
Executives) representative from the Small Business Administration to help you in
the beginning, or hire an accountant to advise you on setting up and
maintaining a recordkeeping system.
Your records will be used to prepare tax returns,
make business decisions, and apply for loans. Set aside a special time each
day to update your records. It will pay off in the long run with more
deductions and fewer headaches.
If your business is small or related to an
activity that is usually considered a hobby, it's even more important that
you keep good records.
The IRS may decide that what you are doing is only
a hobby, and you won't be allowed to deduct expenses or losses from your
home-produced income at tax time. So keep records of all transactions in
which you spend or bring in money. Pick a name for your business and
register it with local or state regulatory authorities. Call your city hall or
county courthouse to find out how.
Your records should tell you these three facts:
* How much cash you owe,
* How much cash you are due, and
* How much cash you have on hand.
You should keep five basic journals:
1. Check register--Shows each check disbursed, the
date of disbursement, number of the check, to whom it was made out
(payee), the amount of money disbursed, and for what purpose.
2. Cash receipts--Shows the amount of money
received, from whom, and for what.
3. Sales journal--Shows the business transaction,
date, for whom it was performed, the amount of the invoice, and the
sales tax, if applicable. It may be divided to indicate labor and goods.
4. Voucher register--A record of bills, money
owed, the date of the bill, to whom it is owed, the amount, and the service.
5. General journal--A means of adjusting some
entries in the other four journals.
Choosing a Recordkeeping System
Set up your records to reflect the amount and type
of activity in your particular business. There are a wide range of
pre-packaged recordkeeping systems. The SBA's pamphlet Small Business
Bibliography No. 15 (see "For Further Information") lists many such
systems. The most useful system for a small, home-based business is usually based on
what is called the "One-Write System." It captures
information at the time the transaction takes place. These One-Write Systems are efficient
because they eliminate the need for recopying the data and are compatible
with electronic data processing if you should decide to computerize.
Even though you may be small and just beginning,
it is probably wise to consult an accountant to help you decide which
recordkeeping system is best for your business. Once it is set up, you can
record the daily transactions or periodically have a bookkeeper post your daily
transactions in your General Ledger and prepare your financial
statements. Be sure to establish a separate bank account for
your business--even before the first sale. Then you will have a complete and
distinct record of your income and expenditures for tax purposes, and you
won't have to remember which expenses were business and which were
personal.
It is important to choose a recordkeeping system
that you understand and will use. It will help you see how well the
business is doing and is the first step in responsible financial management.
Tax Obligations And Benefits
Significant tax savings are available to the
home-based businessowner in the form of deductions, credits, and depreciation
allowances. The time, money, and energy you put into keeping good
records and keeping current on tax laws will be worthwhile and ensure that you
operate within the law. You will need to plan for income tax, social security
(all self-employed persons must pay a federal self-employment tax),
employees' taxes (if you hire anyone), property tax on your home and
business-related taxes, such as sales tax, gross-receipts or inventory tax (in
some states and localities), and excise or individual item taxes (on certain
commodities).
The Internal Revenue Service supplies the
following free booklets (and runs free workshops) to give you details on your
specific obligations:
* Your Federal Income Tax (Publication 17)
* Tax Guide for Small Business (Publication 334)
* Business Use of Your Home (Publication 587)
* Employer's Tax Guide (Circular E)
* Self-Employment Tax (Publication 533)
* Tax Information on Retirement Plans for the
Self-Employed (Publication 560)
* Tax Information on Depreciation (Publication
534)
* Information on Excise Taxes (Publication 510)
* Tax Withholding and Estimated Tax (Publication
505)
There are various federal and state forms you will
need to fill out to start a small business. The federal government
requires you to fill out several forms including the following:
* Application for Employer Identification Number
(Form SS-4) (If you have employees or are subject
to excise tax)
* Employer's Annual Unemployment Tax Return (Form
940)
* Employer's Quarterly Federal Tax Return (Form
941)
* Employee's Withholding Allowance Certificate
(W-4)
* Employer's Wage and Tax Statement (W-2)
* Reconciliation/Transmittal of Income and Tax
Statements (W-3)
As a home-based business owner you should be aware
that every business decision--each purchase and transaction you
make--has tax implications or built-in tax advantages or disadvantages.
