It's a well-known fact that America's small business owners are movers and shakers. They come up with innovative products and services; they employ about 50 percent of all private sector workers; and they persist even during tough economic times. But what might not be such a well-known fact is that most of them do all of this without even leaving their homes.
According to the Small Business Administration, more than 50 percent of small businesses are home-based. Home-based businesses offer low overhead, helpful tax incentives, and the opportunity to work in your pajamas, among other benefits. But before you get started, there are some things -- 101, to be precise -- that you should know about running a company from home. Here is our list of top tips, lessons, pitfalls, and more to get you on your way.
We asked home-based business owners to share their best tips and advice. Here's what they had to say about organizing a home office, skillfully operating a business from home, and more.
1. Create a work environment you feel good in. And that includes investing in professional office equipment and furniture. "Everyone is vulnerable to repetitive stress injuries from using office equipment," says Paul Robert Edwards, coauthor of Working From Home and Setting Up Your Professional Home Office, as well as a Small Business Development Center consultant. "So take care to get things that fit you ergonomically. Particularly important are your chair and your keyboard."
2. Keep your overhead to a minimum. "It's not about how much money you make, it's about how much you keep, so overhead is key," says Craig Wolfe, founder of CelebriDucks, a company that creates celebrity rubber ducks. "It's great that you're working from home, but you can still bankrupt yourself through ill-conceived overspending, especially in technology."
3. Create a strong team. "Work with experts on parts of your business where you are not an expert," says Cathi Brese Doebler, a home-based business owner for 10 years and author of Ditch the Joneses, Discover Your Family. "For example, if you are not good with computer hardware, hire someone to help you set up your computer network. Or, if you are not an expert on taxes, find a good tax advisor. Focus your business on your areas of expertise and strength, and hire experts to help you with your areas of weakness."
4. Work where you're most productive, even if it's outside of your home. "Sometimes home is not the right place and work is not the right place -- even when they are the same place," says Stephanie Staples, a personal coach and motivational speaker. "I need a third location. For example, a donut shop, library -- somewhere that even though other things are going on, I don't have to pay attention or care about it. It is the power of the third location; I think differently, work differently, act differently there, and it really helps me."
5. Work on your business, not in your business. "There's a big difference between working in your business and working on your business," says Jeannel King, a visual facilitator and coach, and founder of her own home-based business, Big Picture Solutions. "A home-based business typically translates into being a small operation of one: you! In that situation, it's easy to focus only on product or service delivery. However, it's essential to make time to work on our business, and that means focusing on the finances, the marketing plans, the vision and strategy, the systems and processes that provide the infrastructure for our businesses to be not just successful, but thriving and sustainable."
6. Have the attitude that you work from home, not at home, says Edwards.
7. Don't hide it, flaunt it! "Don't try to shy away from the fact that you run your business at home," says Maria Rapetskaya, cofounder of Undefined Creative, a home-based design and animation studio. "Give your potential clients the rundown of why it benefits them -- like low overhead."
8. Don't forget that looking professional is still important. Rent an office address, an office for a day, or conference room space when needed, advises Dannelle Shugart, director of business incubation at the Community Business Partnership, a nonprofit near Washington, D.C.
9. Train others in your home to answer the telephone with a pleasant greeting, recommends Edwards.
10. Avoid going into business before you know you have a winning idea. "A good way to vet this is also a method of bootstrapping: Apply for grants. If your idea is good enough to become a successful startup, it's good enough for someone else to help with development," advises Amy Baxter, founder of MMJ Labs, which makes reusable, inexpensive products for personal pain control. "Programs such as local university incubators, Huggies MomInspired, Cartier Women's Initiative Awards, and even Small Business Innovation Research grants can bankroll part of your R&D."
11. Don't underestimate the importance of branding. "Branding is the most important thing when building an identity for your company," says Michael Di Pippo, founder of Penfishingrods.com. "The objectives that a good brand will achieve include delivering the message clearly, confirming your credibility, connecting your target prospects emotionally, motivating the buyer, and [securing] user loyalty."
