Starting A Home Business In A Tough Economy

by WorkFromHome on November 21, 2011

When most Americans think about the current state of the economy, their minds almost immediately focus on the negative aspects of the things that surround them: high unemployment, low or stagnating wages, and a cost of living that seems to be increasing by leaps and bounds even as the ability to meet life’s expenses becomes harder and harder.

What they usually do not focus on is that a combination of great technological advancements, government incentive programs, and a little American ingenuity can lead to a great home business that helps them buck current economic trends. It’s true that home businesses aren’t for everyone, and there are several potential drawbacks to consider. However, for those with the right amount of talent, management capability, and motivation, a home business can be the perfect way to declare independence from the larger economy by building a self-made, self-sustaining business and profit model.

Before beginning this extensive, if lucrative, process, there are quite a few things to consider. It’s best to fully address each of these issues before beginning the process, so as to maximize your initial investment and your chances of a great return on that investment.

Are You the Home Business Type?

Starting a home business requires more than just a great idea or a highly developed set of skills. While those things are a great foundation for a successful business venture, they will need to be put to great use and intricately managed as time goes forward. Perhaps the biggest thing that people overlook is that they must not only be motivated and full of ideas to start a home business, but they must be able to manage themselves.

And it cannot be overstated just how difficult it can sometimes to be manage one’s self. Sure, it’s easy to manage other people by telling them what to do and informing them of the potential consequences, but managing yourself means laying out a set of goals and suffering your own consequences — generally, a lack of money at the end of the week or month.

Do You Have the Management Personality?

Simply put, there those who have it and those who don’t: the management personality is not universal and it often cannot be instilled in those who simply don’t harbor the personal characteristics friendly to successful management. The management personality combines things like customer-centric focus, human relations skills, goal-setting and rewards, and many other factors. You must be creative enough to develop these goals, disciplined enough to stick to them, and social enough to present your well-managed self to a whole host of diverse consumers and clients.

Perhaps one of the biggest aspects of possessing management personality is the ability to be flexible and adaptable to change. Often, those who are new to management will assume that they simply need to be strict and rigid, adhering directly and unwaveringly to their goals and objectives. They perceive change and adaptation as weaknesses and liabilities in their business plan, and they’ll have none of it.

But this could not be further from the case. The true management personality understands that goals and objectives are essential, but they’re also aware that success depends on adapting to factors which are out of their control. Often, the market dictates the path to success more than the business plan. And those new to home business ownership will find themselves responding to the market quite frequently at the outset of their entry into the arena. That’s because new business owners often try to impose their ideas on the marketplace, but often have too little clout to do so. They’ll slowly understand that you must indeed work from the bottom to the top, working with clients and changing their attitudes before the market at large will respond to their plans.

Alongside this flexibility must be a commitment to the business and its success. It won’t be easy to figure out the market you’re entering and serving, and there will be many days that demand long hours, extensive phone calls, and even some lost profits. But it’s important not to give up or let these early struggles doom your business in the long-term. The management personality is committed to the business, aware that struggle often breeds success, and wiling to suffer through early hardship in order to achieve future success.

Business Skills and the Do-It-All Home Business Owner

One thing to keep in mind when starting a home business is that you will be required to perform every single task related to it. That means you’ll not only be responsible for a customer-centered approach that caters to each client’s needs, but also for maintaining the books, records, finances, advertising materials, marketing approach and research, and taking regular inventory of your products, services, failures, and successes. It can be daunting even for the most seasoned and talented professionals. Can you handle it?

If it sounds intimidating, that’s because it generally is for a large number of business professions. But, true to the management personality’s commitment to the business’ success, many of these intimidated home business owners seek help from outside sources. One of the biggest sources for help is the United States Small Business Administration. Operated as a branch of the federal government, the Small Business Administration offers loans, grants, business planning and counseling services, tax information, and even management and business ownership training programs.

Because it’s a branch of the federal government, the Small Business Administration has many local offices that are close to almost anyone in the United States who is looking to start his or her own business. It’s easy to stop by, pick up the necessary information, and talk with a consultant who can set you up for greater success. And the best part is that many of the programs are free or offered at a far reduced cost as compared to college and university courses that cover the same topics.

Of course, that doesn’t mean that home business owners should discount the importance of taking classes at the local college or university. Many universities offer evening classes, billed as “continuing education” courses, that do not count for college credit. These courses are taught by seasoned business professionals, largely to bring aspiring entrepreneurs up to speed on the skills and techniques they’ll need to employ in order to succeed in their business ventures. These courses typically run for several weeks, or may run as a series of weekend workshops. Either way, they’re a great way to learn the tools and tricks of the trade from the people who have been there and learned the hard way.