Deductions may be available for home maintenance and improvements; automobile
expenses; telephone expenses;
office and work space; inventory space; major
purchases, such as a computer; and a wide variety of other items such
as uniforms, coffee service, trademarks, a safe deposit box, credit
bureau fees, and business cards.
Each business situation is different and tax laws
change, so consult up-to-date references, a trusted attorney, and an
accountant who can advise you on your particular obligations and benefits.
Insurance
Insurance helps to safeguard your business against
losses from fire, illness, and injury. You cannot operate without
it. Talk with an insurance representative about your business needs. Check
with the insurance carriers on your home policy and make sure business use of
your home is compatible with your homeowner's policy. In addition to a
homeowner's policy (personal plan), now that you have a business, you will need
a commercial policy for full protection. Discuss these other possible
needs with your agent:
* Product Liability Coverage--to protect you in
case
your product causes injury to the user
* Auto Liability and "Non-owned" Auto
Liability Insurance--if a car is ever used to support the
business in any way
* Medical Payments Insurance--payable if someone
is injured in your home whether or not it was your
fault
* Worker's Compensation--if you have employees
* Business Interruption Insurance or Earnings
Insurance--in case your business is damaged by
fire or some other cause and you must totally or
partially suspend operations
* Disability Income Protection--a form of health
insurance in case you become disabled
* Business Life Insurance--to provide funds for
transition if you die
Be sure to keep all your insurance records and
policies in a safe place--either with your accountant or in a safe
deposit box. If you keep them at home for convenience sake, then give your
policy numbers and insurance company names to your accountant or
lawyer or put it in your safe deposit box.
Final advice for the wise business person is to
read and understand the fine print in all policies and to reevaluate
business insurance needs about every six months.
Other Considerations
Another aspect of planning is sheltering tax
dollars through a Keogh Plan or corporate pension and profit-sharing plans, if
your business is incorporated, or a retirement plan.
If you have a partnership, consider making a Buy
and Sell Agreement with your partner(s). This agreement requires the
surviving partner(s) to buy, and the heirs to sell, the deceased partner's
interest. The surviving partner(s) then becomes the sole owner(s) and the
heirs receive cash for their share of the business.
Dealing With Laws: Zoning, Licensing, Permits, and
Others Unfortunately, many home-based business people try
to "slide" into business, saying "I'll just try it for a few
months and see how things go" or "It's not really a business. I have only
ten clients." This attitude can lead to a lack of planning and big
disappointments. If you set up your studio, print business cards and flyers announcing
classes, and then find that regulations make it illegal to operate out of
your home, you may have to start all over.
Zoning
Before you start your home-based business, do a
thorough investigation of the zoning laws in your community. Zoning
regulations spell out activities permitted and prohibited in specific portions of a
city or county. Call your town hall, zoning office, or local library to
get a copy of zoning laws. Find out the structure of your local zoning
groups. Most areas have Planning, Zoning, and Appeals Boards.
If the home business you are planning conforms to
zoning regulations, then all you need to do is keep abreast of new
proposals that may affect your situation. It's a good idea to stay in touch with
others operating from their homes by joining business organizations or
neighborhood groups in case you ever need to band together to propose or
oppose new regulations.
Maintaining a low profile and friendly relations
with your neighbors will result in more support from them should adverse
regulations affecting your business ever be proposed.
If through your research you discover that the
home business you are planning would violate the zoning code, there are
several possible ways to proceed. You might wish to check with an attorney
who specializes in zoning law to look for a legal way around the regulation.
You might decide to apply to the Zoning Board for a variance or
exception. Or you may be able to change your business enough to make the
operation fit the law. If the regulation outlaws businesses that employ people
other than the owner at home, maybe you can have employees take work to
their own homes. If your business will create too much traffic, consider
another strategy for product distribution. If your business will create
too much noise, maybe you can soundproof your house. At last resort, ask
yourself "Is it worth it to organize a drive to change the law?"
Considering the rapid growth in the number of home-based businesses, you just might
find other entrepreneurs who are also interested in submitting a change in
the regulations to the Zoning Board. Go to meetings of the Board and try
to identify the person who appears most active and most sympathetic to
your position.
