4.01 – Basics of Home-Based Business
Owning a home-based business can be incredibly rewarding, both financially and personally. It allows you to do the work you love while maintaining control over your own life. This chapter covers the fundamentals of starting and managing a home-based business, including financial management, avoiding pitfalls, and knowing when to make the leap. It also explores the good and bad aspects of starting a home-based business, the process of starting from scratch, and transitioning to working from home.
Looking at the Basics of Home-Based Business
A home-based business is one that operates primarily out of your home. Whether you work entirely from home or partly at clients’ locations, if the core of your operations is at home, it qualifies as a home-based business. Here’s what you need to know.
Determining the Kind of Business You Want to Have
When starting a home-based business, you need to decide on two key things:
- What type of business you want to start.
- How you will market your products or services.
There are two main types of home-based businesses:
- Businesses You Start from Scratch: These allow you to mold the business to fit your preferences and market needs, providing a wide variety of possibilities. These tend to be more successful over the long run.
- Businesses You Buy: These include franchises, direct-selling opportunities, and business opportunities.
Each type has its own advantages and considerations.
Franchise
A franchise is an agreement where one business grants another the right to distribute its products or services. Common home-based franchises include:
- Aussie Pet Mobile: Mobile pet grooming
- Jani-King: Commercial cleaning service
- Jazzercise: Dance/exercise classes
- ServiceMaster Clean: Cleaning service
- Snap-on Incorporated: Professional tools and equipment
Direct Selling
Direct selling involves selling products or services directly to consumers. There are two main types:
- Single-Level Marketing: Making money by buying products from a parent company and selling them directly to customers.
- Multi-Level Marketing: Making money through single-level marketing and by sponsoring new sellers.
Examples include:
- 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
Business Opportunity
A business opportunity involves buying an idea, product, system, or service to start your own business. Examples include:
- Astro Jump: Inflatable party rentals
- Debt Zero LLC: Debt settlement
- ClosetMaid: Storage and organizational products
Resources like Entrepreneur Media and GoSmallBiz offer extensive information on business opportunities.
Managing Your Money
Effective financial management is crucial for your home-based business. Here’s how to handle it:
- Find the Money to Start Your Business: Many home-based businesses require minimal startup capital, but franchises or purchased opportunities may need more funding.
- Keep Track of Your Money: Use accounting software like Quicken to organize and monitor your finances.
- Set the Right Prices: Ensure your prices cover costs and generate profit.
- Obtain Health Insurance and Plan for Retirement: Arrange your own health insurance and retirement plans.
- Pay Taxes: Ensure all business taxes are paid.
Avoiding Problems
Every business faces challenges. To minimize issues:
- Legal Issues: Keep a good attorney to handle legal matters.
- Support Services: Find reliable accountants, bankers, consultants, and insurance brokers.
- Scams and Rip-Offs: Carefully evaluate any business opportunity to avoid scams.
Moving Ahead
To grow your business:
- Make the Web Work for You: Use online platforms to promote and sell your products.
- Maintain a Serious Business Attitude: Treat your home-based business professionally.
- Look for Ways to Grow: Consider expansion to increase profits and take advantage of economies of scale.
Leaving Your Full-Time Job for Your Part-Time Business
Consider these questions before leaving your full-time job:
- Is there a growing flow of new customers?
- Has your part-time business produced steady income?
- Are you turning away business due to time constraints?
Affirmative answers to these questions indicate it may be safe to transition to your home-based business full-time. Be aware of potential challenges, such as new technology, outsourcing, or industry decline.
Breaking away from a steady paycheck can be daunting. The closer your business income is to covering your expenses, the more confident you can be in making the transition.
