We’ve successfully managed a business from our home for more than 20 years.
We had a bit of an advantage because I also had a job that brought in income while my partner in life was able to quit his job to get the business started. I was a self-employed, experienced real estate agent with a good client base so I could take over paying bills. If one does not have that reliable income to fall back on, it’s important to have some source of savings or a business loan to support your normal everyday living expenses as well as start up costs for your business.
My partner was already licensed in the state for his profession, and I had good connections from my own business that helped us pick up our first few clients.
We spoke to a CPA about the necessary tax status, and we originally sought the help of an attorney to form an LLC for us, but after learning what is involved in our state, Florida, that can be accomplished fairly easily online and the explanation for the annual reports required along with the forms are also available and fairly simple from the state department of corporations.
You can also establish your business as a corporation, which is a little more detailed, or as a sole proprietor. That’s where your CPA can help you choose the fit that is best for you.
Our CPS offered to come to our home to set us up on an accounting program that is compatible with his office accounting system, which is great at tax time.That included a couple hours of his time teaching us how to use the program. We transfer all our tax information onto a flash drive and drop it by his office
Check to see if your municipality requires a business license to operate out of your home. Ours does.
Our initial overhead was minimal. We contacted our local zoning department to make sure we could operate a home business. We took out an equity loan to purchase equipment and paid it off as quickly as we could. Equity loans can be very risky because your home is your collateral. If you cannot repay even a small loan, the bank can foreclose on your home. We felt confident because of my 2nd income and we had built up considerable savings as a back up. There are other types of business loans out there as well as mentors willing give direction; a good source for anyone starting a new business is SCORE
Once we were up and running, I think the biggest challenge we faced was pricing. We were fairly confident in what our competition was charging because we chose a home business in which both of us had some direct experience. You have to know what your competition is doing. Imperative!!
Even when you determine pricing, it is soooo tempting to discount fees to draw in that new business; in my opinion that is the worst way to get off and running. My partner was the tough one here, he never caves. "Once you lower your price, your client thinks you were overcharging him in the first place." I learned that from a mentor years ago and it’s such an important business basic to us that we have the quote stuck on our bulletin board in the office.
If you know what your competition is doing, you shouldn’t have to negotiate your fees. When we feel we need to entice a client, we offer a break if the client pays cash/check and meets us on the job site upon completion instead of invoicing with a 30 day grace period. 99.9% of our clients jump on that. You’ve not lowered your price, you’ve eliminated one of your services/expenses and passed that savings on to your clients who, in our profession, are always price shopping. So, if need be, we can effectively quote a bit lower than our competition without lowering our prices.
Murphy’s Law will also assure you that the client trying to beat you down on your fees will be your biggest headache during and after the job is complete! I recommend posting that on your bulletin board too!