Starting a Home-Based Business

Operating a business from home is a simple and efficient way of starting a new enterprise. It is much easier than it has ever been before, and it no longer has the stigma that it once did. Now it is an accepted manner of conducting a commercial activity.

In the past home businesses were viewed more as a hobby than a real money making activity. But with the arrival of the Internet; and the ease of communicating; whether through a cell phone, a landline dedicated solely to your business, through e-mail, blackberry, or all of the above, home-based businesses have truly come into their own.

At the start of business activities, it is very important to conserve as much of your business capital as possible. A home-based business eliminates the need to rent office space, pay insurance and utilities, and hire employees.

But in order to succeed, a home-based business must be organized with the same care and focus as any other business. There is no room for sloppy planning and unprofessional behavior, even if you are wearing your pink polka-dot pajamas while answering the phone. This is your business and your future; treat it with the respect it deserves.

The first thing that you must do in order to start your home-based business is to inquire about zoning requirements in your community. Each city has its own set of rules about operating a business at home. Much will depend on the type of business in which you are involved. It could be a problem, for example, if you expect lots of deliveries. Your neighbors may not be too happy about truck traffic in your area. On the other hand, if your business involves phone contact with clients, the neighbors are not likely to be disturbed, know, or care whether you are working from home. But rest assured that the city where you live will care whether you are running a business from home. They will want you to obtain a business license, and renew it annually. So make sure that the first thing you do is contact the department that issues business licenses, you don’t want any unpleasant surprises once you have started your activities.

Another requirement in most counties is obtaining a fictitious name. If you are going to be doing business under a name other than your own personal name, it must be registered as a fictitious business name. In most counties, once the business name is registered, it should be published in a local newspaper. This gives notice the public about the person or persons behind the business name.

The next step will be to open a business bank account. Most banks will require that you present the fictitious business name and the city business license in order to open said bank account.

Once you have taken care of those requirements, it is time to think about your work area. How you organize your work environment is very important because it will make a huge difference in your productivity and comfort. If you have to be looking under toys for a work order, it will cut down on your effectiveness. Besides the desk, file cabinet, good chair, and telephone set-up, make sure that you have the best computer, and particularly best printer. I once had a printer (a brand that shall remain nameless!), which made my life a living hell. It would not print more than two pages without a paper jam. It was as slow as L.A. traffic during rush hour, and every few pages it would show the dreaded exclamation point! I hesitated to replace it because it had cost quite a bit of money, and I kept stocking up on ink cartridges, which made me keep postponing the inevitable decision. I kept telling myself how it was bad for the environment to replace something that was relatively new. I kept thinking about all the money I had invested in ink.

Finally I could take it no more. I bought in a new printer, and donated the old one to Goodwill. I do feel a bit guilty about passing on my problem printer to an unsuspecting person, but I console myself with the thought that perhaps that person’s printing needs are not as demanding as mine, and I do have to say that the scanner was awesome! In any case, make your life as easy as possible, have the best equipment that you can afford. Skimp on other things if you must, but your working tools are key.

A business plan is the next item on your planning list. Actually it should be the first. But human nature being what it is, most business owners postpone this step until they are forced by a bank or other institution to prepare one. I have dealt with many start-up operations and I know that 99% of my clients do not prepare one as a first step, and sometimes never. And yet, it is such a useful and important tool that it is hard to understand why most people resist this step.

A business plan forces the business owner to look at all the details of starting and operating a business. It is the reality check of the start-up world. It gets us to look at how much it is going to cost. It makes us focus on our competition and what they offer. This in turn will force us to differentiate ourselves from our competition. We begin to ask questions such as “Why do I want to go into this line of business?” “ How am I different from those many others who offer the same thing I do?” “What niche can I fill?”

The marketing plan, which may be a part of the business plan, or it may be a separate document, is another indispensable step in the planning stage. No market, no business, it is that simple! Make sure that you thoroughly understand your market, and how to spread the word about your product or service. It seems that certain types of businesses utilize particular marketing strategies. While it is desirable to be creative, make sure that you do not ignore the traditional marketing avenues for your particular industry.

The last two points that I will touch on are extremely important. The fact that they are last on the list does not mean that they are not essential, believe me, they are. Make sure that you keep exact account of every transaction. Keep meticulous records of every expenditure, and every penny that you receive from your clients. The IRS is particularly wary of home-based businesses, and it keeps a close eye on them. In case of an audit, you will be grateful that you kept every scrap of paper. The last point is: consult your attorney. Make sure that you are complying with laws and regulations related to your industry, and to business in general.

OK, sorry, that was not the last point. The last point that I will make is to get in touch with your Small Business Administration office . The SBA offers free or low cost education and consulting services. They are a great resource for any small business, whether start-up or ongoing. Take advantage of their knowledge and expertise, you will be glad you did.