Esteem
Magazine
Setting
Up a Home Office
By
Jeffrey Babener & David Stewart
Most people
approach a home office in a "seat-of-the-pants"
fashion. However, by making the time now to do it right,
you'll save yourself valuable future time and money.
Depending upon your resources, you may have to follow
this process in stages as you can afford it.
Did You
Make the Right Decision?
Before we
start the list of what to do and what to get, let's talk
just a bit about the very first problem facing every
decision maker ... doubt. The minute we make a choice,
the very next thing that happens is to experience doubt
as to whether or not that choice was correct. It's
natural. The adage that applies here is, "Don't
sweat the small stuff." And the real secret to
success is - it's all small stuff!
Someone-usually
a close friend or family member - is bound to tell you
that, "Many people feel that there is something
unprofessional about operating a home-based business."
They may also encourage you to take steps to hide that
fact from the business community. Thank them for their
help, and - don't believe it for a minute! Economic
forecasters predict that by the early 1990s, as much as
20 percent of the entire U.S. work force will be
exclusively home-based. Remember, we told you there are
currently 18.3 million businesses operating out of the
home - a 23 percent increase in only one year! Not only
is there absolutely nothing to be ashamed about if you
conduct business from your home - in fact, you are a
genuine pioneer riding the wave of the future. As long as
your dealings are honest and you conduct yourself in a
business-like manner, you're home free. And freedom is
what this is all about.
Smile When
You Say "Uncle"
Many of the
recommendations we'll be making in this article will
enable your business relationships with the Internal
Revenue Service to be much more "cordial." At
one time (and to some extent, even today), a home-based
business made IRS personnel sit up and take notice. In
many cases, such a declaration meant an automatic audit.
That IRS practice has diminished dramatically. Imagine,
18.3 million automatic audits - no way. It does not mean,
however, that your business will not be subject to close
scrutiny. It does not mean that you can avoid keeping
good records. It does mean that as of this writing, home-based
businesses may be one of the few kinds of tax-advantaged
businesses around today.
Here's our
list of things to do. Remember, we're not suggesting you
spend lots of money or remodel your home to accommodate
your new office. Although, you may establish such a
successful business so quickly that you require a new
1600 sq. ft. addition with beamed ceilings and skylights,
four more phone lines, two computers, audio-video system,
paging system, car phone, training facilities to
accommodate, say, 50 or 60 Networkers, a pool... well,
you'll see.
Seriously,
here's your list:
- Plan
carefully when determining where your office
should be located in your home. To satisfy IRS
requirements, it should be an area - preferably a
separate room or rooms-that you use exclusively
for your business. If it is also used as a sewing
room, a place for your children's model train
layout, or a frequently used spare room, you
cannot legitimately claim that entire portion of
your home's square footage as business use for
tax purposes.
If you have children or
pets in your home, we recommend a room that can
be isolated by a closed door (a secure door is a
must, a lockable door may be even better). It
will be frustrating to return to your office one
day and find that your important business papers
have been scribbled all over with red crayon by a
budding artist or chewed by a teething puppy. If
you invite customers or associates to your
office, it's important that children and pets
respect your professional space and not interfere
with the conduct of your business.
Before
settling on a location for your home office,
consider a couple of things: foot traffic,
machine noise (think twice about putting your
office next to the laundry room), ventilation,
heating and cooling, location of telephone lines,
electrical circuits and windows. Too often,
people select a location for a home-based office
that is secondary to uses by other family members.
That's a credit to your sense of fairness and
consideration, but before you make that kind of
decision, think about how much time you will
spend in that office during the months and years
to come.
Think
about the purpose of that office. If you are
going to be spending one third or one-fourth of
your waking hours in that environment - earning
your and your family's living - it should be as
comfortable and convenient a place as possible.
Think, too, about different times of day and plan
on avoiding conflict with other family members'
routines.
A
dear friend of ours once located his home-based
office in a downstairs room of his two-story
house. Unfortunately, the room had no windows.
Although it was well-lighted and quite
comfortable from most standpoints, and
attractively decorated as well, his inability to
see outside bothered him greatly. He felt closed
in, inhibited and constrained. Soon, he couldn't
wait to get out of his office and go home! He
eventually moved out - not of his home, but of
that room. It became a wood-working shop where
now he spends only a few minutes at a time.
One
other thing. Your family members will have to
accommodate your new location and your new
routine. They may even have to make some
sacrifices to make your home office a reality.
