Home Based Business

By Entrepreneur Staff


Home Based Business Definition:

A business whose primary office is in the owner's home. The business can be any size or any type as long as the office itself is located in a home.

Two out of three companies (of all sizes) begin in a spare bedroom, garage, basement or sometimes even a bathroom. That's how companies as diverse as Apple Computer, Baskin-Robbins ice cream, Electronic Data Systems, Hallmark cards, the Lillian Vernon catalog, 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:

  • First, is it legal to hang your shingle or sign at home? This is one of the many possible restrictions on your being permitted to make your home a working castle. Whether and how flexibly you can operate a business from your home is covered in local zoning ordinances and also by the covenants, codes and restrictions (CC&Rs) of homeowner and condo associations.
  • How are you going to separate your home and your workplace? While the demanding hours required to start any business affect an entrepreneur's family, when you bring the workplace into the home, your family's needs must be taken into account even more.
  • How are you going to establish and maintain a professional image? This is especially important if your address is on Cow Path Lane, your dog loves to bark, or your teenager loves to play his drums in the room next to your home office.

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, an odorous hair salon or a 6 a.m. gathering point for a construction or cleaning crew, many communities ban certain kinds of businesses and prescribe limitations that may handicap some businesses. Here are some common activities communities don't like and may restrict within their zoning code:

  • 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 the percentage of space used for the business)
  • Selling retail goods to the public--sometimes communities limit this to specific hours
  • Storing dangerous amounts or kinds of materials inside or outside your home

So 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 in your neighborhood. This is becoming easier to do, as many communities are making their codes available on their websites. You just need to know what the zoning classification is for your home (that is, R-1, R-2, R-3, etc.), which is easily found at your city or county zoning office.

While many people blithely ignore zoning, a complaining neighbor can put a real kink in your business plan, as you may find yourself with a cease and desist order and have to suddenly move or close down. 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.

Since almost 9 out of 10 people who operate a home business have a family, keeping personal and workspaces separate is critical to peaceful domestic relations. So location, location, location is the first thing to think about when you're planning where your home office will be. If you can have your office in a separate structure, like a garage or a guesthouse in the backyard, you probably need to think no further.

But since the typical home based 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 you have customers coming to your home, locating your office where it can have a separate entrance or be close to an entrance to your home 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, such as laundry and children's toys. About half of home offices are located in a spare bedroom, which hopefully has a relatively soundproof door.

The negative connotation implied by referring to home based businesses as a "cottage industry" is disappearing. Still, presenting a professional image can be a challenge if your 4-year-old answers your phone or your clients are confronted with piles of laundry on the way through the house to your office. Here are some things you can do to let people know you're serious about your business:

  • Have a separate phone line for your business. While your second line can be a residential line, 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. While you can use voice mail, like nearly every corporation does today, one way of gaining a competitive edge is to actually answer your phone or have someone answer it for you. Customers and prospective customers almost always prefer to talk with a live human being rather than deal with voice mail.
  • Use voice mail to capture calls when you're away. Better yet, to give your callers a sense of more personal service, consider going a step beyond and using one of the personal communications assistant technologies like Oryx, or Personal Assistant. These services provide callers with more choices and can help them locate you quickly if needed.
  • Take care that your paper collaterals 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--and not everyone does--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 website for an even snazzier look.
  • Make sure your business address is professional. If your home's street address is something like Lazy Daisy Road, it's a good idea not to 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. (If you do that, be sure your city doesn't make a physical inspection of the business premises before granting a city business license.) P.O. box addresses tend to make clients distrustful; you also can't receive FedEx or UPS deliveries at a P.O. box.
  • Find alternative care for your kids. 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. The most common ones are getting help from relatives, using outside day-care services, or hiring a nanny to care for children while you're working.
  • Another less-used but creative solution is setting up a cooperative day-care arrangement with four or five other parents who work from home and taking 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.

  • Set up meetings off site if you live in an inconvenient location or simply don't have enough space to meet with customers or clients in your home office. You could either meet at your customer's location or at a neutral spot like a restaurant.
  • Dress professionally. How you dress while you work at home affects how you feel about your work and the image you project. While many people working in traditional offices dress informally on the job, you may find it helpful not to dress too casually. While it may be fine to work in PJs, chances are they're not the best choice for all-day wear.

More from Home Based Business


The division of a city or county by legislative regulations into areas (zones), specifying the uses allowable for the property in these areas

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Home Office Tax Deductions

Income tax deductions you're allowed to take if your home office passes the "exclusive use" text needed to qualify for the deduction

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Home Based Business

A business whose primary office is in the owner's home. The business can be any size or any type as long as the office itself is located in a home.

See full definition

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