Building a successful home-based business.
WHEN CYNTHIA BROWER STARTED
Atlantic Optical Framewear (which imports and exports ethnic eyewear) four years ago, finding a location was the least of her worries. "I always wanted to do something home-based because you have the advantage of being able to work any hours that you want and your office is always at your disposal." grower, who imports ethnic eyeglass frames from South America, Asia and Africa, operates her business out of a spare bedroom of her Owings Mills, Maryland, home.
It turns out that Brower is not home alone.
When it comes to starting a business, millions of would-be entrepreneurs are finding that there's no place like home, and are converting dens, bedrooms, basements and attics into offices. According to IDC/LINK, a New York-based market research firm, there are 20 million home-based businesses nationwide in areas ranging from computer consulting and cleaning to medical billing and meeting planning. Growing at an annual rate of 7%-8%, the number of home-based businesses is expected to reach 27.8 million by the year 2001. There are few statistics to show the number of African Americans working at home. However, according to a recent study by Fidelity Investments, the nation's largest mutual fund company and one of the leading providers of financial services, 37% of all home-based businesses are operated by women. As for income, in 1996, 56% of all home-based businesses earned net revenues of less than $50,000, 24% earned $50,000-$99,000, and 20% made more than $100,000.
Self-employment expert Paul Edwards says there are many reasons for choosing to work at home. "A certain proportion, particularly men, work at home because there are tremendous cost savings," says Edwards, who has co-authored several self-employment books, including Working From Home and The Best Home Businesses for the '90s. "For another large segment, it's the idea of having more control over your life and being able to spend more time with your family." For the person looking to balance career and family, a work-at-home environment can create the best of both worlds.
Start-up costs for a home business vary according to the type of operation, but some can be launched for as little as $500. Brower started her company with about $3,000, which included expenses for office equipment, supplies and 12 weeks of training and certification with the Exporters Incubator, an international trade training program created by the International Association for Business Organizations (INAFBO).
The first step to starting a home-based business is deciding what type of operation to run. But before you print your business cards, check your local zoning laws to see which types of businesses are permitted in your neighborhood. Some zoning ordinances exclude home businesses entirely. But the majority place restrictions on these operations, limiting on-street parking, the number of employees, signage and the amount of vehicular traffic. Also check homeowner associations, co-op boards and condominium complexes, which may enforce their own work-at-home restrictions.
Businesses that may be red-flagged include commercial ventures or businesses that require outside storage of supplies, create extreme noise and produce flagrant odors. Those operating without a required license or permit also can be zapped. Many home enterprises such as day care and catering services require certificates of operation. Check with your municipal, county or state office to see if you will need this document. Fees vary according to state and type of operation, but range from $25-$100.
While there are many advantages to setting up shop at home, there are some drawbacks, particularly if the lines of separation between your work environment and home life are not clearly drawn. Setting up a completely separate area for your home office is important because it will qualify you for a home office deduction around tax time. When selecting an area, consider using a spare bedroom (the basement or an enclosed porch or sunroom also is ideal). Forgo working from the kitchen table or family room. As your business becomes more successful, you may need to add personnel or expand your office, so project your space needs for at least five years. Also, determine if your business requires you to bring clients to your home. If so, plan a distraction-free area in your office to meet and talk with customers. You may also want to consider renting office space for your meetings. Brower advises those operating home-based import/export trading companies to rent space when servicing clients. "It behooves you to bring your clients or suppliers to what is traditionally viewed as a business setting," says Brower. "You bring your Korean manufacturer into your home and talk to him across the dining room table."
The home is a relaxed environment, so work-at-home entrepreneurs must be self-disciplined. It can be very easy to get distracted by Oprah and Montel, so be sure to exercise your "self-management muscle." And if you have children, hire a baby-sitter during office hours or schedule outings for the kids so they do not interfere with the business.
Featured below are three businesses that industry experts consider to be among the top home enterprises for the '90s. Although there are hundreds you can launch from home, we made our selections on the basis of their low start-up cost, long-term profit potential and high marketability. The companies chosen are also positioned in industries expected to experience tremendous growth after the millennium.
BECOME THE LIFE OF THE PARTY: EVENT AND MEETING PLANNING
Virtually everyone likes attending black-tie affairs, summer festivals and golf invitationals. Forty-something Rusty Jackson not only attends such events, she plans them. For 12 years, Jackson, who was the national group manager of community relations for Coors in Washington, D.C., did everything from tapping beer kegs, gathering T-shirts and hanging banners to developing community relations events and strategic planning. But after three downsizings, she took her strategic planning and event management skills and branched out on her own. In January 1996, Jackson invested about $25,000 in start-up capital to open Rusty Jackson Productions, (301) 333-0003 a special events management company in D.C. But commuting expenses to and from her office in Georgetown got to be a bit taxing, so she removed the entire operation and her staff of six into the basement of her Mitchellville, Maryland, home.