Learning the hard way is another great way to develop strong business skills, however. It’s often been said that the key to success is failure, and many people are more inclined to learn from their mistakes than they are likely to learn from a business professional who teaches an evening college course or a Small Business Administration employee. That’s because experiencing the consequences first-hand can often teach, in a very real way, what happens when there’s a failure of management, maintenance, or customer service. And it’s like that, much like the child who learns not to touch a hot stovetop, business professionals will learn exactly what to do in order to avoid their most recent mistake.

Working from Home: Should I Make My Home an Office?

One of the considerations that few aspiring home business owners make is that starting a business from home will radically change the way they live their daily lives — even when they’re not working. That’s because a home business necessitates a dramatic change in how a home is operated and structured; inevitably, one room in the home will have to be converted to an office space, complete with computers, phones, printers, scanners, and faxes. The space will be full of files, off limits to young children and perhaps even spouses, and will largely become the nerve center of a home business owner’s daily life.

If you’re the type of person who needs a constant change of scenery in order to be happy, it’s worth considering that you’ll be living and working in the same place. And while this necessarily means less costs related to transportation, fuel, and insurance, it also means that you will be stuck within the same four walls for the entirety of your day — from sunrise to the end of the workday, from breakfast to dinner, from waking up in the morning to getting in bed at night. If you can’t handle that kind of repetitiveness and monotony, it’s worth considering a different option or restructuring your daily life so that you have plenty of breaks and diversions that help you maintain your sense of sanity.

Maintaining a Wall Between Business and Home

There is perhaps nothing more important when you work from home than separating business from your home life. This can be an especially difficult challenge, even for the strictest management personality. After all, the home is full of diversions that a typical office simply is not. Will you be distracted by cleaning that needs to be done? Will you be liable to wander into the kitchen and raid the refrigerator on a daily basis?

Perhaps the best and most essential way to begin creating a division between the home and the home office is simply to create a functional home office in a room in your home. This office should be very office-like, with few distractions and a good deal of organization. It should optimize your workflow and encourage you to finish your work in a quick, timely, and efficient fashion.

It’s also important to maintain this separate office space in order to ensure your family’s sanity. Consider the fact that you don’t’ take your spouse and your children to work every day, and they don’t ever ask to go with you for an eight-hour day in the office, either. Keeping your work separate respects their right to relax in the home and enjoy an evening in each others’ company without being interrupted by your work — be it phone calls, emails, bookkeeping, or other tasks.

A good home office is also a great way to get meaningful tax breaks from the federal government, as the Internal Revenue Service permits small business owners to deduct their expenses — such as maintenance, furnishings, office supplies, utility costs, or rent payments — from their business’ income. The stipulation, of course, is that the business space is used strictly for business and nothing else. If you’re working from your living room, rather than an office you have created for yourself, it’s pretty hard to convince the government that they should deduct business expenses from the same room where you keep your couches, your television, and an extensive collection of family movies.

Another way to create a meaningful wall between your home and the business you operate from within it is to arrange for a separate landline telephone line that is used strictly for business calls and only rings to a phone and answering machine that are kept in the home office. This will ensure that all business calls are made from the office area, and that your family will not be disrupted by any calls that come in during the evening hours after they have returned home from work and school. It’s also a great way of proving to tax specialists that your home office area is, indeed, separate from your living area and thus eligible for tax credits and refunds which benefit small business owners.

Make Sure You’re Legal and Properly Liable

Another thing that must be considered before starting and operating a home business is that the future business falls within the legal guidelines of the community in which your home is located. This is because most communities have strict zoning laws and regulations that limit the size and scope of any business operated in a residential area. Usually, this is not a concern that most small business owners will have to give much thought to after the initial check-up on local laws.

Typically, communities restrict businesses based on the number of people they employ, the burden they place on traffic and local parking availability, and the amount of income they’re generating in a residential space. But for most home business owners, they are self-employed and do not rely on any other employees. They don’t place a strain on local traffic or parking, as they require no assistance. And they are merely generating enough of an income to live their daily life without worrying about finances, rather than generating hundreds of thousands — or millions — of dollars that might make a meaningful impact in the community’s tax revenue.

However, if your business does cater to clients and will be meeting with them at the home, it’s important to consider how often those clients will be stopping by, where they will be parking, and how that will affect your community. In this instance, it is important to check with local officials and make sure that any business taken care of one-on-one with clients is okay with neighbors and those in charge of enforcing traffic and parking regulations.

Another consideration to be made by the new home business owner is whether or not they are properly insured. Those businesses which produce a product and sell it to consumers will want to make sure that those products are covered by a hefty liability issuance policy that protects the business owner in case a product is defective, harmful, or causes some other complication among those it is sold to. You’ll also want to make sure that your business itself is insured against loss, damages, and other issues which can affect businesses of any size.

Finally, it’s important to make sure that your business is not subject to any licensing requirements or inspection procedures required by either your local community, your state, or the federal government. This usually only applies to business which are producing a physical product — anything from toys and accessories to baked goods and other foods. But it’s better to be safe than sorry, as the potential penalties for operating without the proper licenses and inspections can be especially stiff and result in a damaging hit to your profits — and thus your personal finances.