12. Have a plan to tackle your top priority. Establish a work schedule and make getting business your top priority each day until you have business, says Edwards.
13. Have backup. "Have subcontractors in mind, should you get enough business to warrant bringing them onboard," says Michelle Garrett, founder of Garrett Public Relations. "I'm a one-person shop, so there are times when it's nice to call a colleague and give them some projects to work on on my behalf when I'm feeling overloaded. What you want to avoid is getting into a situation when you need help and then trying to find subcontractors. This can be extremely stressful."
14. Get organized. "Organize your files -- both in your computer and your paper files -- so that everything is easy to find," Edwards suggests. "The average executive spends three hours a week looking for things -- that's more than 3.5 weeks a year. As your own boss, you can't afford that. Use color coding for file folders and computer diskettes to make them easy to recognize. Printed labels, which you can create with your computer or a separate label-maker, help readability."
15. Know what you're signing up for. "Too many people want to work from home and expect the assignments to just flow in -- so not the case," says Kristen Fischer, author of Creatively Self-Employed: How Writers and Artists Deal with Career Ups and Downs. "Solid skills in business development, lead generation, sales, and marketing are vital to ensure success."
16. Be honest with yourself. Not everyone is capable of working from home. Be honest with yourself about your work habits and what makes you happy before you decide to start a business from home.
We also asked home-based business owners to share their top lessons. Avoid making their mistakes by reviewing what they had to learn the hard way.
17. Keep your office infrastructure distinct from that used by other family members, recommends Aparna V. Singh, the founder and editor of Women's Web, an online magazine for Indian women, who once lost important data from her pen drive when it was used by family members.
18. Be careful of tunnel vision. "I learned it's important to disconnect when working from home and take time away from my computer/work," says Kristina Cutura, an online advertising consultant and founder of AdWordsCafe.com. "Taking time away gives me some perspective and helps me set more realistic expectations with my clients."
19. Excellent communication is vital to your success. "Since I don't have a lot of face time with my clients but communicate via email and phone mainly, it is vital to communicate regularly and update each other on where we stand with our project and priorities," says Cutura.
20. Invest in a separate landline even if you're trying to cut costs. "One of the first things I realized that I needed to do was get a separate landline and number for my office so that my son, who was then 5 years old, did not pick up the phone when reporters called," says Julie Phillippi-Whitney, founder of Phillippi-Whitney Communications, a home-based PR consulting firm. Paul Robert Edwards also recommends getting a landline in addition to a cell phone. "When the electricity goes out, you want to be able to get calls," he says.
21. Make sure to schedule conference calls at appropriate times. "Never schedule a client conference call when the mailman is due to arrive, or find a way to silence your barking dog when you are on the phone," says Phillippi-Whitney.
22. Isolation can be a negative side effect of working from home, so if you face feelings of isolation, be ready to fight back. "Isolation can lead to poor business decisions and depression, which leads to horrible business decisions," says Benjamin John Coleman, founder of a Web-based craft business. "Because my business is so small and because I operate out of my home, I tend to become isolated. I have few interactions with other people during my day. To combat this isolation, I've joined various community groups. I find that interacting with other people in a volunteer setting helps keep me sane when I'm at home working," he says. "It also affords me an opportunity to network and gives me a group of people to bounce ideas off [of] before I implement them. I've found that these activities enhance my business and increase my quality of life significantly."
Nuts and Bolts
Setting up shop right from your home sounds simple enough. But before you go full speed ahead, make sure what you're doing is legal.
23. Buy business insurance. "Have commercial insurance; your homeowner's does not cover your business," warns Denise Beeson, a professor of small business management at Santa Rosa Junior College in Santa Rosa, California.
24. Study up on tax laws sooner rather than later. "Learn the home business tax laws first," says Mark Grimm, a media relations specialist and home-based business owner. "Don't wait to learn them when you go to file your taxes."