In the unfortunate and unlikely (most zoning
officers don't have time to chase people who aren't bothering anybody) event
that you are issued a "cease and desist" order, you should: 1)
file an appeal immediately with the Appeals Board (if you interpret the
regulations differently than they do); or 2) submit a change in the regulation to
the Zoning Board to allow your business, which may enable you to continue to
operate without fines until the Board reaches a decision. You may need a
lawyer if you are not entirely familiar with the regulations and the
workings of the Board.
Cultural and national trends point in the
direction of zoning regulations that allow quiet, nonpolluting, low-traffic kinds
of home businesses. More and more corporations are employing people to work
at home. Most neighborhoods will adopt a "live and let
live" attitude if you keep your premises neat and quiet and don't create traffic
and parking problems.
Keeping Up With Zoning Legislation
There are two ways to keep up with zoning
legislation in your community (and with other topics of interest to home-based
entrepreneurs). One way is to read local newspapers, especially the business
section and the local or "neighborhood" sections. Be sure you
notice local items about such things as proposed subway stations or the county's plan
for revitalization.
Changes like these could eventually influence
zoning in your area. The other way to keep abreast of trends and zoning
issues is to join the local chapter of a business group, such as the Rotary
Club, the National Association of Women Business Owners, the National
Family Business Council, or a Business and Professional Women,s Club.
Through newsletters, meetings, and friendships that develop, you will hear all
the latest local (and national) issues discussed while you learn
valuable business skills and make useful contacts.
Working With Professionals
Even the smallest and newest business needs help
from at least two kinds of specialists: an attorney and an accountant.
Depending on your type of business and your skills you may, from time to
time, ask the advice of other professionals, such as a direct mail or
marketing specialist, an insurance representative, management consultant, a
computer specialist, a realtor, a public relations expert.
Several guidelines will hold true no matter what
type of expert you are dealing with: 1) Interview professionals to see if
you will be comfortable working with them. Make sure they have served
other small businesses similar to yours. Find out ahead of time exactly
what service you are buying, what the working relationship will be, and
what fees will be charged. 2) Be completely honest about your
business situation. Advice based on partial or incorrect information is no
advice at all. If you are having problems, don't be embarrassed. If your
sales are down, give the experts all the information you have and work as a
team to solve the problem. If business is good, don't be afraid that
professionals will steal your idea or expect a raise. Build a trusting,
businesslike relationship. 3) Expect the professionals you hire to spend at
least some of their time teaching you and explaining complex concepts. But
don't expect to be spoon-fed or delegate all decisions to them. Take
a course at the local community college in recordkeeping and taxes or
public relations to develop more skill in areas where you are inexperienced.
4) Keep your appointments and pay your bills promptly.
Your Lawyer
To find a lawyer who is familiar with businesses
of your size and type, ask for a referral from a business colleague, your
accountant, the local A lawyer can help you decide which is the most
advantageous business structure (sole proprietorship, partnership, or
corporation). He or she can help you with zoning, permit, or licensing
problems; health inspection problems; unpaid bills; contracts and agreements;
patents, trademarks, copyright protection; and some tax problems.
Because there is always the possibility of a lawsuit, claim, or other legal
action against your business, it is wise to have a lawyer who is
already familiar with your business before a crisis arises. A lawyer
experienced with your type of venture should also advise you on laws, programs,
and agencies--(federal, state, and local)--that help small businesses
through loans, grants, procurement set-asides, counseling, and other
ways. He or she will tell you about unexpected legal opportunities and pitfalls
that may affect your business.
In choosing a lawyer, experience and fee should be
related. One lawyer may charge an hourly rate that, at first, looks
cheaper than another lawyer's.
However, because of a lack of experience in some
area, the less expensive lawyer may charge a larger fee in the long run.
Ask for a resume and check references. If you feel overwhelmed, take a
trusted friend to the initial meeting to help you keep on track as you interview
the lawyer about services and fees.
If you retain a law firm, be sure you understand
who will work on your case and who will supervise the work. If junior lawyers
handle your work, the fees should be lower. That's fine as long as you
know an experienced attorney will be reviewing the case periodically.
Let your lawyer know that you expect to be
informed of all developments and consulted before any decisions are made. You may
also want to receive copies of all documents, letters, and memos
written and received in your case or have a chance to read them in the lawyer's
office.
Ask the attorney to estimate the timetable and
costs of your work. You may wish to place a periodic ceiling on fees, after
which he or she would call you before proceeding to do work that would add to
your bill. Always have a written retainer agreement, describing just what
you and the lawyer expect of each other.