"When the lease expired, my staff encouraged me to move the business into my home," says Jackson, who operates her home-based business full time. "We're fully set up. There's a computer on every desk, file cabinets, two printers, a fax machine/ scanner and a phone system set up for billing."
Meeting planners work with corporations, organizations and nonprofit groups to plan annual conferences, fund-raising events, trade shows, shareholder meetings, banquets and other special occasions. Starting this type of home business is easier if you have a public relations background or prior experience as a meeting planner, but it is not a prerequisite. To get started, you will need a computer, fax machine, word processing software and a two-line telephone system. Depending on the types of equipment and resources used, startup cost ranges from $2,750-$8,500.
To secure clients, network among caterers and travel agents. Visit your city's convention and visitors' bureau for a list of upcoming events or volunteer to plan a community event as a way to demonstrate your skills and drum up business. "I was fortunate that during my years at Coors I had worked closely with a number of organizations, so word-of-mouth has been my form of advertisement," recalls Jackson.
Jackson has planned many events including the 15th annual African World Festival in Detroit, the annual Black Entertainment and Sports Lawyers Association Conference (to be held this year in Puerto Rico) and a Celebration of Activism, a celebrity reading of Alice Walker's latest book, All Things We Love Can Be Saved. "We also do a number of golf tournaments and have about 10 events that we're working on managing for 1998," she says.
Meeting planning is a high-pressure business. To be successful, you must be able to work under tight deadlines. You must also be creative, have an eye for detail, have excellent presentation and communication skills and be very organized. "It requires the ability to juggle five to 10 things at one time without losing sight of any small issue because one minor detail falling through the crack could result in major disaster," says Jackson.
Most meeting planners charge by the hour, day or project. The average hourly rate is $40-$60, and the daily fee is $400-$500. Planners of large events tend to charge 15%-20% of the project's entire budget. "The range of my services is from $20,000-$150,000 per event," says Jackson, who coordinates an event every 45-60 days. Since inception, her company has earned $500,000 in revenues. Typical revenues for a home-based meeting planning company range from $25,000-$100,000 per year.
For more information about a home-based meeting planning business, contact: Meeting Professionals International, 4455 LBJ Freeway, Suite 1200, Dallas, TX 75244; 972-7023000.
FEEL LIKE GOING GLOBAL? TRY INTERNATIONAL TRADE
How many times have you heard the words "going global" and wondered how to get involved? While larger corporations are leading the pack when it comes to international trade, many home-based businesses are catching up and cashing in on the $1.3 trillion import/export business. Increased technology has made this type of business perfect for the home. "It's excellent because you really don't have people coming in and out of your office every day," says Brower, also regional director for the National Association of Home-Based Businesses (NAHBB) in Owings Mills, Maryland. "Most of your work is done over the phone and via fax."
To successfully trade internationally, you must research the country you wish to import from or export to and identify manufacturers, wholesalers and distributors who will supply and deliver your products to specific destinations. You must also be familiar with government regulations concerning customs, shipping, tariffs and pricing (see "How To Build A Thriving Import/Export Business," May 1997). Knowledge of a foreign language is helpful but not necessary since English is recognized as the international language for doing business.
One of the first steps to trading is deciding whether there is a market for your product. grower, 47, realized a niche market for ethnic eyeglass frames after talking with a black optometrist about the workmanship of European-fitted frames. She found that African Americans have wider bridges, rounder faces and longer temples but that most frames are made for people with narrow bridges and shorter temples. "That's why the frame slides down the nose, leaves deep marks on the side and hurts behind the ears," says grower.
With assistance from Andecker International, an import/export management company in Baltimore, Brower identified four foreign manufacturers of ethnic-fitted frames. She began importing $1,000 worth of eyeglass wear and selling through four U.S. wholesalers and distributors. Cost ranges from $75-$125 per pair. She is also working with an American manufacturer to export ethnic fitted sunglasses overseas. (Atlantic Optical Framewear; (410) 654-4469)
Brower has earned revenues of nearly $35,000. Typical annual gross revenues for a home-based international trade company are $35,000-$60,000 and up, depending on the product or service you are trading and your competition.
