Thinking of starting your own homebased business? Take a peek behind the shutters and find out what it's like to make the dough right at home.

By Sara Wilson

Opinions expressed by Entrepreneur contributors are their own.

They roll out of bed in the morning and head off for work--still in their pajamas. They work from their dining room tables, stock inventory in their cupboards and arrange meetings in the lobbies of their local hotels. They set their own schedules, jog on the beach during their lunch breaks and give out their house keys to employees across the city.

This is what life is like for Andrew Aussie, co-founder of Honest Foods, a natural foods company; Stacey Roney, founder of Beauty on Call, a staffing agency for the beauty industry; and Meg McAllister and Darcie Rowan, co-founders of McAllister Communications, a PR firm. Using their homes as their headquarters, these entrepreneurs, along with a growing number of others, are running successful businesses without even stepping foot outside their front doors.

A February 2004 study by the Independent Insurance Agents & Brokers indicates that approximately one in 10 U.S. households operate some type of full- or part-time homebased business. And these businesses are more than holding their own. A May 2006 study released by the SBA's Office of Advocacy reveals that America's homebased sole proprietors generate $102 billion in annual revenue.

As it grows in popularity and profits, homebased business is being perceived in a much more favorable light. According to Beverley Williams, a home business advocate for the past two decades, running a business from home was once frowned upon or dismissed as a hobby for moms seeking extra money. Now, homebased business is widely accepted and is attracting both men and women.

Aussie, Roney, McAllister and Rowan learned from experience and mastered the discipline. Here, these successful entrepreneurs open up about the ins and outs of running a business from home, including how to ward off loneliness, set up shop, deal with zoning laws and insurance issues, bring employees into the home and project a professional image.

Making the Transition
Deciding that the quality and taste of their brand was more important than the luxury of their workspace, Aussie, 39, and Mark Oliver, 58, decided to launch Honest Foods in April 2006 from Aussie's Del Mar, California, home. This gave them the freedom to invest the majority of their startup capital into two years of research and development, but it also meant a major adjustment for Aussie, who had been used to a very social office environment.

For 11 years, Aussie had worked in sales and marketing for Kashi Co., where he led a team of 12 people and was surrounded by 60 to 70 coworkers. During the transition, Aussie had to figure out how to recreate that social stimulation from his home office. He relies more than ever on phone and e-mail to stay connected with others, regularly arranges in-person meetings with vendors and suppliers at his home or a local restaurant or coffeehouse, and has even thrown parties for his ex-coworkers. "I thrive on camaraderie and social interaction, so it has been key to realize that it's now my responsibility to set that up," says Aussie. "I set up a lot of lunches and gatherings that maybe I wouldn't have set up before as a way to bring some more social interaction to my daily experience."

Combating loneliness is one of the top challenges facing homebased entrepreneurs, according to Williams and Paul Edwards, author of numerous books on the topic, and co-author of The Entrepreneurial Parent: How to Earn Your Living and Still Enjoy Your Family, Your Work and Your Life. Williams recommends seeking out the services of the local chamber of commerce or other small-business groups. These can offer good support networks as well as serve as invaluable resources of information.

Aussie also has learned that when not in the same office, over-communication is key in keeping everyone on the same page. Information, which is so effortlessly transmitted in an office setting through impromptu meetings or nonverbal communication, isn't always transmitted as accurately among Honest Foods' independent contractors who work virtually from their homes. "It means following up in writing, following up with voice mail, sending another e-mail, sending out reminders, doing all those weekly meetings," says Aussie. "These may have seemed superfluous in the office setting but are absolutely critical in a home office."

Another transition you'll have to make is equipping your home office, rather than relying on your IT guy to make all the decisions. Scrimping and saving is good, but even a home office needs a minimum investment in terms of equipment. As tempting as it may be, Edwards advises resisting the urge to go all-cellular or depending just on Skype and instead recommends equipping the home with at least one landline.

Aussie recycled his father's office equipment, furnished his office with hand-me-down furniture but made sure his copier is high speed, his phone has a speaker on it and his computer is top quality. Says Aussie, "People may underestimate the need to make that kind of investment in your home office."

Setting Up
Honest Foods is flourishing with year-end sales projected to reach $1 million and product already on the shelves of major natural food retailers, including Whole Foods Market and Wild Oats Markets. This success might be partially due to the physical setup of Aussie's office. He runs the business from a separate room in the house dedicated as his office space to keep his work life separate from his family life. It may seem trivial, but separating family life both spatially and time-wise is crucial, according to Edwards, who recommends using a screen or a divider if a separate room can't be spared.

Other key questions you should consider before choosing where to set up office: Does it interfere with the family foot traffic, and does it offer the solitude needed to work? A little planning beforehand could greatly affect the productivity of the business.

