Starting A Home Based Business

By Richard Okolo

Running a home based business can be an exciting and overwhelming task in itself. When you undertake the entrepreneurship route, one may often wonder what necessary tools are required to do so. This article will attempt to assist you with this venture.

I. Your Office

Make sure that you have a specific area in your home which you can call your office. This will assist you in being more serious about conducting business activities. Be sure to isolate yourself from all distractions to focus clearly on your work. Also, make sure others in your home respect your office as your workplace. It is imperative that people are clear of your special work environment.

Accessories
There are various essential things that you should have in your office for business use. Some of the things are as follows:
– Sturdy work desk with chairs
– Telephone and answering service
– Desktop stationary
– Filing cabinets
– Proper lighting, plumbing, air conditioning and heating
– Business cards, pamphlets, brochures

II. Design A Budget & Get Your Business Tools

You need to make a list and a budget of things you will need to start your business.
You must think about how much you want to spend and how to spend it. Try making a financial forecast to determine a dollar figure to decide on your budget constraints.

In any business, you need tools to be able to implement your plan(s). Some of the necessary tools you may need for your business are as follows:

Personal computer
I recommend one with at least 2GB of RAM (Random Access Memory) and a 150 GB (Gigabyte) hard drive (with the newest processor available). If you really want to save money, you can purchase a computer used or refurbished. When you buy your personal computer, ask the vendor if the PC system has business software applications on it.

Business software applications
Usually when you buy a computer in the store, the PC will come equipped with software. You may not have installed on the computer the necessary software applications that you require. Some of them I recommend are as follows: Microsoft Office, Lotus SmartSuite, Quicken Financials, and Turbo Tax. These programs are fairly easy to use and will help you keep track of expenditures, financial data, etc.

Color Printers & Fax Machines
Most computer systems come with a printer. If you have to purchase one, buy an inexpensive printer which is compatible with your computer. Some of the more popular printer systems are Hewlett Packard, Canon, and Epson. Fax machines can be quite expensive. Only purchase a fax machine if your business will entail you sending numerous documents out on a daily or weekly basis. Otherwise, you can purchase fax software or use a fax service to send documents over the internet. This is usually very cost effective and can save your business money in the long run. To save additional money, try to purchase a printer with refillable ink cartridges. This is especially resourceful if you have to print materials often.

III. Finding & Utilizing Start-Up Capital

Where to get the money? This is the biggest hurdle in the road to entrepreneurship (in the beginning anyway). This requires some savvy investment planning and assistance from business professionals.

The first thing you need to do is create a budget projection. This is a summary of your revenues and expenditures.

Revenues. This area includes how much money will come into your business and from what sources.

Expenses. This will include your utilities, rent, taxes, salaries, loan payments, etc.

Revenues – Expenses = Gross Income

Remember, you are trying to determine your financial viability at this stage. This is not a business plan, but rather a personal business evaluation.

Personal credit check
How is your credit? It is imperative that your credit rating is in good standing to be able to borrow money (if necessary). Find out your credit rating by contacting your credit agency (e.g. Equifax). Remember, you want to be able to borrow money before you need it, not when you actually require it.

Debt & Equity Financing
These terms often throw business enthusiasts into a plethora of thoughts. All this is the money which you borrow vs. the money that will be invested in your business. What I advise here is with each spectrum of financing, you must make sure that the financing terms are clearly specified and attainable.

Personal Savings
Using your personal savings can be advantageous. One reason is that you have full control over your business. There is no debt/equity ratio to consider. At the same time, you may run into a situation where you need additional funds to continue you business and/or expand your operations. My advice here is to use personal savings for the small start-up expenses (e.g. personal computer, printer, software, stationary, furniture, etc). Try to secure additional funds through borrowing and other financing resources.

Credit cards
DO NOT use credit cards to start your business! They almost always have a high interest rate. Again, use credit cards to pay for VERY SMALL start up expenses. Pay off the SMALL balance as soon as the bill comes. This also helps keep intact your credit rating.

Family & Friends
The key here is to make the borrowing a business contract and not a personal guarantee. Therefore, always make a contractual agreement for specified repayments terms. Make the borrowing as professional as possible (a promissory note is a good way to borrow from family and friends).

Business/Personal Loans
There are numerous sources of loans available to a budding entrepreneur. Your bank would be a good place to start. Remember, banks lend money to make money. Be prepared to show a business plan with specific financial statements outlying your R.O.I. (rate of return) on their money and your ability to repay.

The Small Business Administration (www.sba.gov) can assist you further by helping you to locate and secure business loans. They often work with micro lenders to provide not only the start-up capital but also mentorship and training assistance as well.

IV. Mentorship

Find a mentor in the same type of business that you are in. Seek out there advice on a regular basis. And most importantly, find a mentor who has reached a level of success you want to achieve. If you have someone in mind already, be sure to contact them prior to starting your business.

Try to join a business mentoring program and/or an entrepreneurship program. This way, you will be introduced to a positive support network and may possibly meet additional business mentors as well.

V. Form A Success Team

As a small business owner, you will encounter many unforeseen variables in operating your business. Quite often, having the mobility to take your business to the next level can become difficult due to the lack of support around you. Having no one around you who understands and helps to nurture your ideas can make it difficult to forge ahead. Therefore, you may want to assemble a success team with other business owners who share the same interests. Holding regular meetings with your group will allow for growth of your conceptual ideas. You can go online and find groups like this as well.

VI. Tax Advantages

If your small business operates out of your home, you’ve gotten a couple of recent reprieves from the IRS. First, you can now depreciate a portion of your home without incurring a taxable gain when you sell your home, assuming that you’ve lived in your home at least two years.

Second, home office rules previously required that a room in your house be used exclusively for your business and for no other purpose. This rule has been changed. Now, if you use part of a room for your business, you can take deductions for the portion of the room that you use.

If you run your business out of your home, take advantage of these new rules.

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