Involving everyone in your decision making
process will make it much easier - and you'll
probably get some great ideas from them as well.
Once your family understands the reason for the
change and what positive benefits it will mean
for them, they will accept the idea with grace.
If you're like most of us, when your family is
behind you and truly supportive, there's nothing
you can't accomplish.
- Selecting
a name. As an individual, you can begin simply
with your name, followed by your business.
However, the name you choose for your business
can be very, very important. So give it a lot of
thought. Here's why:
You
only get one chance to make a first impression.
The name of your business is what most people see
or hear first. Your name is what marketing
experts refer to as your position. Positioning is
the image you and your business have in the mind
of the public. And it's in the mind that your
name gets its first chance to create a customer.
A bad
position can break a business - even a rich and
powerful one. Would you buy a Xerox computer? Or
how about an Exxon office system? Both of these
Fortune 500 giants lost a fortune because of poor
positioning. Xerox means copiers. Exxon means gas
and oil. Nobody wanted computers from either of
them - even though their products were excellent!
A good position cannot promise to make a business
successful, but it will help tremendously.
Shake'n'Bake says it all, and so does Taster's
Choice, to name just a few. Our recommendation is
that you choose a name that gives your potential
consumer a clear idea of what your company does
and that you do it better than anybody else.
Please,
don't be tempted to use only initials. The public
grants the privilege to use initials to
businesses when their fame and reputation deserve
it. IBM was International Business Machines for
years before we started calling them IBM. The
same was true for GE and AT&T. Spell it out
for now.
In
any case, be sure you are aware of all the
regulations in your state regarding filing a
business name. If filing a DBA is necessary, be
sure you do it before opening your business
checking account. Some banks require a copy of
the DBA filing before they will open an account
for you. If you choose to incorporate, the first
part of the process is "clearing" the
corporate name in your state. A bank may want a
copy of these papers as well.
- Opening
a business checking account is very important.
Most of the time, people in network marketing buy
and sell products. They might send a personal
check to pay for those products, and when they
sell them, they put the money back into their
personal account and spend it for groceries or
other needs. They may make a good profit, but
they won't know how much, when, or from what
source. What do most people do when they have
money? They spend it.
If
you are serious about your business, you need a
separate business account. You will need that
account for tax purposes, but opening a business
checking account is also visible evidence of your
commitment and your decision to go into business
for yourself.
Don't waste money on
fancy checks or checkbooks. The cheapest are
often the best. If you have a business name,
consult the bank officer handling your account
about the way your name should appear on the
account and on the checks themselves. Some states
have requirements that your name be listed first,
then the initials "d/b/a" (doing
business as), followed by your business or
company name. For example:
Bill Smith d/b/a
Smith's Home Products 500 Main Street Anytown, U.S.A.
Your
bank officer will know how to handle this
procedure. Incidentally, all banks are not
created equal. Choose your bank with the same
care with which you'd choose a car. Shop around.
Kick the tires by comparing fees, services, and
most important of all, compare personal chemistry.
It will be important for you to establish your
account with a bank that welcomes you and your
small business. Look for a small, solvent bank or
a local neighborhood branch of a big, solvent
bank. Find a bank that will take the time to help
you and that will provide you with business tools
that will make your banking activities easier and
support your growth. If you feel a little shy
about this, if you have a "Gee, I'm not a
big deal. I feel funny asking for so much of
their time" attitude - just remember: That
banker may be looking at a future millionaire -
you.
- Get a
business telephone line installed. Do not use
your home phone for business calls - unless
you're a single person with a limited social life.
Having a business number allows you to deduct the
entire phone bill as a business expense. You will
also get a free listing in the business section
of the telephone directory and Yellow Pages,
which can be a very big plus. Having a phone line
dedicated to business use will help everyone (including
yourself) to think of you in a business-like way.
An
answering machine is a must for your business
phone. The once-detested device is now generally
accepted by business people and just about
everybody else. Some models allow you to check
your messages from an outside phone. If you plan
to travel, get one of those. Also, get a machine
that records the date and time of the incoming
call as well as one that allows for longer
messages. You don't want an important message to
be cut short by a trigger-happy answering device.
An
alternative is a good telephone answering service
where your phone is answered by a "live"
person. This is very professional and makes a
great impression. It may be too expensive at
first, but if it's affordable - do it.