Your Accountant
Most businesses fail not for lack of good ideas or
good will, but rather for lack of financial expertise and planning. Look
for an accountant as you would an attorney. Get referrals from trusted
friends, business associations, or professional organizations.
Discuss fees in advance and draw up a written agreement about how you will
work together. Your accountant (along with your lawyer) can advise
about initial business decisions, such as the form of the business. Your
accountant will help set up your books, draw up and analyze profit and loss
statements, advise on financial decisions (e.g., buying a computer), and
give advice on cash requirements for your start-up phase. He or she
can make budget forecasts, help prepare financial information for a loan
application, and handle tax matters.
Accounting firms offer a variety of services. If
this is not an easy area for you, the fees you pay will be well worth it.
Most firms will maintain books of original entry, prepare bank
reconciliation statements and post the general ledger, prepare balance sheets and
income statements on a quarterly or semi-annual basis, and design and
implement various accounting and recordkeeping systems.
They will also get your federal and state
withholding numbers for you, give instructions on where and when to file tax
returns, prepare tax returns, and do general tax planning for the small business
person.
Your accountant is your key financial advisor. He
or she should alert you to potential danger areas and advise you on how to
handle growth spurts, how to best plan for slow business times, and how
to financially nurture and protect your business future.
State and Federal Laws That May Apply to Your
Business
Most localities have registration and licensing
requirements that will apply to you. A license is a formal permission to
practice a certain business activity, issued by a local, state, or
federal government. You may have the type of business that requires a permit
from the local
authorities. There is often a small fee for
licenses and permits (usually $15-25). A license may require some kind of
examination to certify that the recipient is qualified. Your business name must be
registered and a sales tax number must be obtained. Separate business
telephones and bank accounts are usually required. Of course, you will want to
have the latter anyway for accurate bookkeeping purposes, If you have
employees, you are responsible for withholding income and Social
Security taxes. You must also pay worker's compensation and unemployment
insurance and comply with minimum wage and employee health laws.
If your operations are intrastate, you will be
concerned primarily with state and local, rather than federal, licensing.
Businesses frequently subject to state or local control are retail food
establishments, drinking places, barber shops, beauty shops, plumbing
firms, and taxi companies.
They are primarily service businesses and are
subject to regulations for the protection of public health and morals. Your
attorney can help you make sure you have complied with all licensing and
permit requirements.
Depending on your type of business you may have to
comply with building and safety codes, too.
Think twice about the liabilities of operating
without proper licenses and registrations. If you begin to advertise or are
fortunate enough to "make the news" in some way, you will probably hear
from a local official. You will pay with embarrassment, time, and money if
your business is not properly licensed.
If you find legal regulations, permits, and
licenses confusing, make sure you find some way to get the information you need
to operate legally. Get help from your lawyer, accountant, business
partner, or even your local librarian. This is not an aspect of business
operations that can be delayed until you "get around to it." Your
business reputation and financial standing are at stake.
Understanding the Financial Side
Who Needs Financial Planning? You do! All
businesses run on money for the purpose of making money. A major reason for
business failure is the lack of financial planning. Although it is nearly
impossible to make exact estimates, approximate ones will help. The very
process of thinking through these financial questions will develop your
business acumen and lead to solid planning. Get your accountant involved in
reviewing your plans and advising you, too.
Estimating Start-Up Costs
Begin your financial planning by estimating your
initial or start-up costs.
Include all items of a nonrecurring nature such as
fees, licenses, permits, franchise fees, insurance, telephone deposit,
tools, equipment, office supplies, fixtures, installation of fixtures and
equipment, remodeling and decorating, funds for your opening promotional
event if you plan to have one, signs, and, of course, professional fees for
your attorney and accountant.
Depending on your type of operation, the amount of
money you invest, and the energy you expect to put in (part-time to
full-time) can determine how much working capital you will need. Many business
experts say if you expect a profit in six months, double that time and be
ready to operate without profits for twelve months to give yourself a
cushion in case of unanticipated expenses or delays. Study the growth
patterns of other similar business and ask for advice from your
accountant and attorney.
Projecting Operating Income and Expenses
Next, estimate the "working" capital you
will need to keep operating for six to twelve months. Operating expenses include
salaries; expenses for telephone, light, heat, office supplies, and other
supplies or materials; debt interest; advertising fees; maintenance
costs; taxes; legal and accounting fees; insurance fees; business
membership fees; and special services expenses, such as secretarial, copying,
and delivery service.
