Statistics vary, but some estimates suggest that as many as 20 million Americans work from home at least part of the time. Clearly, some of those in the at-home workforce are employees telecommuting for established companies, but with the economy in shambles and employment rates reaching record highs, more and more people are embracing the entrepreneurial spirit and starting new businesses these days. Starting a new business can be overwhelming and expensive, and one popular way to ease into the new venture is to commence operations from your residence. Operating the business from home may be a realistic long term plan for some, but it can also be a good way to test the waters, get the kinks out and nurture the idea before you launch it on a bigger scale.
While operating a business out of one’s home can help cut costs and eliminate some of the logistical headaches that traditionally accompany opening a new business, those who dream of creating and operating a company from home should take note of these considerations before they start the process.
Can you be a productive homebody?
Sure, working from home may sounds like a great concept to many people, but before you take the plunge, you must consider whether at home employment is right for you. Self motivating types are likely to have success working from home. However, if you thrive in an environment where you receive constant feedback and interact with coworkers, perhaps this is not a good move for you. And if you’re easily distracted, the lure of household amenities like the television could thwart productivity. If you are starting your new venture solo, you must feel comfortable working alone and not be susceptible to a feeling of social isolation. Indeed, reflecting on your personality could be a strong indicator of whether working from home will work for you.
Do you have a strong idea?
All successful businesses begin with a great idea. Or, maybe it’s just a so-so idea, but it gets refined and tweaked until its potential emerges. If the flexibility of self working from home or the freedom of self employment is motivating your decision to start a new business, perhaps you’re not ready to make a move. A good idea, coupled with a passion and desire to see it through, should be the primary force behind your venture.
Keep it legal
Before you hang a shingle by your front door to advertise your new business, you must consider the legal implications of operating a business from your home. These are some of the many questions you must ask yourself:
- Have you incorporated the business or formally organized the company structure to avoid personal liability?
- Have you carefully considered and established how the company will be taxed?
- Have you consulted with local officials to obtain necessary business licenses?
- Have you confirmed that operating the business out of your home will not violate local zoning ordinances?
- If you live in a condominium development or a neighborhood governed by restrictive covenants, have you confirmed that your new venture does not violate the rules of the homeowners’ association?
If you don’t feel confident handling any of these items, make sure you consult with an attorney and/or tax professional who may be able to shepherd you through this process.
Money, money, money
Money should be at the forefront of any budding entrepreneur’s mind – not just the potential for financial gain once the business is up and running, but also the sometimes daunting startup costs. Before you get too invested in your idea, begin budgeting for these items. You need to consider costs like legal fees, marketing fees, the cost of computers and other office supplies, etc. The range of potential costs you will encounter may vary greatly depending on the kind of business you are pursuing, so make sure you do your research. If you’ll need a loan to finance the opening of the business, start talking to lenders very early and monitor your credit so that doesn’t throw a wrench in your plans.
Be a good neighbor
Many home-based businesses have absolutely no impact on the rest of the neighborhood. In fact, if most of your at home work involves communicating electronically or on the phone with clients, chances are the neighbors won’t even know you have a home office. On the other hand, if your business requires clients to visit your office, if you have employees who arrive on your property routinely, or if conducting your business creates noise or other nuisances, you need to consider others in your community. If your business disturbs others around you, you could have a problem.
About the author
Jack Simms is a researcher on home-purchasing plans for LeadStep.com’s Current Mortgage Rates website. In addition to his research for LeadSteps, Jack provides marketing and branding services to real estate professionals in northern California. Jack’s research seeks to assist home owners and buyers in all facets of home ownership through the LeadSteps Local Mortgage Rates website.