Chapter One
What You Need to Know about Home-Based Business
In This Chapter
* Defining the home-based business
* Understanding the basics
* Dealing with the good and the bad news
Congratulations! You've decided to start a home-based business. We welcome you as you join with millions of others who have already made a decision to start a home-based business. According to the Small Business Administration (SBA), there are about 23.7 million businesses in the United States today. Of this total, 99.7 percent are small businesses (defined by the government as businesses with fewer than 500 employees), or about 23.6 million. Of these, just over half - about 11.8 million - are home-based businesses.
That's a lot of home-based businesses!
Take it from us: Owning your own home-based business may be the most rewarding experience of your entire life. And not just in a financial sense (although many home-based businesspeople find the financial rewards to be significant), but also rewarding in the sense of doing the work you love and having control over your own life.
Of course, every great journey begins with the first step. In this chapter, we provide you with an overview of this book, taking a look at the basics of home-based business - including getting started, managing your money, avoiding problems, and moving ahead. Finally, we'll consider some of the good news - and the bad - about starting your own home-based business and knowing when it's time to make the move.
Home-Based Business Defined
A home-based business is, not surprisingly, a business based in your home. Whether you do all the work in your home or on customers' or third-party premises, whether you run a franchise, a direct-sales operation, or a business opportunity (described in the next section), if the center of your operations is based in your home, it's a home-based business.
The Basics of Home-Based Business
Each part of this book is dedicated to a specific aspect of the home-based business process. In the sections that follow, we take a peek at the topics to be covered within each of these parts.
What kind of business will it be?
Once you decide you're going to start your own home-based business, you're left with two questions: Exactly what kind of home-based business should you start, and what's the best way to market your products or services?
There are two major types of home-based businesses: businesses you start from scratch and businesses you can buy. The latter category of home-based business is further split into three types: franchises, direct selling, and business opportunities. Whether you prefer to march to your own drummer or get a business-in-a-box depends on your personal preferences: whether you like to create systems (or follow those of others) and how much structure you like.
TIP
The advantage of a business you start from scratch is that it can be molded to your preferences and to existing and emerging markets, and thus provides 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. (In their book Finding Your Perfect Work, Paul and Sarah provide an appendix with characteristics of over 1,500 self-employment careers and hundreds of examples in the book of unique businesses that people have carved out for themselves.)
Each type of home business that you can buy, on the other hand, has its own spin. Here are examples of the three different types.
Franchise
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:
American Leak Detection (water/gas leak detection) Merry Maids (cleaning service) Kinderdance International (teaching dance to preschoolers) ServiceMaster (cleaning service) Terminix Termite and Pest Control (pest control)
Direct selling
Direct selling involves selling consumer products or services in a person-to-person manner, away from a fixed retail location. There are two main types of direct-selling opportunities:
Single-level marketing is making money by buying products from a parent company and then selling those products directly to customers. Multi-level marketing involves making money through single-level marketing and by sponsoring new direct sellers.
Some common home-based direct-selling opportunities include the following:
Amway/Quixtar (household cleaning products) Discovery Toys, Inc. (toys) Longaberger Company (baskets) Mary Kay, Inc. (cosmetics) Nikken, Inc. (wellness technology)
Business opportunities
A business opportunity is an idea, product, system, or service that someone else develops and offers to sell to others to help them start their own, similar business. (One way to think of a business opportunity is that it's any business concept you can buy from someone else that's not direct-selling or a franchise.) Your customers and clients pay you directly when you deliver a product or service to them. Here are several examples of business opportunities that can easily be run out of one's home:
Balloon Wrap, Inc. (balloon gift wrap) Cardservice International (transaction service provider) Home Video Studio, Inc. (video studio) Rhino Linings USA, Inc. (truck bed liners)
Interested in finding out the names of more companies and how to get in touch with them? Entrepreneur magazine (at www.entrepreneurmag.com) and gosmallbiz.com also have extensive information on business opportunities you can buy. You can also do an online search for companies on Google (www.google.com), using the keywords business opportunity.
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So once you decide on a business and get it started, you've got 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! Check out the rest of Part I for more information on choosing and marketing your business.
Managing your money
Money makes the world go 'round, and because this is your financial well-being we're talking about, it's very important to have a handle on your money. This means you've got to do the following:
Find the money you'll need to start up your business. The good news is that most home-based businesses require little or no money to start up. For the rest of you, there are lots of sources of start-up capital, including friends and family, savings, credit cards, bank loans, and more. Keep track of your money. For most of us, this means using a simple accounting or bookkeeping software package, such as QuickBooks, Quicken, or Microsoft Money, to organize and monitor your business finances. Set the right price for your products and services. Set your prices too high, and you'll scare customers away; set them too low, and 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've got your own business, you're the one who needs to arrange for health insurance and setting up IRAs, 401(k)s, or other retirement plans for the day when you're ready to hang up your business and ride 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 for sure.
