Starting and Managing a Business From Your Home

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by Lynne Waymon
Produced in cooperation with the American Association of
Community and Junior Colleges

Charles Liner, SBA Contracting Officer's Technical Representative
Judy Nye, Project Director, AACJC
Martha McKemie, Senior Writer-Editor, SBA
Eugene Donaldson, Graphics, SBA

About the Author

Lynne Waymon designs and delivers continuing education programs in the
fields of small business management, management skills, and personal
development. She has worked with private corporations, government agencies,
and community groups to develop courses specially designed for their
employees. Programs under her direction at Montgomery College in Maryland
received awards from the Small Business Administration for "outstanding
performance providing consistently high quality business management
training of substantive value to the small business community" in 1978 and
in 1982.

Introduction: "There's No Place Like Home"

The cottage industry, an old-fashioned enterprise, is enjoying a revival so
strong that it's difficult to find out just how many Americans are now
working at home. Estimates range from two to five million and the numbers
may double by 1990.

Because women now enter business at a rate five times faster than men, the
trend of operating from home is growing. A natural starting place for many
businesses seems to be the garage, basement, or den. A recent Census Bureau
study showed that over 300,000 women's businesses are operated out of the
home.

Homemakers, hobbyists, retirees, people interested in a second income, and
the disabled are just a few of the groups attracted to home enterprises. A
young mother's craft business began when she started appliqueing
decorations on her children's clothes. A retired government worker bought
36 beehives and sold honey to local health food stores and at craft fairs.
A teacher did typing and secretarial jobs for her husband and friends until
she realized the potential market and opened a full-time secretarial
service from her apartment. Others have become home business owners by
using their skills in catering, counseling, teaching, day care, sewing,
writing, photography, consulting, market research, and landscape design.

The list of services that have been successfully operated from home is
endless: chimney sweeping, maid services, messenger services, wake-up and
answering services, home nursing, mail order businesses, party planning,
dog grooming, kitchen and closet planning and organizing, and others too
numerous to mention. As you explore the questions asked in the first
chapter, "Home Entrepreneurship: Is It For You," let your thoughts run
freely through the possibilities until you can target exactly the right
type of business for your skills, your home space, your market, and your
part of the country.

Home Entrepreneurship: Is It For You?

The first step in deciding whether to start a business is to ask yourself
this important question: "Do I have what it takes to be an entrepreneur?"
Studying the characteristics of successful business owners will help you to
tell whether your personality traits, experiences, and values are similar
to those who have succeeded. And assessing your experience, skills, and
life goals will also help you decide if you want to invest the energy,
time, and resources that successful entrepreneurship requires.

Who is the "Typical" Entrepreneur?

What makes an entrepreneur successful is a hotly debated and vigorously
researched subject. In Success And Survival In The Family-Owned Business,
Pat B. Alcorn, an expert on entrepreneurial problems, has developed the
following questionnaire to help you determine your "Entrepreneurial
Quotient." Write your answers in the margin. Then read on to discover what
she believes characterizes the typical entrepreneur:

Do you reconcile your bank account as soon as the monthly statement comes
in?

Entrepreneurs are careful about money. They usually know how much money
they have so they can seize opportunities on short notice. They know what
things cost, whether prices are going up or down, and whether they are
getting a bargain.

Did you earn money on your own from some source other than your family
before you were 10 years old?

Most people who are going to make money in business show an affinity for
making money at an early age--by babysitting, selling lemonade, delivering
newspapers, or some such strategy.

Do you get up early in the morning and find yourself at work before others
are out of bed?

Entrepreneurs sleep and eat enough to keep up their strength, but they don't
usually tarry at these pursuits.

Do you tend to trust your hunches rather than wait until you have a lot of
information on hand?

Hunches are judgments based on factors that cannot be quantified, A big part
of entrepreneurship seems to be risk-taking based on these hunches.

Do you keep new ideas in your head instead of writing them down?

Entrepreneurs keep a lot of things in their heads, including their most
creative ideas.

Do you remember people's names and faces well?

Ease in remembering names and faces is very important in the business world.

Were you good in "hard" subjects--mathematics, biology, engineering,
accounting, and so forth--in school?

People who major in business administration in college are more likely to
be successful entrepreneurs than anyone else. They prefer subjects in which
the answers are conclusive rather than open-ended conclusions full of
contingencies.

In school, did you pretty much stay away from such organizations as Scouts
and student government?

Most entrepreneurs tend to be loners rather than joiners, unless joining is
a useful tactic for making contacts and gathering business information.

In courting the opposite sex, did you tend to go for one person at a time
as opposed to playing the field?