The
way you answer your business phone is important
to your business start-up. First, give callers
your business name. Then, tell them who is
speaking. "Smith's Distribution Co. this is
Bill Smith," is a simple but professional
way to answer your business phone. Please, don't
be cute or clever. Be a pro and play it straight.
- Get a
sales tax license if necessary. If you buy
products at wholesale and sell them to retail
customers, your state may require you to collect,
report and pay state sales taxes. In most states,
the license is available from the state
department of revenue. If you live in a city of
any significant size, it also may require a sales
license or permit. Make sure you check all your
local government entities in order to comply with
their regulations for new businesses. Having a
sales tax license may have some advantages. Some
companies will require a copy of your sales tax
license before you can make wholesale purchases
for resale. Also, any item you purchase that you
intend to re-sell should be bought without state
sales tax. You'll need your tax number in lieu of
paying that tax. And having a sales tax license
further legitimizes your new business.
- Order a
rubber stamp with your business name, address and
phone number on it, so that every brochure,
flyer, order form or piece of correspondence is
clearly marked as coming from you. Otherwise,
you'll be giving out literature to people who
won't know who to contact for more information or
for placing orders.
- Set up
files for prospects, sales, follow-up,
distributors, tax information, expense receipts,
etc. Setting up files doesn't need to be an
expensive or complicated proposition. Buy a box
of manila folders and some 3 x 5 index cards with
alphabetical dividers and a box to put them in.
If money is a factor, you can go low budget and
buy a temporary cardboard filing box, folders,
index cards, plus dividers, all for under $25.
- Join
your local Chamber of Commerce as soon as you can
afford to. Not only will you learn first hand
about what is happening and what will happen in
your community, but also, most Chambers have
mixers, meetings and business breakfasts that
will give you an excellent opportunity to meet
new people and to make many new business contacts.
- If
you're affiliated with a larger corporation, read
all company brochures, training materials and
information your company provide. There is a good
reason why your company spends so much money
developing training materials and providing these
brochures. It is so you can learn from them and
not have to reinvent the wheel. Starting your own
business is hard enough without having to be a
pioneer.
- Develop
an action plan and write it down. Set specific
goals for your new business. Each goal you write
down should have a desired result and a timetable
for completing it. Have one plan for the first 30
days. Have another for the next six months. Have
yet another for your first year. This kind of
planning may be the most important thing you do
in getting started. You cannot succeed without
knowing where you are going or without having a
benchmark or standard to measure your progress.
These plans are not ideas carved on stone tablets.
You'll need to revise them - often. There will be
many unknowns, especially for your one year plan.
Don't let that stop you! It's vital that you
begin thinking about the future immediately. It
will save you endless frustration in the months
to come.
Some
notes about planning and goals: Both goal setting
and planning work best backwards. What we mean
is, reach out into the future, as far ahead as
your imagination can go, and set those long-term
goals first. Now ask yourself, "What would
be the step just before achieving this last goal?"
Keep working backwards from there until you get
to today. Then make that call or get ready for
that meeting. And please remember, "It's not
just how you plan your work - it's how you work
your plan."
- Finally,
develop daily routines and disciplines to
establish a business-like attitude and atmosphere.
This may seem elementary, but it needs to become
a part of your new mind set. If you previously
worked for someone else, getting started in your
own business may be difficult for you. There is
no one to care whether you get to work on time.
There is no one to nag you about getting a
project, task or assignment completed. There is
no one to review your performance - no one to
scold you for a poor job or praise you for a good
one. No one whose job it is to make sure you're
motivated. No one, that is, but you. You must
begin to fill all of those roles. Opportunity is
one side of the coin. Responsibility is the other.
Commitment is the key, discipline the tool.
Establish good work
habits from day one. A great way to begin is to
pick a time that your office opens each day and
be in it faithfully at that time. Treat your home
and your office as two separate places that just
happen to be in the same building. Don't mix
activities between the two.
When
you announce that you're getting started in your
own business, you are telling the world that you
are ready to accept new risks and new
responsibilities. You're telling everyone you
know that you are willing to work harder and
smarter than ever to make your dreams come true.
You are letting everyone know that you are going
to be successful in your new endeavor and that
you mean business.
Jeffrey
A. Babener, a partner in the Portland, Oregon,
law firm Babener
& Associates, represents many of
the leading direct selling companies in the
United States and abroad.
|
Back