Think you can handle your own home-based business? Certain personality traits could help you succeed. Starting a business is a big responsibility that includes commitment, professionalism and self-discipline. It involves careful consideration, such as what type of competition you'll encounter, the demand for and quality of the service or product you'll provide and the management of cash flow. Read on to find out how a swift launch and expedited growth can occur as long as you weigh the pros and cons of developing a business, create a solid business and financial plan and understand and abide by local and federal laws and guidelines.
Find YourInner Drive
When it comes to starting your own business, examining your abilities before you act can save you from disappointment and wasted time in the long run. For instance, ask yourself whether you can set goals and stick with the plan. Once the goals are set, do you think you can accomplish what you've planned? Setbacks will occur; do you think you can remain optimistic?
Most entrepreneurs often demonstrate characteristics that include confidence, risk-taking, creativity, drive and determination, but the following personality traits can directly impact your business as well.
Passion for the business will make you a hard worker.
Ethical principles, such as wanting to provide a useful business to your community and to have the respect of your peers, can give your business a positive image.
Persistence is needed to stay on top of events taking place within the business.
Networking will help your business grow because it gets the word out about your company and creates relationships for its benefit.
Organization is another attribute that aids growth.
Points to Consider
Determine whether this is the right choice before you take on the challenge by considering the pros and cons. Some potential pros and cons of a home-based business are as follows.
You can stay at home (no commuting).
You may dress casually.
You can set your own work hours.
You are your own boss.
You would have more tax benefits and write-offs, such as claiming depreciation for your home office.
The town or city you reside in will want to maintain a positive character and quality, which will mean your activities and future growth potential may be limited.
You may face zoning restrictions.
You may face prohibition of the production and sale of certain goods.
Most likely you will need to invest many hours to set up the business; this may infringe on your personal and family life.
The Internal Revenue Service (IRS) may have a bunch of questions for you to answer, as this federal watchdog keeps a close eye on home-based businesses.
Resources to Consider
Forging ahead and starting the business may require you to enlist the help of a local attorney and an accountant, but free information and assistance are also available from your local Small Business Development Center (SBDC) and SCORE offices. Both are associated with the U.S. Small Business Administration (SBA). The IRS can even provide free assistance, which would include accounting and recordkeeping, through the Small Business Tax Education Program.
Begin With a Solid Framework
A business plan is needed for the company. It will allow you to foresee whether your ideas will work and what challenges you'll face down the road. First, determine whether the business will be a sole proprietorship, partnership, limited liability company (LLC) or corporation.
Outline the mission statement, which should detail exactly why you are in business. Beyond that, write down the goals for the business, how you will meet the goals, who will be responsible for them and when they will be realized.
Evaluate the cost of the service or product in the outline. For instance, determine the costs of all materials found in the product, labor costs for creating the product and the cost for indirect materials and labor, such as supplies and clerical services. Figure out the cash flow by starting with the purchase of the inventory and following through to how payment is collected.
The business plan should also address the following points:
- who the customers are and their needs
- your knowledge of the business
- your qualifications
- pricing models
- how the finances are managed
- projections for the future
- how it is different from the competition
Financing and Legal Setup
Identify the amount of startup funds and the type of financing you will need and their source.
It's important to understand and follow federal, state and local government rules. Papers must be filed if you incorporate, or want to protect the name of the business. Go to your town office or city hall if licenses and permits are needed to operate the business. The local code-enforcement officer can let you know whether you comply with zoning restrictions.
Register for an Employer Identification Number if you plan to incorporate or if your partnership or proprietorship has employees. The business area or home office must be part of the home and used on a regular and exclusive basis in order to qualify for a tax deduction from the IRS. Don't assume your home insurance will cover your home-business activities. Find out how the business will affect your policy and get any extra policies that will help protect you against losses.
Create a business environment that maintains professionalism and allows you to function well. Analyze the space you will need for the office, production, tools and equipment, clientele and pick-up and delivery. Consider the location, traffic and parking.
The following are some important items you may need to include:
- a home computer
- an address or post office box
- a separate telephone line
- voice mail
- a fax machine
- company letterhead
- a separate bank account
The Bottom Line
Deciding to start your own business from home is obviously a big step, but with the right forethought and preparation it can be a rewarding experience, both professionally and personally.