Homebased Business 101
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
Whether your ambition is to run a homebased business or to grow your enterprise beyond your home as soon as cash flow allows it, starting at home is a good choice for you. Two out of three companies begin in a spare bedroom, garage, basement or sometimes even a bathroom. That's how companies as diverse as Apple Computer, Baskin-Robbins, Electronic Data Systems, Hallmark and Purex began. Of course, the Internet makes operating a virtual company from home more feasible and popular than ever. If you want to hang your shingle at home, either permanently or temporarily, here are some things you must consider:
Can You Work From Home Legally?
Most cities and many counties have zoning ordinances that limit, to one degree or another, whether you can operate a business from home. While many communities have modernized their zoning ordinances to recognize that a computer-based business isn't like a noisy auto body repair shop or an odorous hair salon, others prescribe limitations that may ban or handicap certain kinds of businesses. Here are some common activities communities' zoning codes may restrict:
- Increased vehicular traffic, both moving and parked on the street
- Prominent signs
- Employees not related to you who are working in your home
- Use of the home more for business than as a residence (determined by percentage of space used for the business)
- Selling retail goods to the public-sometimes limited to specific hours
- Storing dangerous amounts or kinds of materials inside or outside your home
If you're planning to launch your business from home, the first thing to do is to check out what commercial activity your city or county allows. This is becoming easier to do, as many communities are making their codes available on their Web site. You just need to know what the zoning classification is for your home (that is, R-1, R-2, R-3, etc.)-you can find information at your city or county zoning office.
While many people blithely ignore zoning, a complaining neighbor can throw a real kink in your business plan with a cease and desist order. So find out what you're allowed to do, and get along with your neighbors. With their support, you may be able to get a waiver of restrictions, called a variance or conditional-use permit.
Also, some people choose to rent a private mailing box with a street address to use as their official business address. If you do that, be sure your city doesn't make a physical inspection of the business premises before granting a city business license.
While you may not have a zoning problem, if you rent or belong to a homeowner or property-owners association (which all condominium and co-op owners do), you may find even harsher restrictions on operating a homebased business. Homeowner agreements are often harder to change, but often so many members are themselves working at home these days, the restrictions are sometimes not enforced.
Will People Take Your Homebased Business Seriously?
The negative connotation attached to homebased businesses is disappearing. Still, presenting a professional image can be a challenge if your 4-year-old answers your phone or if your clients are confronted with piles of laundry on the way through the house to your office.
The best standard for how a homebased business should present itself is to be indistinguishable from any other business. There's no need for your business image to convey where your office is located. Web sites, for example, are becoming the most important "storefront" for businesses of all sizes, and yours can be as good or better than any.
What's important is that your Web site address, like your e-mail address, is memorable and easy to enter. Think about what your URL will look like if you paint it on the side of your vehicle. Other ways to present a professional image while operating your business from home include:
- Have a separate telephone line for your business. Opting for a business line will enable you to have one and sometimes two Yellow Pages listings and will enable people to call directory assistance or use Internet-based Yellow Pages to find your business by name. These benefits can easily justify the additional cost of a business line. Also, locate your business phone away from household noise.
- Answer your phone in a formal and professional manner. If other family members answer your business line, make sure they do the same, including using your company name.
- Use voice mail to capture calls when you're away. Better yet, consider going a step beyond and use one of the personal communications assistant technologies like Wildfire, Oryx, Personal Assistant or Solo Call. These provide callers with more choices and can help those who need you to locate you quickly.
- Make sure your materials have a consistent, quality look. While you can certainly design your own letterhead, envelopes, business cards, brochures and invoice statements, if you don't have a visual sense, consider using a professional to do your design work. You can either have the final product professionally printed or print items as you need them on your own printer. Try coordinating your materials with your Web site for an even snazzier look.
- Make sure your business address is professional. If your home's street address is something like Cow Path Lane or Lazy Daisy Road, don't use it as the address where business mail and packages are delivered. We recommend using street addresses from a business district: You can rent from a mail-receiving service or an office suite complex. P.O. box addresses tend to make clients distrustful; you also can't receive FedEx or UPS deliveries at a P.O. box.
How Do You Handle Homebased Hassles?
Since almost nine out of 10 people who operate a home business have a family, keeping personal and work spaces separate is critical to peaceful domestic relations. If you can have your office in a separate structure, like a garage or a guest house in the backyard, you probably need to think no further.
But since the typical homebased business is located inside a home, you need to consider noise and family traffic patterns when deciding where to put your office. Of course, if you're locating your business at home so you can care for your children, you may choose to compromise privacy for a vantage point that will enable you to see or hear what your children are doing while you work.
If occupying a separate room is impossible, use furniture, screens and room dividers to create a sense of physical separateness. This can also be significant in passing the exclusive-use test needed to qualify for a home office tax deduction. This test requires that the part of your home you deduct must be used only for business. Two exceptions: If you're storing inventory or using a room to provide day care, you can also use the space as part of your residence.
Learn MoreWhere, oh where, will you set up your office? Follow these steps to find a place for your home office space.
If you have customers coming to your home, locating your office where it can have a separate entrance or be close to an entrance can save you time and trouble. If business visitors must walk through your home to get to your office, it's important to keep personal areas of your home neat and uncluttered by personal items.
While many parents do care for their children while working, you can't expect to work at 100 percent efficiency with children underfoot, so consider other options, such as getting help from relatives, using outside day-care services or hiring a housekeeper during office hours.
A more creative solution is setting up a cooperative day-care arrangement with four or five other parents who work from home and alternatively take turns caring for the children. You may only be able to work four days a week, but in those four days you can be more productive than you would be in five days with your children competing for your attention.
If you live in an inconvenient location or simply don't have enough space to meet with customers or clients in your home office, consider meeting at their location or a neutral spot like a restaurant, offer pickup and delivery services and use videoconferencing for meetings.