What You Need to Know about Starting Your Own Work-from-Home Business
Are you ready to put that work-from-home idea to work? (Take our work-from-home quiz to assess your readiness.) Not surprisingly, a work-from-home business is a business based in a home. Whether you do all the work in your home or you do some of it on customers’ or third-party premises, whether you run a franchise, a direct-sales operation, or a business opportunity, if the center of your operations is based in your home, it’s a work-from-home business.
Determining the kind of work-from-home business you want to have
After you decide you’re going to start your own small business, you have to answer two questions:
- What kind of work-from-home business do you want to start?
- What’s the best way to market your products or services?
You basically have two types of work-from-home businesses to choose from: businesses you start from scratch and businesses you buy. The latter category is further split into three types: franchises, direct-selling opportunities, and business opportunities. Whether you prefer to march to your own drum and start your business from the ground up or get a business-in-a-box depends on your personal preferences.
The advantage of a business you start from scratch is that you can mold it to fit your preferences and the existing and emerging markets, which provides you with a boundless variety of possibilities. Businesses started from scratch account for the majority of viable, full-time businesses — in other words, they tend to be more successful over the long run than businesses you can buy.
Each type of home business that you can buy, on the other hand, has its own spin. The following information illustrates how the three types are different from one another.
A franchise is an agreement in which one business grants another business the right to distribute its products or services. Some common home-based franchises include the following:
- Aussie Pet Mobile (mobile pet grooming)
- Jani-King (commercial cleaning service)
- Jazzercise (dance/exercise classes)
- ServiceMaster Clean (cleaning service)
- Snap-on Tools (professional tools and equipment)
Direct selling involves selling consumer products or services in a person-to-person manner, away from a fixed retail location. The two main types of direct-selling opportunities are
- Single-level marketing: Making money by buying products from a parent company and then selling those products directly to customers
- Multi-level marketing: Making money through single-level marketing and by sponsoring new direct sellers
Some common home-based direct-selling opportunities include the following:
- Shaklee (household cleaning products)
- Pampered Chef (kitchen tools)
- Green Irene (green products and consulting)
- Mary Kay (cosmetics)
- Fuller Brush Company (household and personal-care products)
A business opportunity is an idea, product, system, or service that someone develops and offers to sell to others to help them start their own, similar businesses. With a business opportunity, your customers and clients pay you directly when you deliver a product or service to them. (Another way to think of a business opportunity is that it’s any business concept you can buy from someone else that isn’t direct selling or franchising.) Here are several examples of business opportunities that you can easily run out of your home:
- Astro Events of America (inflatable party rentals)
- Debt Zero LLC (debt settlement)
- ClosetMaid (storage and organizational products)
Interested in how to find more companies and how to get in touch with them? Entrepreneur Media and Go Small Biz have extensive information on business opportunities you can buy. You can also do a search on Google or your favorite search engine, using the keywords business opportunity.
After you decide on a work-from-home business, you have to find the money to get it started. Then you have to market your products or services and persuade people to buy them. You can choose conventional methods of promotion, such as advertising and public relations, or you can leverage new selling opportunities, such as the Internet, to your advantage. Or you can (and probably should) do both. It’s your choice — you’re the boss!
Managing your money as a work-from-home business owner
Money makes the world go ’round, and because you’re talking about your financial well-being here, it’s very important that you have a handle on your business finances. To get the handle you need, do the following:
- Find the money you need to start your business. The good news is that many work-from-home businesses require little or no money to start up. If you decide to buy a franchise or business opportunity from someone else, however, you definitely need some amount of start-up funding. To find this funding, consider all your options, including friends and family, savings, credit cards, bank loans, and more.
- Keep track of your money. In most cases, keeping track of your money means using a simple accounting or bookkeeping software package (such as Quicken) to organize and monitor your business finances.
- Set the right price for your products and services. If you set your prices too high, you’ll scare customers away; if you set them too low, you’ll be swamped with customers, but you won’t make enough money to stay afloat. Be sure to charge enough to cover your costs while generating a healthy profit.
- Obtain health insurance, and plan for your retirement. When you have your own business, you’re the one who needs to arrange for health insurance and set up IRAs, 401(k)s, or other retirement plans for the day when you’re ready to hang up your business and stroll off into the sunset.
- Pay taxes. As someone famous once said, “The only things you can count on in life are death and taxes.” Well, taxes are a definite, so make sure you pay all the taxes you owe for your home-based business.
Avoiding problems in your work-from-home business
Eventually, every business — home-based or not — runs into problems. Whether the problems are being late on a delivery or hitting a snag with the Internal Revenue Service, as the owner of your own business, you need to avoid problems whenever possible and deal with them quickly and decisively when you can’t avoid them. Some of the problems you may deal with include the following:
- Legal issues: After a good accountant, the next best friend of any business owner is a good attorney. Keep one handy to help you deal with legal issues when they inevitably arise.
- Issues with support services: Finding skilled and reliable outside support services — lawyers, accountants, bankers, business consultants, and insurance brokers — isn’t necessarily an easy task, especially if your business is in a small town where you’re pretty much stuck with what’s down the road.
- Scams and rip-offs: More and more work-from-home business scams seem to appear every day, so don’t rush into any business opportunity. Take your time and fully explore every opportunity before you sign on the dotted line. And remember, if it looks too good to be true, it probably is.
Moving ahead with your small business idea
One of the best things about owning your own business is watching it develop, mature, and grow. After all, a growing business is the gift that keeps on giving — all year round, year after year. To keep your business moving ahead, consider doing the following:
- Make the web work for you. Doing business and generating sales and interest in your business via the Internet is practically a given for any work-from-home business today. You can make the web work for you in any number of ways, from starting a blog or website to networking with others through online forums or social networking sites, such as Twitter, Facebook, and LinkedIn.
- Maintain a serious business attitude. Just because your business is located at home instead of in a big office building downtown doesn’t mean you shouldn’t treat it like the business it is. Although you can have fun and work all kinds of creative schedules, don’t forget that the business part of your business is important, too; you have to treat your business like a business if you hope to be successful.
- Look for ways to grow. For many businesses, growth can turn an operation that is doing well financially into an operation that is doing great! Growth allows you to take advantage of economies of scale that may be available only to larger businesses, to serve more customers, and to increase profits. For these reasons and more, growing your business should always be on your agenda.
Leaving your full-time job for your part-time business
An important, basic consideration that many fledgling, part-time work-from-home business owners face is whether or not to leave a full-time job in favor of a work-from-home business. Before you give up your full-time job, ask yourself these questions:
- Has there been a steadily growing flow of new customers in your home-based business?
- Has your business, even though it’s only been part-time, produced a steady flow of income through seasonal or other cycles typical of the business?
- Are you turning away business because of limits on your time? If not, do you think business would increase if you had the time to market or take on more customers?
Being able to answer at least two of these questions in the affirmative is a good sign that it would be safe to leave your full-time job. Of course, you should also be aware of any developments that could worsen the outlook for your business to grow, such as pending legislation, new technology, the movement of the kind of work you do outside the U.S. (outsourcing or cloud computing), or the decline of an industry your business depends on.
If your day job has been providing you the contacts you’ve needed to build your part-time business, you need to find ways to replace them before you leave your job.
Breaking the umbilical cord of a paycheck is an uncomfortable step for most people. So the closer the current income from your business is to the amount of money you need to pay your basic business and living expenses, the more confident you can be.
Regardless of which work-from-home business you choose, make sure you have considered all eventualities before taking the leap.