It is a good idea to obtain typical operating
ratios for the kind of business in which you are interested. Among the
sources for such ratios are Robert Morris Associates, Dun & Bradstreet,
Inc., the Accounting Corporation of America, trade associations,
publishers of trade magazines, specialized accounting firms, industrial companies
(for example, National Cash Register Co.), and colleges and universities.
The typical ratios for your type of business combined with your estimated
sales volume will serve as benchmarks for estimating the various items of
expense. However, do not rely exclusively on this method for estimating
each expense item. Modify these estimates through investigation and
quotations in the particular market area where you plan to operate.
In addition to business operating capital, you
will need to plan for reserve capital to cover personal expenses. This
estimate will include all your normal living expenses, such as food,
household expenses, car payments, rent or mortgage, clothing, medical
expenses, entertainment, and taxes for you and your family.
After you have estimated start-up costs, working
or operating capital needed for six to twelve months, and personal
expenses and obligations, you may see that you need more start-up capital than
you thought. What will you do? Discuss this with your accountant,
attorney,
and trusted business associates and family. Entrepreneurs secure needed
capital in a variety of ways. You can:
* Get loans or gifts from family members or
friends. Make businesslike, written agreements and be sure to
disclose fully the potential risk as well as the possible
profit.
* Apply for a bank loan. For this you will need a
comprehensive statement of your personal financial
condition and a business plan with financial projections to
present to the loan officer. If you need help in preparing
your loan application, take a course for small business
people at a local community college or visit your nearest SBA
office to get assistance from a SCORE counselor.
* Apply for an SBA loan guarantee. The SBA is not
a bank, but it does extend guarantees and may rarely
participate in a loan when the bank is unable or unwilling to
provide the entire financing itself. The SBA loan officer
will ask you the same hard questions as a loan officer in a
commercial bank and require the same carefully
considered data on your personal finances, start-up costs,
and business projections.
* Search for some sort of venture capital. For
start-up entrepreneurs some prior managerial or
entrepreneurial track record is usually necessary in order to get
venture capital. The main disadvantage of venture capital
is that you will probably have to give up between 50 to 90
percent ownership of the new business in return
for the capital. A home business is extremely unlikely to
attract venture capital.
Understanding Your Balance Sheet
Your Balance Sheet is a summary of the status of
your business--i.e., its assets, liabilities, and net worth--at an instant
in time. By reviewing your Balance Sheet along with the Profit and Loss
Statement and Cash-Flow Statement, you will be able to make informed
financial and business planning decision.
The Balance Sheet is drawn up using the totals
from the individual accounts kept in your General Ledger. It shows what you
have left when you pay all your creditors. Assets less liabilities equal
capital or net worth. The assets and liabilities sections must
balance--hence the name Balance Sheet. It can be produced quarterly, semi-annually, or at
the end of each calendar or fiscal year.
While your accountant will be most helpful in
drawing up your Balance Sheet, it is you who must understand it. Current
assets are anything of value you own such as cash, inventory, or property
that the business owner can convert into cash within a year; fixed assets
are things such as land and equipment. Liabilities are debts the business
must pay. They may be current (such as amounts owed to suppliers or your
accountant) or they may be long-term (such as notes owed to the bank).
Capital (also called equity or net worth) is the excess of your assets over
your liabilities.
Prepare a Balance Sheet for your new business
during the planning phase to estimate its financial condition at that time and
also a projected one for the first year of business. This will help you
decide on the feasibility of your venture and make modifications to ensure
profitability. You can also use these statements as part of the documentation
in a loan application.
Understanding Your Profit and Loss Statement
Your Profit and Loss Statement is a detailed,
month-by-month tally of the income from sales and the expenses incurred to
generate the sales. It is a good assessment tool because it shows the effect
of your decision on profit. It is a good planning tool because you can
"try out" decisions on paper before actually going ahead.
The Profit and Loss Statement includes four kinds
of information:
* The Sales information lists the number of units
sold and the total revenues generated by the sales.
* The Direct Expenses category includes the cost
of labor, materials, and manufacturing overhead (but not
normal overhead).