25. Be aware of local zoning laws. Zoning laws vary depending on where you live and are determined by the city or the county. Home businesses that deal with the public, have employees working out of the home, or have nonstandard business hours are at higher risk of being challenged in front of a zoning commission.
26. Obtain a general business permit. Most home-based businesses require a business permit to legally operate, according to Lawyers.com. Additionally, special permits may be required depending on the type of business it is.
27. Prepare for inspection. If your business involves food handling, hazardous materials, or outside clients or employees entering your home, be prepared to pass an official inspection.
Tax Deductions for a Home Office
Getting familiar with the tax laws will be necessary as a home-based business owner. The more knowledgeable you are, the more likely you'll be able to save yourself major bucks when filing your taxes. Paul Robert Edwards highlights 10 top deductions for home-based businesses, but consult your accountant to make sure you apply them correctly to your company.
28. Expenses related to cleaning the home office
29. Depreciating the office space in the home
30. Household furniture converted for use in the home office
31. Household supplies used in the home office
32. Interest on your mortgage attributable to business use of your home
33. Internet expenses related to the business
34. Real estate taxes attributable to business use of your home
35. Repair and maintenance of the office portion of your home
36. Telephone, except the base local service, for the first line into your home
37. Utilities and trash collection attributable to business use of your home (for example, electricity, gas, and water)
Funding Your Home-Based Business
Be prepared to face a catch-22 when it comes to funding. "More often than not, a home-based business is going to require less capital, but often, because most of the funding is for intangible assets, it's harder to get more traditional sources of funding," says David Nilssen, CEO and cofounder of Guidant Financial Group, a firm specializing in self-directed IRAs and small business financing. If you're having trouble getting a traditional bank loan, Nilssen recommends these options for obtaining outside funding.
38. Credit cards: Personal credit cards are still the No. 1 way that people fund a business. The rates are not terribly attractive, but using credit cards does not require any collateral other than your credit score, and credit is available instantly upon approval. Even more attractive than personal credit cards are business credit cards. You can call your current credit card companies and tell them you are starting a business and need business credit cards. While they will still require you to pledge your credit score as collateral for the loan, it will not appear on your credit profile and thus could make it easier to secure future funding if needed.
39. Peer-to-peer lending: There are many companies that aggregate investors and provide microloans to individuals without applying "use of proceeds" requirements. These loans are considered unsecured, and an individual who has good credit could receive up to $50,000 at as low as 9 or 10 percent.
40. Rollovers for business startups: Invest a portion of your retirement funds into your business without getting a loan or taking a taxable distribution. If you believe your new business has great growth opportunity, it may make sense to invest in it instead of getting a loan, which saves on the interest you'd otherwise send to the bank.
41. SBA Microloan Program: This program provides startups with loans of up to $50,000. The average loan is just $13,000 and must be repaid within a maximum of six years.
42. Cash-out refinance: Because there are no "use of proceeds" requirements, these loans are typically amortized over 30 years, and because rates are near an all-time low, this can be a very attractive option. Note: Cashing out home equity through a refinance does mean that you pay interest on the entire amount regardless of whether you use it right away.
43. Home equity lines of credit: Unlike a cash-out refinance, a HELOC allows the borrower to use cash as needed, and interest only accrues on the withdrawn amount. HELOCs are typically amortized over 20 years and are variable, so payments will be slightly larger (because they're paid off faster), and the interest rate could go up over time.
44. Equipment lease: An equipment lease is a loan in which a lender buys equipment and then "rents" it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business may purchase the equipment for its fair market value. This option is great for businesses that are making small purchases and have no revenue yet.
There are many tech tools that will greatly assist you in being more efficient and professional in your home business. We checked in with some home-based business owners to see what tools help them the most.
45. Smartphones: Just because your business is based from home, doesn't mean you need to be stuck at home. A smartphone can help you run your business from anywhere. "Smartphones can create flexibility and accessibility while attending to the children's needs," says Monica Harris Mondolovich, who has been running a home-based business, MHM Editorial Services, for 10 years while raising two young children.