The international trade business is booming. Companies are finding that to remain competitive and stay successful, they must branch out into foreign lands. "Ninety percent of our people want to go into it, but they think it's so far above them," says Rudy Lewis, president of the NAHBB. "But it's a super area. It's real money and this is one area where African Americans can excel."
Darrin Wheeler, 31, owner of D.W. Leather Imports, (215) 228-6778, in Philadelphia, realized the potential of international trade while working as a sports agent in Cyprus, off the coast of Greece. Representing international basketball players, Wheeler says he grew fond of working with different countries. After leaving athletics in 1995, he began training to become a stockbroker and, last December, started a home-based international trade business part time. While his company is still in the development stages, Wheeler expects to begin importing lea-ther goods--including handbags, briefcases and wallets--from India and Thailand this year.
Since international business deals take longer to close, working in the import/export workday. Start-up costs range from $3,000-$10,000. This includes a fax machine, computer equipment, printer, copier and memberships in trade associations.
For more information about international trade, contact: Trade Information Center, 1401 Constitution Ave. NW, Room 7424, Washington, DC 20230; 800-USA-TRADE. Or contact: The International Association for Business Organizations, P.O. Box 30149, Baltimore, MD 21270; 410-581-1373.
THE ROYAL TREATMENT: HOME CLEANING SERVICE
Who has time to clean? Between work, the gym, dinner with friends and your usual five hours of sleep, there seems to be little time to wash windows and vacuum the carpet. But this lifestyle is making cleaning services very profitable ventures. In fact, home cleaning alone is a $92-million-a-year business. There are also many commercial cleaning franchises that can be purchased for as little as $5,000 and operated from the home. (See "15 Franchises for Under $50,000," this issue.)
Cleaning services are perhaps the easiest and cheapest businesses to start in the home. With less than $1,000, a few cleaning supplies (many of which you can get from your own cabinet) and just the knowledge of how to use a mop, some Mr. Clean and a bucket, you can open for business.
Mae Harbor, 50, owner of Royal Enterprise, (913) 334-4926, in Kansas City, Kansas, started her home cleaning company in April 1996, after being laid off from GST Steel, a manufacturing plant. She operates her part-time cleaning service along with another home-based business. "I clean Tuesday, Wednesday and Thursday and keep Mondays and Fridays open for speaking engagements," says Harbor, who also owns Target Communication, a public speaking consulting company. While her public speaking company has yet to turn profitable, Harbor's home cleaning service generates about $2,500 per month. Typical revenues for a full-time person working alone range from $20,000-$30,000 annually.
To drum up business for your home cleaning service, list your company name in the Yellow Pages or distribute flyers in your neighborhood or business district. "I ran one advertisement for three months, got two customers, and from there it has grown," says Harbor, who now has more than a dozen regular customers. Fees for house cleaning range from $10-$20 per hour and $50-$75 per day. Harbor, 50, charges by the house. "It depends on how large the house is, how much activity there is and how often the client wants it cleaned. It can range anywhere from $45-$100 or better," she says.
Most cleaning businesses are perceived as low-status operations, so image and professionalism are everything. You must be willing to roll up your sleeves and work hard. "My business is taken seriously because I put serious work into it," says Harbor. "When customers walk into a room, they don't see dust and spider webs still in the corner. They don't see crumbs at the edge of the counter cabinet, and the sinks sparkle because they get a royal cleaning treatment."
For additional information about cleaning services, contact: Cleaning Consultants, Inc., P.O. Box 1273, Seattle, WA 98111; 206-682-9748.
PROTECTING YOUR HOME BUSINESS
While operating a home-based business is low-risk, it is still a valuable investment that should be protected through business insurance. Although your residence may already be insured for fire and other damage, never rely totally on your homeowner's policy to cover your home business. "Most homeowner's and rental policies will exclude business activity, so you would have to look for what is called an 'in-home business policy,'" says Mary Smith, president of M.S. Technical Services Inc. in Gaithersburg, Maryland.
Smith, 39, says most companies writing this type of policy will include personal business property, general liability and loss of income. However, some home-based businesses need special coverage. For example, a food manufacturer should have product liability insurance to cover if someone gets hurt using a product. Home-based businesses that have several employees need to provide workers' compensation coverage. You may even need additional automobile insurance if your present policy doesn't cover injury while running business errands.
When looking for coverage, consult an agent specializing in home-based businesses. Have your agent conduct a risk analysis of your property to determine the value of equipment and furnishings. When negotiating a policy, be sure that coverage on all business-related materials is for the full cost of each item--not the depreciated value. Depending on your carrier and the type of business, in-home business policy premiums can cost $150 and up per year.