* Indirect Expenses are the costs you have even if
the product is not produced or the service is not
delivered. They include the fixed costs or normal overhead of
salaries, rent, utilities, insurance, depreciation, office
supplies, taxes, and professional fees for your lawyers and
accountant.
* Income or Profit is the last category on the
Profit and Loss Statement. It is shown both as
pre-tax and after-tax or net income. The IRS will look at your pre-tax
figure, whereas your loan officer and you are more
concerned with your after-tax figure.
Your Profit and Loss Statement should be prepared
at the very minimum once a year--and more often in the beginning or growth
stages of your business.
It is a key document from which the economic
health of a business can be determined. Make certain you do it properly and
understand its meaning.
Understanding Your Cash Flow Statement
Your business must have a healthy cash flow to
survive. Cash flow is the amount of money available in your business at any
given time. To keep tabs on cash flow, forecast the funds you expect to
disburse and receive over a given period of time. Then you can predict
deficiencies or surplus in cash and decide how to respond.
A cash flow projection serves one other very
useful purpose in addition to planning. As the actual information becomes
available to you, compare it to the monthly cash flow estimates you previously
made to see how accurately you are estimating. As you do this, you will be
giving your self on-the-spot business training in making more
accurate estimates and plans for the coming months. As your ability to estimate
improves, your financial control of the business will increase.
The creative business owner works with his or her
accountant to use the information gleaned from all of these financial
tools to make a variety of managerial decisions--decisions on buying
supplies, expansion, when to hire more employees, how to get the best tax breaks,
and many other important steps that will shape the future of the business.
Make it Easy on Yourself
Successful home-based business owners learn from
experience--their own and that of others. In Jeffry A. Timmon's study of
entrepreneurial personality characteristics (New Venture Creation: A Guide to
Small Business Development), he notes that entrepreneurs are
disappointed but not discouraged by failure. They use failures as
learning experiences and try to understand their role in causing the failure in
order to avoid similar problems in the future. Furthermore, Timmons
asserts, entrepreneurs seek and use feedback on their performance in order to
take corrective action and improve.
How to Learn From Experience
You can learn from experience in several ways:
First, work closely and creatively with
professional advisors, such as your lawyer and your accountant. As you continually
review your business records, you will see "mistakes," but
you will also begin to develop skill in planning and managing.
Second, continue to learn about all areas of
business operations, constantly acquiring new ideas. Most community
colleges have short, inexpensive, practical courses for business owners
in topics like "Financing a Small Business,"
"Choosing a Small Business Computer," and "Starting and Operating a Home-Based
Business."
Third, get to know other business owners with
similar needs or problems.
Talking with others may be a way to avoid
repeating the mistakes they have made and benefiting from their experience. Local
and national organizations offer membership, social events, networking
opportunities, newsletters, and seminars for homebased business owners. Through
these organizations you can often advertise your product or service to other
business owners. They also provide a way to learn about services you may
need, such as accounting, public relations, or a responsible secretarial
service. These organizations offer updates in such areas as taxes and zoning in
their newsletters and workshops.
Finding and Using Resources, Networks, and Support
Groups Start out with the attitude "Whatever my
current business problem, I can find the solution. Somewhere there is information,
a book, a person, an organization, or a government agency that can
help." A word of warning though: finding resources and building networks
can be very time-consuming.
Joining organizations can turn out to be
expensive, especially if you are too busy to use their services and support once
you join. So use this list to organize your search for resources useful to
you, then pick and choose carefully what you decide to read, join, buy, or
attend: Your Public Library: Visit your local library. Get
to know its resources. In addition to books, many libraries offer free
workshops, lend skill-building tapes, and become a central place
to pick up catalogues and brochures describing continuing education
opportunities for business owners. Ask the librarian for current copies of
zoning regulations. Get familiar with new books and resources in your
field (computers, health care, crafts, etc.) as well as in business skills
(advertising techniques, financing, etc.) Look for magazines such as In
Business, Black Enterprise, Venture, or The Journal of Small Business
Management. Reading selectively is free. Subscribing to too many magazines may be
expensive.
Organizations: A wide variety of local and
national organizations have sprung up to serve the informational, lobbying,
and networking needs of business entrepreneurs. Through meetings,
services, or newsletters, groups such as the National Association of Women Business
Owners, American Entrepreneurs Association, Business and
Professional Women's Club, National Alliance of Home-based Businesswomen, and the
National Association for Cottage Industry offer members everything from
camaraderie to valuable "perks," such as group rates on health
insurance. David Gumpert's book, The Insider's Guide to Small Business Resources, has
addresses of many of these groups and other information on such resources.