46. Project management software: Sara Sutton Fell, CEO and founder of FlexJobs, uses project management software to keep everyone on the same page with business projects. "At FlexJobs, we use Pivotal Tracker to set priorities and efficiently manage projects," states Fell.
47. Cloud-based sync-and-share tools: Jill Mayer uses SugarSync, a cloud-based sync-and-share solution. "My husband and I both have home-based businesses, and this service is invaluable to us," says Mayer, a contractor with Lyman Public Relations. "It not only comes in handy while traveling or if we're out of the office by giving us access to all of our data right from our phone, tablet or laptop as if we're sitting at our office desktops, but the sharing and collaboration features are extremely helpful and convenient when working with colleagues and clients."
48. Cloud-based scheduling software: StormSource Software is one such option. Some of its features include self-scheduling, which allows individuals to book their own services online; automated email and text message reminders sent prior to scheduled appointment times; online customer payment options; record-keeping and reporting capabilities; and e-marketing functionality. And because it's cloud-based, it's accessible from anywhere.
49. Work phones: "Use services like GoogleVoice, or Skype to get a private office number that can be forwarded to your home phone or used independently," says Joshua Red Russak, founder of First Time Online LLC. GoogleVoice is free, while RingCentral and Skype's business offerings are paid services.
Marketing Your Home-Based Business
As with every business, marketing is crucial, but it can be even more important for a home-based business. Here are 10 ways to get your business noticed -- and they could make all the difference.
50. Use free marketing tools. Molly Sylestine, marketing associate for Volusion, recommends you take advantage of search engines such as Google Shopping, which allow you to submit your products to a shopping feed for free.
51. Get quoted. "Use services such as Reporter Connection, PitchRate, and ProfNet to connect with reporters and be quoted in traditional media," recommends Shel Horowitz, a home-based marketing consultant and copywriter who, in one year, was quoted or cited in 131 stories thanks to such services. HARO, Reporter Connection, and PitchRate are free, while ProfNet is a paid service.
52. Start networking. "Hibernating is fine for bears, but not for people," says Edwards. "Identify and join social networks and local trade and business associations that will advance your business." Russak of First Time Online recommends creating a Facebook page, Twitter account, and LinkedIn profile as alternatives to your website so you can "be in five places at once from the comfort of your living room."
53. Understand the power of referrals. Garrett of Garrett Public Relations works with a team of professionals that includes a graphic designer, a photographer, and a writer. She recommends them to clients who need their services and, in return, these professionals refer her services to their clients.
54. Start a blog. "[A blog is a] very inexpensive way to increase your credibility in a competitive environment," says Sheryl L. Johnson, founder of BD-PRo Marketing Solutions.
55. Participate in speaking events. "Look for opportunities to reach your target market through speaking events," says Johnson.
56. Collaborate with others. Team up with other businesses to grow your own via cross-promotions, protective strategic alliances, partnerships, and virtual organizations, says Edwards.
57. Attend or exhibit at local trade shows, advises Beeson of Santa Rosa Junior College.
Dealing with Employees
It might be easier and more cost-effective for you to have a virtual staff working from their homes rather than your home. If you choose to go that route, Michelle Gamble-Risley, CEO of 3L Publishing, a publishing firm run entirely as a virtual distributed company with staff located in their home offices, offers these words of wisdom.
58. Only hire people you completely trust. A virtual environment begs for staff that you do not need or want to directly supervise. You have to work with people who you know are trustworthy and true to their words. Their words and actions are the only things you can truly count on when you don't see them in person.
59. Personal initiative: A virtual team needs to be loaded with people who take true personal initiative. They do things without asking permission, and they are skilled and knowledgeable enough that what they do is professional and competent.
60. Competence: Your virtual staff has to be competent enough [that you can] rely on them to do the job effectively. For example, when I hire someone, I let them know they are on their own. They will be expected to figure it out without training or assistance, because I'm not going to send that assistance.