For more information on how to insure your home-based business, contact: The Insurance Information Institute, 110 Williams St., 24th Floor, New York, NY 10038; 212-669-9206.
GETTING YOUR FINANCIAL HOUSE IN ORDER
When Uncle Sam comes calling for his piece of your home business, you want to be ready. Set up a detailed record-keeping system and keep track of all business-related expenses. Such computer software programs as Quicken offer easy-to-follow formats for separating business and personal expenses. Never mix the two. Also set up a separate business bank account.
When filing your tax return, keep in mind there are several home expenses that are tax deductible: office supplies, professional and trade memberships/dues, travel, insurance premiums, local and long-distance telephone calls, maintenance and repair of office computers, and employee wages and benefits.
Home-based business owners can also claim a "home office" deduction in which they deduct part of their rent or take a depreciation deduction based on how the business is used in the home. About 1.6 million home-based business owners claim a home office deduction each year. According to the IRS, a house, apartment, mobile home, boat or condominium can qualify. However, to claim this deduction, your home office must be: (1) your principal place of business; (2) a separate and distinguishable space in your home; and (3) regularly and exclusively used for business. The language regarding this deduction is not simple, so contact your local IRS office or your accountant for complete definitions.
YOU'RE NEVER HOME ALONE
Operating a home business does not have to be a lonely experience. There are various programs that offer support and a office and those who just take the office home. You can talk with trained representatives about setting up shop at home (800-700-1100). "Since we've found that this particular market is very technologically savvy and comprises pretty strong Internet users, we have also put up a very robust Web site. It allows you to determine whether you're a good candidate for working at home and what the financial implications are," says Carol Larsen, the program's executive director.
Long distance carrier AT&T also has help for the start-up business. AT&T's Resources For New Business program, launched in 1995, is a value-added service for existing AT&T customers. "When you enroll in the program, you're going to get what is called the starter kit, which gives you some of the basic nuts and bolts of how to start a business," says Vincent Salas, an AT&T spokesperson.
While not geared specifically toward home-based businesses, the program does offer information crucial to all entrepreneurs: business plan writing, using the Internet to sell products and services, and marketing and advertising your operation. The program also offers teleconference seminars where experts discuss such issues as time management, improving customer service and financial planning. Membership costs $99.
Home businesses are serious operations that are gaining popularity across the country. So the next time you're looking for that perfect location to set up shop, remember, home is more than just a place to hang your hat. It's also a place to hang out your shingle.
RELATED ARTICLE: HELP FOR YOUR HOME BASED BUSINESS
National Association of Home Based Businesses 10451 Mill Run Circle, Suite 400 Owings Mills, MD 21117 410-363-3698 www.worldhomebiz.com www.ameribiz.com The oldest home-based business group in the country, NAHBB was launched in 1984. It services more than 200 classifications of home businesses and offers a home-based business occupational handbook.
Small Office Home Office Association International 1767 Business Center Dr., Suite 302 Reston, VA 20190 703-438-3000 www.sohoa.com SOHOA extends a variety of benefits including insurance programs, leasing services, business consulting and discounts on office supplies.
National Association for the Self-Employed 2121 Precint Line Rd. Hurst, TX 76054 800-232-NASE NASE serves as an advocate for the self-employed. Its toll-free hot line can provide advice for operating a home-based business.
Home Office Association of America 909 Third Ave., Suite 990 New York, NY 10022 800-809-4622 www.hoaa.com Also referred to as the Small Office/Home Office (SOHO), this organization offers discounts, group health insurance and a monthly newsletter.
Association of Enterprising Mothers 6965 El Camino Real, Suite 106-612 Carlsbad, CA 92009 760-434-9225 800-223-9360 www.momwork.com A national organization, AOEM provides ideas for the best businesses for moms. Members are given a home business start-up guide, which details resources and skills needed to work at home.
PUBLICATIONS: The Best Home Businesses For The '90s By Paul and Sarah Edwards Tatcher/Putnam; $12.95
Mompreneurs: A Mother's Practical Step-by-Step Guide to Work-at-Home Success By Ellen H. Parlapiano & Patricia Cobe The Berkley Publishing Group; $13
Legal Guide for Starting & Running a Small Business By Fred S. Steingold Nolo Press; $24.95
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|Title Annotation:||includes resources for the home-based business owner|
|Author:||Beech, Wendy M.|
|Date:||Sep 1, 1997|
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