Be sure to check out Part II of this book for lots of detailed information on managing your money.
Avoiding problems
Eventually, every business - home-based or not - runs into problems. As the owner of your own business, it's very much in your interest to avoid problems whenever possible and to deal with them quickly and decisively when they can't be avoided. Some of the problems you'll potentially 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 the inevitable legal issues when they arise. Working with support services. Finding skilled and reliable outside support services - lawyers, accountants, bankers, business consultants, and insurance brokers - is not necessarily an easy task, especially if your business is in a small town where you're pretty much stuck with what you've got. Scams and ripoffs. There are loads of home-based business scams out there, and it seems that more appear every day. Part of avoiding scams and ripoffs is remembering these words: If it looks too good to be true, it probably is! Don't rush into any business opportunity; take your time and fully explore it before you sign on the dotted line.
Want to avoid problems in your home-based business? Good. Simply move on to Part III, and you'll be well on your way to doing just that.
Moving ahead
One of the best things about owning your own business is watching it develop, mature, and grow. A growing business is the gift that keeps on giving - all year 'round, year after year. So to keep your business moving ahead, consider doing the following:
Maintain a serious business attitude. Just because your business is located at home instead of in a big office building downtown, that doesn't mean that you shouldn't treat it like the business it is. While you can have fun and work all kinds of creative schedules, don't forget that business is serious, too, and that you've got to treat your business like a business if you hope to be successful.
Institute a truce with your friends and family. Moving forward with your business requires that you minimize disruptions caused by loved ones, neighbors, friends who work in regular jobs, and anyone else who can distract you from your work. Do whatever it takes to avoid the negative impacts of such disruptions to your business.
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 might 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.
ASK PAUL & SARAH
To discover in-depth information on these particular topics, be sure to check out Part IV sooner rather than later.
Should you leave your full-time job and ramp up your part-time business?
Ask yourself several questions:
Has there been a steadily growing flow of new customers over your time in business? Has your business, even though part-time, been producing 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, can you see that if you had the time to market or take on more customers, they would be there?
If you can answer at least two out of these questions in the affirmative, it's a good sign that it would be safe to leave your 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 United States (outsourcing), or the decline of an industry your business is dependent on.
If your work has been providing you the contacts you have used to build your part-time business, it's important you find ways to replace these.
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 producing the money you need to pay your basic business and living expenses, the more confident you can be.
The Good News and the Bad
Surprise, surprise: There's both good news and bad when it comes to starting your own home-based business. The good news is that the good news probably outweighs the bad for most of us. So in the spirit of putting our best foot forward, let's start with the good news.
Reasons to start a home-based business
When you start a home-based business, you're leaving behind the relative comfort and security of a regular career or 9-to-5 job and venturing out on your own. How far out you venture on your own depends on the kind of home-based business you get involved in. Many franchises provide extensive support and training, for example, and franchisees (someone like you) are able to seek advice from experienced franchisees or from the franchisor (the party selling a franchise opportunity) when and if it's necessary. This support can be invaluable if you're new to the world of home-based business.
At the other end of the spectrum, some business opportunities offer little or no support whatsoever. If you're a dealer in synthetic motor oil, for example, you may have trouble getting the huge, multinational conglomerate that manufactures the oil to return your calls, much less send you some product brochures. Training or extensive, hands-on support if you run into the inevitable snags? Nope - that's not going to happen.
Which brings us to the good news about starting and running your own home-based business:
You're the boss. For many owners of home-based businesses, just this is reason enough to justify making the move out of the 9-to-5. You get all the benefits of your hard work. When you make a profit, it's all yours. No one else is going to try to take it away from you (except, perhaps, the tax man - see Chapter 10). You have the flexibility to work when and where you want. Are you a night owl? Perhaps your most productive times don't coincide with the standard 9-to-5 work schedule that most regular businesses require their employees to adhere to. And you may find that - because interruptions from co-workers are no longer an issue and the days of endless meetings are left far behind - you're much more productive working in your workshop than in a regular office. With your own home-based business, you're the one who decides when and where you work. You get to choose your clients and customers. The customer may always be right, but that doesn't mean you have to put up with one who mistreats you or gives you more headaches than they're worth. When you own your own business, you can fire the clients you don't want to work with. Sounds like fun, doesn't it? (Believe us, it is!) You can put as much or as little time into your business as you like. Do you want to work for only a few hours a day or week? No problem. Ready for a full-time schedule or even more? Great! The more effort you put into your business, the more money you can make. You get to decide how much money you want to make and then you can work the kind of schedule that will help you meet your goal. (Continues...)
Excerpted from Home-Based Business For Dummiesby Paul Edwards Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
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