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 Your

Inner 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.

Pros

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.

Cons

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.

Think Professionally
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.

Related Articles
  1. Retirement

    Why Retiring Sooner Might Be a Bad Idea

    Learn why even though most people dream of early retirement, it has plenty of downfalls that include less money, lower productivity and schedule upheaval.
  2. Entrepreneurship

    Start Your Own Small Business

    Quit your job, be your own boss and earn a paycheck. Find out what to do to make it happen.
  3. Entrepreneurship

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  4. Entrepreneurship

    7 Steps To Selling Your Small Business

    Money in the bank and newfound free time make this grueling process worth the trouble.
  5. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  6. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  7. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
  8. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  9. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  10. Entrepreneurship

    Are You Really an Entrepeneur? A Reality Check

    If you are going to be an entrepreneur, and you’re doing it on a shoestring, you’ll need more than a good idea. Here are some skills to master.
RELATED FAQS
  1. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  2. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
Trading Center