61. Good communication: Your virtual team needs to stay in good communication. They need to answer their emails, mobile phones, or texts and not ignore the team's requests. Poor communication suggests they're not doing their jobs. It also erodes trust that they're doing what they said they're doing. [In addition, good communication] enhances your customer service.
62. Time management: A virtual staff needs to be able to effectively manage their own time. If they flex their schedules, it has to be according to the needs of the company -- it cannot ignore the needs of the company. They also have to prioritize their time correctly based on these needs and not their personal needs, unless it's a day off.
63. Child care: A work-at-home environment and a working mother is a poor substitute for actual child care. We expect our team to have proper arrangements for child care and avoid trying to do both at the same time.
64. Availability: While we don't work in the same physical office, we do activities together. I expect my team to be available for networking and meetings outside of the office.
65. Open schedules and flexibility: We're not opposed to open schedules. Our edict is to get the job done on time and right the first time. In some cases, when and where that job gets done is not as important as the fact that it gets done.
66. Conference calls: We try to do regular conference calls with the group to keep everyone on the same page, promoting the same vision.
67. Virtual tech equipment: Make sure you have equipped your team with the right tools to stay in communication [and] send large files, or provide [them] access to systems. You want to ensure you remove barriers to performance by providing the right tools for virtual business. (Note: Tools such as instant messaging, wikis or message boards, and conference meeting software will help improve communication.)
But if you choose to bring employees into your home, you may want to set some ground rules to keep lines from blurring. Richard Rabinowitz runs a national, multimillion-dollar photo workshop series, Digital Photo Academy, right from his home. A staff of six works around the dining room table in his New York City apartment keeping track of teachers, students, and workshop spaces. Chaotic though it may seem, the business brings in over $2 million per year. Rabinowitz maintains order by enforcing the following seven rules.
68. Only use the designated DPA lines for work calls. Do not use or answer the house lines. Personal calls should be kept to a minimum as if the office space were in corporate quarters, with personal calls made on your own time during breaks.
69. Work hours are from 10 a.m. to 6 p.m. After 6 p.m. the office becomes Richard's apartment, whenever possible.
70. Everyone must clean up after themselves. They are, after all, in someone's home.
71. Everyone should go out for lunch or bring prepared food. They should not use the kitchen beyond refrigeration.
72. Staff are not allowed to enter certain rooms. Understandably, bedrooms, the master bathroom, and other personal spaces are off-limits to employees.
73. Residents should try to handle family issues before or after office hours. When residents are at their "office desks," they are working and should not be disturbed with nonwork issues.
74. Use keys to enter the office during work hours only. Employees do not have an all-access pass to drop in whenever they want.
Working from home may sound like fun, but what happens when the 1,000 distractions get in the way, or you're simply feeling unproductive? Your business is going to suffer. Time management is a crucial aspect of running a home-based business successfully.
75. Invest in a time management class. "This is what I tell people to do before they do anything else," says Tim McGraw, a home-based marketing strategist and copywriter. "It should be considered your 'first day at work.' I highly recommend a full-day seminar from the likes of Franklin-Covey or the American Management Association. It will be the best $300 you invest to launch your business, you will walk away with tools in hand -- paper-based as well as software applications -- and it will instill habits that will serve you through your career."
76. Create a sustainable routine that signals the beginning and the end of the work day. "One of my earliest clients was a software coder, and he would go to the local diner early in the morning to look at the paper, eat breakfast, and [hang out] with locals. Then he would code for seven hours, and when his wife came home from her job they would take a walk, and that was the end of the workday -- no more coding until the next morning," says McGraw.
77. Structure your schedule. "Just because you may not have to attend meetings or structure your schedule the same way that you would if you worked in an office with others, you still need to provide structure for your schedule," says Doebler of Ditch the Joneses, Discover Your Family. "When I have larger projects, I set time aside in my calendar to focus on them. This helps me to stay on schedule and finish projects on time and with high quality."
