Home Business Success In 21 Steps
By Don Hayes
Over one hundred million home-based businesses will be in operation
by 2006, according to Link Resource's National Work-at Home Survey. All
around the country, people who want more control over their lives are starting
home businesses.
In New Orleans, Rick Hart's home based cajun Cargo ships seafood nation
wide. In Palatine, Illinois, Stephaine Heavey works from home designing
and selling original patterns for fabric dolls. And in Dallas, Lisa McElya
published the Dallas Party & Event Planners Guidebook from the entire
first floor of her two-story home.
These three people are living the new American dream of owning a business,
but avoiding the high overhead and start-up costs of a commercial location.
If the idea of working from home is appealing, but you don't know where
to begin, here is a step-by-step guide.
STEP #1 DECIDE WHAT PART OF THE HOUSE TO USE
Select an area away from family activity. The perfect space is a separate
room (or perhaps the garage), but any area will do, if it can hold all
the business supplies and equipment, and also provide enough work space
for desks, tables, or counters.
STEP #2 DETERMINE HOW MUCH TIME YOU CAN SPEND ON THE BUSINESS
Many people start a home business on a part-time basis while raising
children or working outside the home. Others start full-time when family
and finances allow. However you begin, figure out how may hours per week
you can devote to the business Make a weekly chart of your activities,
examine it, and determine where the business fits. Don't assume you have
time and find out later you don't.
STEP #3 DECIDE ON THE TYPE OF BUSINESS
Make a list of things you like to do, your work and volunteer experience,
and items you own that can be used in a business. Look over this line-up,
and using ideas from it, list possible businesses to start. Eliminate any
business that isn't appealing or doesn't fill a need people have.
For ideas on different types of businesses, consult the end of this
article. Other ideas can be found in the source material listed at the
end of this article.
STEP #4 CHOOSE A LEGAL FORM
The three basic legal forms are sole proprietorship, partnership, and
corporation. The most common is the sole proprietorship. As its name implies,
a sole proprietorship is owned by one individual. It is the oldest form
of business, the easiest to start, and the least complicated to dissolve.
Here are some of the advantages of this business form:
1. You own all the profits
2. Your business is easy and cheap to organize. You don't need any
government approval, although you may be required to carry a city, state
or county license. Your only other obligation is to notify the Internal
revenue Service (IRS) for the purposes of sales tax.
3. You're the boss
4. You enjoy certain tax savings.
You must pay regular individual taxes on your income, property, and
payroll, but these are not levied as special taxes, as with a corporation.
You will also have to pay sales tax which you have received from your customers.
5. Greater personal incentive and satisfaction. Since you have your
investment to lose if your business is not successful, you should be more
willing to put time, thought, and energy into the business. And when your
business is successful, you enjoy maximum sense of accomplishment since
you know its success was dependent upon your decisions about your management
ability alone.
For more information about this and other forms of business, send for
the U.S. Small Business Administration (SBA) Publication MP25. Selecting
the Legal Structure for Your BUsiness (50 cents). It outlines the advantages
and disadvantages of each legal type of structure. If after reading it
you are still uncertain what form of the business should take, consult
an attorney.
STEP #5 DETERMINE WHERE THE MONEY WILL COME FROM
There are three ways to finance start-up costs: use your own money,
obtain a loan, or find investors. If possible, it is better to start small,
use your savings, and not worry about repaying a debt. also keep in mind
that since you are a home-based, chances of qualifying for a loan or finding
investors are slim until the success of your idea is proven.
STEP #6 GATHER INFORMATION Spend a few weeks researching home-based
businesses. A library or bookstore can provide numerous books on business
basics, and on the specific type of business that interest you. Homemade
Money by Barbara Brabee (see sources) is an excellent book to start with.
If you are considering a computer business, get in touch with the association
of Electronics; Cottagers, P.O. Box 1738, Davis, CA 95617-1738. To keep
informed of what is happening in home business world, contact National
Home Business report, P.O. Box 2137, Naperville, IL 60566, for subscription
information; and Mothers Home Business Network, P.O. Box 423, East Meadow,
NY 11554 (send SASE for free information).
STEP #7 CHECK ON ZONING RESTRICTIONS
Find out how your property is zoned, the call City Hall and ask what
regulations apply to home businesses in that zone. Also, if you rent or
live in a condominium, check the lease or homeowner's association rules
to be certain a home business is allowed.
Generally, if you do not annoy your neighbors with excess noise, odors,
and traffic, you will not be deterred from running a business at home.