Aussie has learned he works best by shutting everything down and closing the door to his office at a set time each day. Work schedules will differ according to the preferences of the entrepreneur, but no matter how you operate best, Edwards strongly recommends setting goals for each day, so the business continues to move forward despite the hundreds of distractions that can occur daily.

Overcoming Homebased Hurdles

Heeding the advice of experts regarding the physical separation of work life from home life may be an ideal to work toward, but sometimes a company's growth can make this a physically impossible task. Roney, 38--along with her husband, her Beauty on Call business, seven employees and three interns--just moved into a single family home, where one whole floor and two spare bedrooms will be devoted to work space. This is quite an upgrade from their three-bedroom condo, where the work flowed out onto the kitchen table. From her Chicago home, she works with almost every cosmetics company and has more than 500 freelancers nationwide.

Roney expects 2007 sales to approach $1 million and plans to hire four more employees this year, which means her business might even outgrow her new single family home by next year. Roney plans on holding out from moving into an office as long as possible. "By eliminating that overhead, we're able to be more profitable, so I can hire more staff," says Roney. "Anytime we bring on more business, I'd rather use that money to hire an additional employee or pay my existing employees more money and also offer competitive pricing to my clients."

Roney loves working from home and has passed on the advantages to her employees. There's no dress code, and they all wear slippers; her employees complete 40 hours of work per week but have no set schedule. At least once every week, Roney prepares lunch for everyone. "Our home is their home, and they all have a great relationship with my husband. They feel very comfortable here," says Roney. "It's like family."

Entrepreneurs Who Need People
Roney's relationship with her employees is based on trust, but how does she go about finding people who merit that trust? Roney admits she hasn't always chosen correctly, but she has learned to look for certain qualities in potential employees, such as an entrepreneurial spirit and self-motivation. She also has started working with people initially on a freelance basis, so she can get to know them before hiring them full time.

Bringing employees into the house is a big step that needs to be considered carefully. It's a decision Aussie is currently struggling with, as he isn't entirely certain how comfortable he would be sharing his house with an employee. Ultimately, though, the decision might not even be one for the individual entrepreneur to make. Edwards warns that it could present conflict from a zoning standpoint. "This is where you really have to check your zoning, because if you live in a common interest development, [having employees] can create parking problems and get you into hassles with your neighbors," he says.

You can't be too careful when it comes to zoning restrictions in general, warns Williams, who recalls several instances where individuals lost their businesses due to zoning violations. "You cannot assume you can do whatever you want in your own house," she says.

To find out what's permissible, you should start by determining if a homeowner's association governs your residence. If so, you should carefully examine the covenants and restrictions. If not, inquire at City Hall or the county's Department of Economic Development or Department of Licenses and Permits.

Williams also warns entrepreneurs to purchase appropriate insurance for their businesses, as homeowner's insurance rarely covers home businesses. "Talk to an insurance agent, preferably an independent agent who can take a look at all different kinds of programs from different companies and find the best one," she advises.

Staying Professional
While the perception of homebased entrepreneurship has improved significantly, it may still be wise to keep the fact that you're working from home under the radar. "Despite the percentage of people approving of this now, you'll run into some people who will have a problem with it," says Edwards. "The best policy is to not make a point of it--not lie about it, certainly--but for all purposes, to create a business that doesn't have a geographical identity."

Being in the PR industry, where perception is important, McAllister, 43, and Rowan, 39, tried having an office when they first launched the company in 2001. Located in Toronto, the office was on the same street as the "big boys," but when the rent and the taxes went through the roof, they realized perception shouldn't have to come at such a high price. So they moved the business out of the office and into their respective homes--McAllister's two-bedroom home in Toronto and Rowan's New York City apartment--and thereby cut their expenses in half.

To compensate, they found alternative ways to maintain the level of professionalism their clients require. They work with a web hosting company so they and the approximately 10 independent contractors they work with all have a similar e-mail address; they partnered with a local The UPS Store franchise to handle all their bulk shipping needs, which relieves the impact their business has on their homes; and they use a conferencing service so they can both speak with clients via the phone. In addition, they researched all their local hotels and coffeehouses to find the best locations for meeting with clients.

"An increasing number of hotels are offering coffee service and free internet connections in the lobby," says McAllister. "So it behooves you to do a little research and find the places closest to you that keep with the image you're creating, the service you're providing and the industry you're working in, so you're never left scrambling."

McAllister and Rowan are projecting their annual billings to hit $500,000, but they have reaped more than just profits by keeping their business in-house. By setting up a virtual office and inherently trusting one another as well as their independent contractors to remain focused on the overall goal of the business, they have replaced office politics and rigidity with a commitment to be disciplined and work as a team. McAllister says, "Being outside of the four walls has helped us to create a company that is more solid in terms of the way people work together and feel about each other and the work they do than being within four walls ever could."

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