How to Start a Home-Based Business
Up until recently, going to work
meant traveling from home to a plant or office.
Today many people do some or all of their work at
home. A private market-research firm estimates
that as many as 13 million people squeeze extra
hours into their work week by taking work home from
their full-time jobs, while some 9 million people
work exclusively at home. Many people find that
working at home is an ideal arrangement and decide
to formally set up businesses there. The SBA
estimates that more than 3 million of these home-based
businesses are now operating throughout the country.
Everyday, people are striking out
and achieving economic and creative independence
by turning their skills into dollars. Garages,
basements and attics are being transformed into
the corporate headquarters of the newest entrepreneurs
-- home-based business people. And with recent
technological advances and a rising demand for "service-oriented"
businesses, the opportunities seem to be endless.
Is a Home-Based Business for You?
Before
you dive headfirst into a home-based business,
it's essential that you know why you are
doing it and how you will do it.
To succeed, your business must be based on something
greater than a desire to be your own boss; an
honest assessment of your own personality; an
understanding of what's involved; and a lot of
hard work. You have to be willing to plan
ahead, then make improvements and adjustments
along the road. While there are no "best"
or "right" reasons for starting a home-based business,
it is vital to have a very clear idea of what
you are getting into and why. Ask yourself
these questions:
- Are you a self-starter?
- Can you stick to business if you're working
at home?
- Do you have the necessary self-discipline
to maintain schedules?
- Can you deal with the isolation of working
from home?
Working under the same roof that your family lives
under may not prove to be as easy as it seems.
It is important that you work in a professional
environment; if at all possible, you should set
up a separate office in your home. You must
consider if:
- Your home has the space for a business and
- You can successfully run the business from
your home.
Legal Requirements
A home-based business is subject
to many of the same laws and regulations affecting
other businesses -- and you will be responsible
for complying with them. There are some general
areas to watch out for, but be sure to consult an
attorney and your state department of labor to find
out which laws and regulations will affect your
business.
Zoning: Be aware of your
city's zoning regulations. If your business
operates in violation of them, you could be fined
or closed down. Restrictions on certain goods:
Certain products may not be produced in the home.
Most states outlaw home production of fireworks,
drugs, poisons, explosives, sanitary or medical
products, and toys. Some states also prohibit
home-based businesses from making food, drink or
clothing.
Registration and accounting requirements:
You many need a:
- work certificate or a license from the state
(your business's name also may need to be registered
with the state),
- sales tax number,
- separate business telephone and
- separate business bank account.
If your business has employees, you are responsible
for:
- withholding income and social security taxes,
and
- complying with minimum wage and employee
health and safety laws.
Finding Your Niche
Choosing a home business is like
choosing a spouse or partner -- your decision must
be approached with a great deal of care. You
need to learn as much about the market for any product
or service as you can. Before you invest your
time, effort and money, take a few moments to answer
the following questions. Answers to these
questions will help you separate sound ideas from
those with a high potential for failure.
- Can you identify and describe the business
you plan on establishing?
- What will be your product or service?
- Is there a demand for your product or service?
- What advantages do you have over your competitors?
- Do you have the talent and expertise needed
to compete successfully?
Developing A Business Plan
If you've researched your market,
thought over the pros and cons of a home-based business,
and decided to go ahead, it's time to put together
a business plan.
Developing
a business plan forces you to take an objective
and critical look at your business idea. Even
more, the finished product is a tool that will help
move your business toward success.
A business plan should be neat, written
clearly, and should include several things.
The cover page should list the business name,
address, mailing address, telephone number and the
names of the owner(s). Identify your primary
goals and objectives.
Next, give an accurate and concise
description of the business:
- What is the principal activity? Be
specific. Give product or service descriptions.
- How will the business be started?
- Why will it succeed? Promote your idea.
Use your market research.
- What skills and experience do you bring to
the business?
Marketing is the core of your business. Carefully
think about the following questions, then include
your marketing strategy in the business plan:
- Can you market your business from home?
- Who and what is you market?
- What pricing/sales terms are you planning?
- How will you be competitive?
The Financial Plan
Money fuels all businesses.
With a little planning, you'll find that you can
avoid most financial difficulties. When drawing
up a financial plan, don't worry about using estimates.
The process of thinking through these questions
helps develop your business skills and leads to
solid financial planning.
Start-up costs: To estimate
your start-up costs, include all initial expenses
such as fees, licenses, permits, telephone deposit,
tools, office equipment and promotional expenses.
Business experts say you should not expect a
profit for the first eight to 10 months,
so be sure to give yourself enough cushion.
Additional Assistance
The Virginia Cooperative Extension
Service also provides valuable assistaqnce to current
and prospective home-based bisiness owners. Contact
Ann Lasovica, Virginia Cooperative Specialist, Home-Based
Business, at (804) 524-5253 or e-mail at:
lastovic@vt.edu
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