78. Understand your own work habits and what tools will work best for you. "Get an egg timer or a digital stopwatch with a countdown function," advises Laurence J. Stybel, founding partner and president of Stybel Peabody Lincolnshire. "Decide on the chunk of time that you are most productive. For example, I can be productive for 45 minutes at a time. After that, the law of diminishing returns starts to apply."
79. Work when you're most productive. "Think about what time of day you work best," says Doebler. "For example, if you accomplish a lot of work in the mornings, be sure to dedicate that time to your most difficult work projects. Save the mundane tasks for times of the day when you might be feeling less creative."
Balancing Business Life with a Personal Life
As a home-based business owner, perhaps even more challenging than time management is successfully balancing your business life with your personal life. Lori Quaranta struggled with this after starting her business, Consetta Web Solutions, in 2006. "When you work from home, you are always at work," says Quaranta, who is also a mother. "Keeping a work/life balance is harder than you think." Here are her top five tips for maintaining that balance.
80. Contrary to the beliefs of those in your personal life, you are at work even though you are home. Set boundaries and ask that they respect your workday when it comes to phone calls, pop-in visits, etc.
81. No matter how busy you become, it's important to take a break, or be sure to break for lunch and leave the house. Even if you go for a coffee or a walk, this helps tremendously to clear your head.
82. Make sure your work space is not part of your family space. Create a room specifically to use as your office, especially if you have children. This accomplishes two things: You know that when you walk in that room you are there to work until you are done, and then you shut the door and all family members know that they should respect your work space when you are in it.
83. Family time is sacred. For those that have clients in different time zones, clearly define the hours you can be reached by phone. I live on the East Coast and have clients on the West Coast -- a three hour difference. They can be getting ready to leave work and want to call, and I could be ready to go to sleep and not at the top of my game. There will be times that you'll need to burn the midnight oil, but it should be an exception, not a daily occurrence.
Resources for Growing Your Home-Based Business
Everyone needs a helping hand. Denise Beeson recommends the following resources.
84. Free consulting from SCORE
85. Free consulting from the SBDC in your local area
86. The SBA.gov website for podcasts, webinars, and basic information about starting and growing a business
87. Your local community college for inexpensive classes on how to start and run a small business
88. Your local university for interns to assist you with research or to write your business plan
89. See the Economic Development Board or Chamber of Commerce in your city or county for assistance with small business growth.
90. Check out the local business incubator in your area. It may offer classes and/or the future opportunity to move into an environment to move your business to the next level.
91. Find online resources such as BatchHaÃ¼s, which offers a weekly coworking open house to give at-home workers the opportunity to meet others for brainstorming and inspiration, recommends Theresa Freeman on behalf of BatchBlue Software.
Common Pitfalls, Misconceptions, and Mind-Sets to Avoid
Think you have what it takes to run a business from home? Jeannette de Beauvoir has been running Customline Wordware, a home-based writing and editing service, since 1990 and highlights some common misconceptions that have steered many home-based entrepreneurs off course.
92. I'm setting my own schedule, so it's perfectly okay for me to watch some TV, do some housecleaning, etc., instead of working; I'll get caught up later.
93. I can run my business and take care of my toddler at the same time.
94. It's okay to spend a lot of time on Facebook; after all, it's my home-based equivalent of the water cooler!
95. Writing is an art, and I'm an artist; I don't need to write a business plan.
96. Manicures are tax-deductible, aren't they? They make me feel good, and I work better when I feel good.
97. Yeah, I feel a little unprofessional when I work in my pajamas, but they're so comfortable!
98. The proximity of my office to my kitchen means I snack frequently. Okay, very frequently! What's wrong with that?
99. If I have a great website, that's really all the marketing I need to do.
100. I can declare the occasional dinner out as an office expense as long as I mention the word work at least once in the conversation.
101. Nobody really minds hearing my dog barking in the background during a business conference call.
Looking for home-based business ideas to get started? Check out AllBusiness.com's list of the Top 25 Home-Based Business Ideas and AllBusiness.com's picks of the best franchises that can be run from home.
Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at [email protected].