Government Resources: Contact your local or
district office of the U.S. Small Business Administration (SBA) to learn about
SBA services and publications. The SBA also offers free or
inexpensive workshops and counseling through SCORE is a volunteer program
sponsored by the SBA through which retired executives who have
management expertise are linked with owners/managers of small business or
prospective entrepreneurs who need help.
The Department of Commerce, Bureau of the Census,
Department of Defense (procurement), Department of Labor, IRS (ask for
the free "Business Tax Kit"), Federal Trade Commission, and the
Government Printing Office all have publications and services to inform and
support you. Local and state government offices may also have services to help
you. Addresses will be available in your telephone book, under U.S.
Government, at your public library, or at the SBA office near you.
Community colleges: Most community colleges now
have short, inexpensive, noncredit programs for entrepreneurs. The classes
usually are convenient to business owners and are taught by experienced
owners and managers.
As a home-based business person you can overcome
feelings of isolation and give and receive valuable information if you tap
into networks and resources. Being active in professional and trade
associations will help to build a good marketing network for your service or
product. Take the time and invest the money for memberships. Then
continually evaluate which organizations and resources best serve your
business information and networking needs.
Managing Time and Stress
Expect to encounter stress and time problems
similar to those of other business owners but accentuated by the fact that
you work at home. Follow these guidelines to make it a little easier on
yourself:
1) Plan your time and establish priorities on a
daily "to do" list. Decide what your "prime time" is and do your
most important or difficult tasks. Set "business hours," specific times
when you are at work and times when you turn on the answering machine because you
are "on duty but off call." You, your customers, and your family
will appreciate knowing your set routine, even though you know that for special
events or emergencies you can break that schedule.
2) Notice what your four or five big time-wasters
are and learn techniques to eliminate them or compensate for them. Some
common ones are: telephone interruptions, visitors, socializing, excessive
paperwork, lack of policies and procedures, procrastination, failure to
delegate, unclear objectives, poor scheduling, lack of self-discipline, and lack
of skill in a needed area.
3) Stay in contact with people. Even though you
prefer to work at home, you should plan work-related or social activities that
provide frequent contact with others. This will help your morale if you
feel isolated. Even for home-based business owners who like feeling
isolated, keeping up with business and professional contacts is a must.
4) Build a fitness program into your day. Many
successful entrepreneurs exercise in order to think creatively because
physical activity sends oxygen to the brain and helps the mind function
better. With regular exercise your health will improve, your stress
level will go down, and your trim look will inspire people to have confidence
in your abilities.
5) Give your home business as much of a separate
and distinct physical identity as possible. Although you might save a
few dollars by using the ironing board as a bookshelf and a cardboard box
as a file cabinet, the stress and strain of operating without proper
space and supplies will take its toll. Have a separate room or area for your
business, with a separate entrance if customers or suppliers visit. Consider
soundproofing so your family won't be bothered by your noise and vice
versa. (In addition to the psychological and physical comfort of having a
separate office, the IRS requires it in order for you to make a legitimate
claim for tax deductions.)
6) Take care of your major business asset: YOU.
Being the boss can be exciting, fulfilling, and rewarding. It can also
be lonely, stressful, and demanding. Learn to balance your professional and
personal life. Go on vacation. Get a weekly massage. Join a health
club. Take a class in meditation. Attend a business owner's breakfast
club. Your business depends on you to be at your best.
Profile: Jeanette's Day-Care Center
Jeanette wanted to return to work when her two
children started school.
Since her degree was in child psychology, she
applied for a job as an assistant at a neighborhood day-care center. When
she heard the salary, she decided there must be a better way. After several
months of planning and researching, she decided to open her own day-care
center in her basement recreation room. With remodeling she could
accommodate the children and meet the zoning and licensing regulations. Four
years later, her center has an excellent reputation and a long waiting list.
She likes being "at home" and working in the business half-days while
attending school for a graduate degree in business administration.
Profile: Wallflowers, A Wallpapering Partnership
Thirteen years ago Jane and Rachel bought a van
together and formed "Wallflowers," a wallpapering and
painting business. When they started, Rachel was recently divorced and | 