The neighbors may not even be aware of the business, but it is necessary
to know exactly what you can and can't do before you start. This is important
should any problems or questions arise later.
STEP #8 PICK A BUSINESS NAME AND REGISTER IT
If the business you choose is different form your name, file an assumed
(or fictitious) name certificate with the county. You are notified if another
business already has that name, so you can select a new one.
Do this before investing in expensive stationery and brochures. It costs
only a few dollars to file, and it protects the business name from being
used by someone else in the county.
STEP #9 WRITE A BUSINESS PLAN
A good business plan clarifies your ideas and establishes a plan of
action. A good business plan should include a description of what you are
selling, your background and qualifications, who the prospective customers
are and where they can be found, what is needed to build the business,
how you plan to promote, and how much money is need for start-up costs.
SBA Publication #M925, The Business Plan for Home-Based Business ($1)
is helpful.
STEP #10 GET AN IDENTIFYING NUMBER
If you are the sole proprietor of the business and have no employees,
you may either use your Social Security number or an Employee Identification
Number (EIN) as the business number on official forms. If you have employees,
or the business is set up as a partnership or corporation, you must obtain
an EIN. To do this, complete IRS Form SS-4 (Application for Employer Identification
Number) and file it with the nearest IRS Center.
STEP #11 OBTAIN A SALES TAX PERMIT
If the product or service you sell is taxable, you need a state sales
tax permit. Call the local tax agency, explain the type of business you
have and what you sell, and ask if you need to collect sales tax. If you
do, they will send you the necessary information and forms to complete.
You also use this tax number when your purchase items for resale.
STEP #12 OBTAIN LICENSES & PERMITS
It's very important not to overlook any necessary license or permit.
For example, some cities and counties require a general business license,
and most have special laws regarding the preparation and sale of food.
Call City Hall to find out what is need for your particular business.
In addition, Chamber of Commerce provide information on city, county and
state licenses and permits.
STEP #13 SELECT BUSINESS CARDS, STATIONERY, BROCHURES
Spend time on the color, design and paper for these items. They make
a definite impression-good or bad- on the people who receive them. If you
are not certain what is most suitable and effective, consult a graphics
designer or a creative printer whose work you like.
STEP #14 OPEN A BUSINESS CHECKING ACCOUNT
Call several banks to find out what services they offer, and what minimum
balance, if any, must be maintained to avoid paying a service charge. Also
ask about credit card if you plan to offer this convenience to your customers.
Bank fees can be significant, so shop around for the best deal.
If your personal checking account is with a credit union, see if it
can also provide a separate business account. when you open your account,
you may need to show the assumed name certificate and business license.
Finally, investigate obtaining a credit card in the business's name.
If this is not possible, set aside a personal credit card to use for business
expenses.
STEP #15 SET UP RECORD-KEEPING SYSTEMS
Put together a simple and effective bookkeeping system with an 8 1/2
x 11" three-ring binder, columnar pad sheets and twelve pocket dividers
from the office supply store. For each month, set up columnar sheets for
income and expenses. Use a pocket divider for each month's receipts, bank
statement, deposit tickets, and canceled checks.
In addition, an automobile log for business mileage, and filing system
for correspondence, invoices, supplier catalogs, client records, etc. are
two other useful tools.
For more information on record-keeping, see IRS publication #583, Information
for Business taxpayers.
STEP #16 CHECK IRS REQUIREMENTS
If you comply with basic IRS guidelines, you can deduct a percentage
of normal household expenses (mortgage, interest, taxes, insurance, utilities,
repairs, etc.) as a business expense. see the box accompanying this article
and, for more detailed information, IRS publication #587, Business Use
of the Home.
Also become familiar with these IRS forms: Schedule SE (compensation
of Social Security Self-Employment Tax) and Schedule 1040 ES (estimated
Tax for Individuals). Depending on circumstances, you may have to file
them.
STEP #17 OUTFIT THE BUSINESS
Make a list of everything needed to start the business, but before you
buy anything, look around the house for things you already own that are
usable.
When you are ready to start purchasing, check the classified ads and
garage sales. Both are good, inexpensive sources for office furniture,
typewriters, computers, answering machines, etc. But only what is absolutely
necessary for start-up, and wait until the business is off the ground to
get the extras.
STEP #18 DECIDE ON TELEPHONE REQUIREMENTS
Call the telephone company to find out the cost of a business phone
in your area. If you cannot afford a separate business line, investigate
the telephone company's regulations on using your personal phone in a business.