Is There a Market for Your Product or Service?

Before going into business on your own, it’s important to evaluate just how big the market is for the product or service you’re going to be marketing to consumers and clients. This is an important part of the process; even the best ideas are subject to failure if the marketplace is already crowded with competition and low demand.

Begin By Estimating Your Potential Sales

In order to ensure that your idea has a large market to cater to, it’s time to identity just how large — geographically — your market is. Decide on the exact area in which you plan to offer your service and compete with those who have similar offerings. This often means limiting yourself to the city you currently reside in, the suburbs which surround that city, and maybe a few outlying rural areas. Keeping it small in the beginning ensures that you’ll build a strong local client base, and it helps to ensure that you aren’t overreaching or spreading yourself too thin from day one. Remember that a larger geographic area requires more time, more money, and more effort — things which may be in short supply at the very beginning.

After defining the size and geographic scope of the market you’re about to begin serving, it’s time to consider who lives there. Not just how many people call your area home, but how many of them have the means and the needs to buy your product. Are you offering something that is relevant to the local lifestyle? Are you charging an amount for your product or serve that is easily affordable by the local community? Remember that you may have a highly desirable product, but a tough economy and a discerning consumer will still force you to offer the best rate — or leave the market entirely.

Once you’ve identified where you’re offering your product, it’s time to see who is offering the same thing — or something similar — in that defined geographic area. The key to beating the competition is to research them and know exactly what they’re offering. You’ll want to make a list of pros and cons as it relates to each competitor and each of their products. These are opportunities for you to improve on their offering, and they’ll also serve as advertising and marketing material that will draw new clients. Additionally, you’ll be able to speak with people in an intelligent manner about what you’re offering them and why it’s better than what they already have.

Perhaps the best way to do this, other than using your own knowledge of the area in which you live, is simply to begin speaking with your friends and neighbors in the area. Ask them what they know about certain brands or businesses, ask them what they’re willing to spend on those services (in a way that is a little less overt), and get a sense for how they feel about switching to a service you might offer. Talk about the good, discuss the bad, and understand what you must do to make an immediate impact and land your first paying customers.

Are You Fully Prepared?

If you’ve completed all of the processes and considerations mentioned in the above sections of this article, it’s likely that you consider yourself well-prepared to begin your own home business. You’ve done research on the local community’s needs, purchasing power, and desire for a new service; you’ve evaluated your home’s suitability as a workplace and its impact on your family; and you’ve looked into the laws and regulations for small businesses, traffic and parking needs, liability and insurance, and licenses and inspections that relate to your business.

You’re probably on the road to success, but there are just a few more steps to complete before you can consider yourself fully prepared and ready to tackle the challenges of home business ownership.

Crafting the Business Plan

One thing that has not yet been discussed is the necessity of a strong business plan that will dictate exactly what your business will produce, how it will produce those goods or services, who it will serve, what will be charged for the products or services, and what the expectations are for profits, overhead, and your own annual salary.

This business plan dictates what each aspect of the business will — or should — cost. Whether it’s advertising and marketing materials, home office equipment and supplies, customer outreach and relations, and other necessary items for the business. It lays out a plan for profitability, setting a strict — yet achievable — goal for when a profit will first be turned.

This plan is not only an essential way to keep yourself on track, but it’s also a key way to present your ideas to banks and small business lending institutions. Those institutions are more than willing to help small business owners get a financial head start on their ideas, but they’ll need solid documentation that a business has a great plan for success. They’ll want to know that your expectations are ambitious, but realistic, and they’ll want to know that you’re a qualified and competent manager of your own time, your own space, your own family, and your own products and customers. A strong business plan is the key to keeping yourself on track and to impressing those who may be willing to invest in your long-term success.

Be Future-Minded

Starting a business at home is going to be tough, at least for the first few months or even the first year. In addition to your business plan, make yourself a list of expectations — maybe even hopes and dreams — about where your business will find itself in two years, five years, and even ten years. Set long-range goals that inspire you to meet short-term goals, and always be thinking of the next big success. Keep expansion in mind, both in terms of products and in terms of the geographic area you serve. Always be willing to adapt your business to a changed market or the growing needs of your client base, and keep in mind that this home business is not just a “now” thing, but a long-term lifestyle choice and a change in the way you operate your life.

What to Do Next

After completing all of the steps above, it’s time to get the legal documentation and small business funding in place that will set you up for success. It’s time to begin developing advertising and marketing materials and disseminating the message your business wishes to convey to clients and customers. You have done your research and you now know where your opportunities are based. This is the key to seizing them and landing your first big success.

With a well-researched market, a well-reasoned business plan, and a tough management personality, the next thing you’re going to do is succeed at starting a home business.

Related Articles:

Previous post:

Next post: