The Pros and Cons of having a home-based business

There are many advantages to having a home-based business, but also some definite negatives. The first thing you need to ask yourself is what you expect to gain by running a business out of your home. Are you trying to lessen your work hours or are you looking for more flexibility and control over the projects or products you are producing? Are you simply thinking of saving rent money and commute time over having a commercial location?

An article for www.moneymanagement.org lists some of the primary pros and cons of starting your home-based business.

Pro: You are your own boss. You choose the work, the clients, and the hours. You alone are responsible for the success of your business, and that is this best motivation.

Con: You are also your own accountant, marketer, tech support, customer service representative, and custodian. The job encompasses more than just doing work you love, at times you will also have to do support work to make your business successful.

Pro: Balanced career and family life. Setting your own hours and vacation time allows you to fit your family’s schedules together seamlessly.

Con: The scale can easily tip toward home responsibilities. Setting up a distraction-free area to work and allotting a certain amount of time per day to focus on your work can help increase productivity.

Pro: Increased tax benefit and write-offs. If you have an area of your home dedicated solely to your business, you may be able to take a home office tax deduction. Other expenses can also be deducted as well.

Con: No health insurance benefits unless you pay out of pocket. Paying for private insurance is expensive, but is worth the hefty price tag in case of a medical emergency.

Pro: Your office is down the hall and you can work in your pajamas. No commute and no required office wardrobe are two of the money-saving perks of working at home.

Con: You may miss the interaction with coworkers. If having a sounding-board for your ideas is important to you, consider joining a networking group or professional association so you can interact with others in your field.

Pro: Increased income potential. Owning your own business allows for far greater earning and growth potential.

Con: No set income. While there is the potential for greater income, there is also a possibility that you will have some periods where the work and the money dry up. Having an emergency savings account can be a great relief during times when you are not making any income.

William G. Owen, writing for Ohio State University www.ohioline.osu.edu, says, “There are more than 15 million home-based businesses in the United States today. There is good reason for that high figure. Having a business in your home can provide flexible working hours and give you the luxury of being your own boss. Also, there are disadvantages to working at home that must be considered. … Carefully consider whether the sacrifices are outweighed by the benefits. If the advantages outnumber the disadvantages, perhaps you should join the ranks of home-based business owners.”

There are some other considerations too. Will you be seeing clients in your home? If so you’ll need additional business insurance beyond your home owner’s policy. What equipment will you need to purchase to adequately run your business that is normally supplied by an employer?

Whatever you decide, remember that your SCORE counselor is a resource for answering your questions and can help guide you through the perils of establishing your home-base business so you can start on solid footing.

How to become an independent contractor

The first thing to realize is that being a consultant, or an independent contractor, means you will be in business for yourself. And, just as with any other business, you should start out with a business plan. The key to success is sound planning. Also, you must realize that the steps needed to accomplish this are multi-faceted.

The Small Business Association (www.sba.gov) is an excellent resource. The SBA describes independent contractors as, “Commonly known as consultants, freelancers and self-employed, independent contractors are individuals who are hired to do a particular job, receiving payment only for the work being done. Independent contractors are business owners, and are not their clients’ employees. They do not receive employee benefits or the same legal protections as employees, and are often responsible for their own expenses.

“Like all other small business owners, you will need to follow some essential steps to starting your business. This includes getting the proper tax registrations, business and occupational licenses and permits from federal, state and local governments in order to operate legally. As an independent contractor, you will also want to create a standard agreement for your services.”

Covering essential legal and contractual issues before you begin your venture will save you many headaches as you build your consulting business. The process of establishing yourself as a business may seem daunting, but you will be one among large numbers. According to a September 2011 article in www.USAtoday.com, 14.5 million people in the U.S. are self employed.

In a blog for www.allbusiness.com, Caron Beesley, says, “With few business sectors spared the impact of the recession and many employees facing layoffs, the thought of becoming an independent contractor, consultant, or freelancer is an increasingly attractive option for many professionals.

“If you are not sure,” advises Beesley, “that being an independent contractor is right for you, it’s worth taking time to complete (the SBA) quick Start-Up Assessment Tool (http://web.sba.gov/sbtn/sbat/index.cfm?Tool=4).

 

“If your client misclassifies you as an employee,” cautions Beesley, “they may be required to pay back taxes and provide employee benefits, workers’ compensation, unemployment, and more. As an independent contractor you do not have the same legal rights and protections as employees:

• You are paid for the work performed. Your clients are not required to pay overtime and minimum wage
• You are not covered under your clients’ workers’ compensation benefits
• You are not entitled to receive your clients’ employee benefits
• You are not covered under Equal Employment Opportunity laws as they apply to your client’s relationship with its employees
• Your taxes are not withheld and paid by your client, including income, FICA and unemployment”

The SBA reports that more than half of all U.S. businesses are based out of an owner’s home. That means that more than likely, as a consultant, your research and preparation to perform your services will be performed out of your home and this is an additional consideration for insurance, time management and other myriad details. Consider your SCORE counselor as your first line of defense when you are planning to become self employed.

Successful Marketing is successfully planned

Although there is no single, foolproof method to promote your business, with vast numbers of people using the internet and social media to find the products and services they are looking for, there are several approaches a business owner can take, and good news for the bottom line, many of them are free and other have a nominal cost. The one thing that is certain though, is that it is essential that you let people know your business exists.

Social media is rapidly becoming the new “word-of-mouth” for businesses. Ken Colburn, the Data Doctor, has presented SCORE Social Media Workshops recently in Flagstaff, Prescott and Tucson. SCORE is planning on offering a basic Social Media Workshop for those people who are completely unfamiliar with using any form of social media. Getting up to speed in these venues will help your business with that vital “word-of-mouth.”

Eric Vreeland, posting on http://blog.hubspot.com writes on The Ultimate List: 50 Local Business Directories, “As a local business, attracting new customers can be a major challenge. Quickly disappearing are the days when people would go to the YellowPages to find local businesses. Today people are turning to the internet as a way to find trusted business recommendations. One way local businesses can get found is through inclusion in online directories. Adding a listing to these online directories is easy, but if you only list in a few you’re really missing a huge opportunity to get found by online searchers.”

Another way to move forward in today’s marketing is to begin with a focused plan for your business. Deborah Mainville-Knight (www.mindyourownbusinessconsulting.com) says, when you know what your Vision is (the legacy you want to leave), what your Mission is (how you’re going to get there), and what your Values are, you’re in much better shape to navigate today’s changing marketing environment. I have a friend who’s tagline reads: “Principle Above Profit” and that articulated value alone tells you so much about how he operates his business. When choosing how to market your business, remembering that people do business with people is still the underlying golden rule. Your written Vision and Mission statements are not just nice words that you create and leave in your computer somewhere … they provide the backbone for all your marketing messages. When someone sticks a microphone in your face and asks you about your business, you’ll have your consistent response at the ready. Whether you’re crafting social media messages, print advertising, radio spots or coupons for the newspaper, your Vision and Mission Statements will guide you. Once you’ve determined your direction and principles, the goals and strategies for the next six months to a year become much more relevant. After all, if you don’t decide where you’re going, you might wind up some place you don’t want to be! Strategic Planning for your business is typically the precursor to writing an effective Business Plan.”

When you are grappling with marketing issues rely on your SCORE counselor for guidance. No single counselor can provide you with all the answers you need, but SCORE is nationwide so its resources are vast and Northern Arizona SCORE specifically has counselors that have spent their careers in the marketing field for national companies.

Choosing the best legal structure for a business

The four basic business legal structures are sole proprietorship, partnership, Limited Liability Company, and two corporations; “S” and “C”. Each has distinct advantages and disadvantages. Which of these are right for any business depends on multiple factors.

“In large part,” says an article in www.nolo.com, “the best ownership structure for your business depends on the type of services or products it will provide. If your business will engage in risky activities — for example, trading stocks or repairing roofs — you’ll almost surely want to form a business entity that provides personal liability protection (“limited liability”), which shields your personal assets from business debts and claims. A corporation or a limited liability company (LLC) is probably the best choice for you.

If you’re business is starting on a shoestring, you might want to form the simplest type of business — a sole proprietorship (for a single-owner businesses) or a partnership (for businesses with more than one owner). Unless you are planning to do a particularly risky business, the limited liability provided by an LLC or a corporation may not be worth the cost and paperwork required to create and run one.

Additionally, sole proprietorships and partnerships are easy to set up. These don’t require filing any  complicated forms or fees to start your business; simply registering with the county you are located in, is all that is required to open a bank account and registering the business if you will be collecting taxes. Plus, you don’t have to follow any special operating rules. This gives you great flexibility, but there is one glaring disadvantage; you have no protection for you or your family. If a financial problem or lawsuit arises, your own assets are at risk and you could end up losing your first born and everything else. Insurance can minimize the risk but you are assuming great personal liability.

On the other hand, LLCs and corporations are almost always more expensive to create and more difficult to maintain. To form an LLC or corporation, you must file with the Secretary of State www.azsos.gov and pay a fee to the Arizona Corporation Commission www.azcc.gov, which ranges from about $50 to $95, plus additional fees for name reservation among others. Also, corporations and LLCs must elect officers (generally, a president, vice president, and secretary) to run the company. They also have to keep records of important business decisions and follow other formalities.

Of the two forms of incorporation, “C Corp” and “S Corp”, the C Corp is doubly taxed, first on its profit before distribution and then the earnings are taxed after they are distributed to the stockowners. The S Corp gives the owners the needed limited liability and simplifies the taxation since there is no corporate tax. Only the distribution is taxed as personal income tax.

Before deciding on your legal business structure, talk with your tax adviser and attorney. This decision has long-term implications as to how your business will operate and how it will be taxed. It is wisest to obtain business counsel before you apply for your business license.

Include your SCORE counselor on your planning and rely on the expert advice that SCORE is noted for.

SCORE helping to Remake America

Featured on Good Morning American, March 8, 2012:

Over the course of 2012, Yahoo! News is capturing the challenges of the nation by following the experiences of six families striving to achieve the American Dream, while dealing with issues from joblessness to foreclosure to lack of health insurance.

You can help these families and others like them around the nation. Here’s how:

SHARE, CONNECT AND SUPPORT: Share your experiences, offer advice and show your support as each Remake America family deals with its unique challenges and approaches decision points each week:

MAKE A DONATION AND IMPACT MORE FAMILIES AND COMMUNITIES:Organizations across the U.S. are working to support families like these. Learn more and make a difference by donating to support these causes:

SCORE: Family business owners like Bill can benefit greatly from mentorship, education and small business resources. SCORE is a nonprofit association dedicated to educating entrepreneurs and helping small businesses start, grow, and succeed nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA), and has been mentoring small-business owners for more than forty years.

Watch the video: http://news.yahoo.com/elections/remake-america/

Take Steps to Turn an Idea into a Business

There are literally thousands of would-be entrepreneurs who have a “great” idea but don’t know how to move the idea into a plan of action. One of the first things to ask yourself is if this is something that might just be a hobby or if it is something you want to seriously pursue as a business. The key to successful business ideas is execution, and that takes planning and hard work, and lots of it. Starting off with a business plan is the first step toward changing your ideas into a reality. By putting your thoughts on paper you can see where there are gaps in your thinking and corrections are easier to make.

Solid business operations support great ideas every time. Actually, contrary to popular thinking, most good, profitable businesses are developed from rather ordinary ideas, but grow into successful ventures because the entrepreneur is passionate about what he/she is doing.

Jennifer Fleiss, writing for www.forbes.com says, “Sure, entrepreneurship is intimidating, but the reward is not just in building a successful company; it is in the lessons and growth you acquire every day just by doing, trying — and yes — failing.

Be open to suggestions and guidance from successful business people. Brett Krkosska for www.HomeBizTools.com lists several steps you can take. He writes, “Behind every successful business you’ll find at least one great idea. For most people, the definition of a successful business is one which is profitable, and a profitable business is built upon ideas that have been properly researched. Here are some steps you can take to research your idea and turn it into a profitable business:

1. Make a list of the reasons why you want to go into business for yourself. Look at your list critically. Does starting your own business help you realize these things?
2. Make a list of the things you like to do with your time. Success can be elusive if you’re not truly excited about your business. What are your interests and hobbies? What are you good at?
3. Focus on filling a niche. It is your expertise, uniquely practiced and applied within your business field that creates your niche in the market.
4. Talk to friends or family who own or work in a similar business. Get their input on your idea.
5. Participate in discussion forums. This is a great way to take the pulse of your potential customers. You can also see trends, get feedback, and establish working relationships with like-minded people.
6. Evaluate the demand for your product or service. You need to understand the pace and direction of your industry. This understanding alerts you to shortcomings with your idea and helps you channel your energies correctly. It also helps you approach your business with innovation and vision.
7. Research businesses in your surrounding area in order to size up the competition. Ask yourself how your business will be better and different.
8. Visit your competitors online.
9. Define the operation of your business.

Also, remember that your SCORE counselor is your first source for expert advice. Sign up for a Business Plan Workshop and stay excited and enthusiastic about your idea. It’s the best road to success.

Score Advanced Social Media Seminar

After the success of the introductory Social Media Workshop held in October 2011, Northern Arizona SCORE, partnering with the Flagstaff Chamber of Commerce, is hosting an advanced Social Media for Small Businesses Seminar January 21, 2012. The workshop will be held at the Flagstaff Chamber of Commerce, 101 West Route 66, Flagstaff, AZ 86001-5542, from 9am to noon and will be limited to 20 participants. The cost is $25 per person for the entire morning workshop.

Northern Arizona small businesses can learn how to grow and enhance their business by using the different social media outlets. This seminar is being presented by Ken Colburn, the president and founder of Data Doctors, a Tempe-based company that offers computer repair solutions for individuals and businesses. Ken Colburn has been involved in the consumer electronics industry since the early 80′s and founded Data Doctors Computer Services, a national computer service provider, in 1988.Ken also hosted the Award-Winning Data Doctors Radio Program and is a frequent expert to the media on all things technical. He has been honored as a recipient of the WP Carey Spirit of Enterprise Award.”

Ken currently writes a weekly computer advice column, hosts the weekly “Computer Corner” radio show on KTAR Radio in Phoenix as well as the Cox Television technology show “Tech-NoPhobia”. Ken’s ability to explain technology to the average user makes him a popular speaker at schools, computer clubs and national conferences.

Larry Grossman, retired entrepreneur and current Northern Arizona SCORE President, will be the facilitator for this seminar. Larry is a serial entrepreneur and has authored a book by the same name. He has co-founded five companies, taking three public with IPO’s on the NASDAQ. He is the inventor of the Orthopedic Mini C-arm X-ray Imaging technology.

Don’t miss this impressive seminar to enable you to take advantage of this opportunity to learn how to grow your business through today’s technology.

To register for this seminar, or for more information, contact Northern Arizona SCORE at 1-866-779-4829, or visit the Web site, www.scorenaz.org, or email scoreoffice@scorenaz.org.

Also this seminar will be presented in Prescott in February. Please check this blog or the website, www.scorenaz.org for details.