It may be possible to do this if you follow certain guidelines. Keep a
record of long distance business calls as they are a deductible expense.
Finally, consider the benefits of an answering machine to catch calls when
you are out.
STEP #19 CHECK OUT THE POST OFFICE & UPS
Using a post office box as the business address down plays the fact
you are home-based. It also prevents customers from dropping in at all
hours.
While looking into box rental, ask for information on the various postal
rates, particularly bulk rate, if you plan to do large or specialized mailings.
If you mail many packages, check out United Parcel Service (UPS), as it
is less expensive than the Post Office.
STEP #20 PURCHASE THE NECESSARY INSURANCE
Check with your homeowners insurance agent about a rider for your existing
policy or the need for a separate business policy. Also make sure you have
adequate personal and product liability coverage. Shop around, as each
company has different rules regarding home businesses
To save money on medical insurance, join an association and participate
in their group plan. One such body is The National association for the
Self-Employed: they can be reached at 800-527-5504.
STEP #21 ORGANIZE THE HOUSE & YOURSELF
To have more time for business, organize and simplify household routines.
Start by holding a garage sale to get rid of unnecessary possessions. Next,
have a family conference and divide household duties, making sure each
person does his or her part. The, set up a planning notebook to keep track
of appointments, things to do, calls to make, errands to run, shopping,
etc. Finally, set up a work schedule so you won't get sidetracked by TV,
neighbor's visits, snacking, and telephone calls.
Creating and operating a home business is a wonderful and rewarding
challenge. The satisfaction is not only in the money earned, but in doing
what makes you happy.
SOURCES
SMALL BUSINESS ADMINISTRATION. Pamphlets mentioned in this article are
available by calling the nearest SBA office or ordering from SBA, P.O.
Box 15434, Ft. Worth, TX 76119.
NEWSLETTERS
HOMEWORKING MOTHERS. Mothers' Home Business Network, dept. 10-6, P.O.
Box 423. East Meadow, NY 11554: sample available for $2 and SASE.
NATIONAL HOME BUSINESS REPORT, Barbara Brabec Productions, Dept 10-6,
P.O. Box 2137, Naperville, IL 60588; $18/year, quarterly. (Sample issue,
$4.00)
BOOKS, REPORTS
ELECTRONIC COTTAGE HANDBOOK #2 MAKING $$ WITH YOUR HOME COMPUTER by
Lis Fleming. Fleming, Ltd., P.O. Box 1738, Davis, CA 95617-1738; $7.00
ppd.
HOMEMADE MONEY by Barbara Brabec, Barbara Brabec Productions, P.O. Box
2137, Naperville, IL 60566; $16.95
HELP FOR YOUR GROWING HOMEBASED BUSINESS by Babara Brabec. Barbara Brabec
Productions, P.O. Box 2137, Naperville, IL 60566; $13.45.
THE #1 HOME BUSINESS BOOK by George and Sandra Delany. Liberty Publishing
Publishing Co. Inc., Dept 10-6, 50 Scott Adam Rd., Cockeysville, MD 21030;
$4.95.
THE COMPLETE WORK-AT-HOME DIRECTORY AND IDEA BOOK. E.A. Morgan Publishing
Co.,Dept. 10-6, P.O. Box 1375, Huntington, NY 11743; $15. (Includes free
report: " The Legalities and Tax Advantages In a Home Business.")
THE WORK-AT-HOME SOURCEBOOK by Lynie Arden. Live Oak Publications, Dept.
10-6, 6003 N. 51st Street, Suite 106, Boulder, CO 80301; $13.95
STAY HOME AND MIND YOUR OWN BUSINESS by Jo Frohbieter-Mueller. Betterway
Publications, Box 219, Crozet, VA 22932; $11.45
101 BEST BUSINESSES TO STAR by Sharon Kahn & The Philip Lief Group
(Doubleday, 1983, $19.85). Many of the businesses profiled are suitable
for running at home.
ASSOCIATIONS
AMERICAN HOME BUSINESS ASSOCIATION, 60 Arch St.,Greenwich, CT 06830.
NATIONAL ALLIANCE OF HOME-BASED BUSINESS WOMEN, Dept. 10-6, P.O. Box
95, Norwood, NJ 07648; $30 annual membership.
NATIONAL ASSOCIATION FOR THE COTTAGE INDUSTRY, Dept. 10-6 P.O. Box 14850,
Chicago, IL 60614; $45 membership.
|