Most entrepreneurs preferred one person because to play the field would have
taken too much time away from business activities.

Do you close deals with a handshake rather than insisting on written
contracts and guarantees?

Good entrepreneurs are often comfortable with something less binding than
written contracts. When the only bond is a word, it becomes a matter of
honor, and no entrepreneur can afford to lose honor.

Do you devote considerably more time and thought to work than to other
activities, such as hobbies?

Entrepreneurs may have some leisure time activities, but their principal
hobby is their work.

A similar test was developed by John Komives, director of Milwaukee's
Center for Venture Management. Again, write your answers in the margin,
then read on to see the expert's answers

Was your parent an entrepreneur?

Having a close relative who was an entrepreneur is the single most telling
indicator of a successful entrepreneur.

Are you an immigrant?

There is a high correlation between immigrants and entrepreneurs. In this
sense, "immigrant" includes not only those who were born outside the United
States, but also those who moved from farm to city or from the Midwest to
the West Coast.

Did you have a paper route?

The entrepreneurial streak shows up early in life.

Were you a good student?

Typical entrepreneurs were anything but model students and often were
expelled from school.

Do you have a favorite spectator sport?

The best answer is "no." Entrepreneurs are poor spectators. They often
excel at individual, fast-paced sports such as skiing or sailing.

What size company do you now work for?

The typical entrepreneur comes from a medium-sized company--30 to 500
employees.

Have you ever been fired?

Entrepreneurs make poor employees. That's why they become entrepreneurs.

If you had a new business going, would you play your cards close to the
vest, or would you be willing to discuss problems with your employees?

Typical entrepreneurs have a secretive streak. If they confide in anyone,
it is likely to be another entrepreneur.

Are you an inventor? A Ph.D.?

Not a positive indicator. Inventors fall in love with their products,
Ph.D.s with their research.

How old are your?

The typical age for starting a business seems to be 32-35.

When do you plan to retire?

In still another study, Jeffry A. Timmons asserts that entrepreneurs are
people who have high energy, feel self-confident, set long-term goals, and
view money as a measure of accomplishment. They persist in problem solving,
take moderate risks, learn from failures, seek and use feedback, take
initiative, accept personal responsibility, and use all available
resources. They compete with themselves and believe that success or failure
lies within their personal control or influence. They can tolerate
ambiguity.

Are You Ready, Willing, and Able?

Now that you have studied the characteristics of others who have succeeded,
survey your reasons for wanting a home-based business. Are you dissatisfied
with your current job? What are your skills? What is your business
experience, especially in the business you want to start? What are your
life goals? What resources do you have that might help?

Answering these questions will provide reality testing for ideas that can
sound incredibly glamorous when chatting with friends or seductively
attractive when you are irritated or bored by your present job.

Order a copy of the SBA pamphlet Checklist For Going Into Business, MA
2.016 (see For Further Information). Answer the questions and discuss your
reactions with friends and family. Or better yet, ask several people close
to you to think carefully about you and fill out the checklist for you.
Have you underestimated your abilities? Overestimated them? Sometimes an
evaluation by a friend is more useful than a self-evaluation.

How does your family react to the idea of a home business? Will you expect
them to help out? What changes would your business use of the house mean
for them? Will you have to remodel to create a usable business space?

What resources are available to you? Will you start by keeping your job and
"moonlighting" for a while? Do you have a small nest egg, inheritance, or
retirement income to live on until you get the business going? Do you
already own tools or machines that will help (for instance, a word
processor for a secretarial business or professional cameras and a darkroom
for a commercial photography business)? Are you able to go back to school
for training if necessary? Have you built up a network of contacts and
possible customers through your previous lines of work or will you be
starting from scratch?

Answering these questions honestly and completely will help you assess not
only your chances for success but also which type of home-based business to
choose. For instance, if your past professional life and contacts are all
in the educational, teaching, child-oriented school area, then you should
have powerful reasons for leaving that and opening a mail-order seed
business. Possibly a tutoring business or a tot exercise franchise would
use more of your resources and networks. On the other hand, if your
assessment of your life goals and preferences helps you realize that you
are burned out from working with kids, then perhaps a business planning
birthday parties could later be built into a general party planning and
catering business. You would be using your old contacts to build a
long-range business plan that focuses on a service business for adults.

The Advantages of Home-Based Business

Why have millions of Americans chosen to work and live in the same place?
Why are cottage industries sprouting faster than we can count them? Some
home-based businesses start by accident rather than by conscious design.
Secretarial services, day-care centers, craft ventures, and the like may
start out as weekend activities in the recreation room. After a while their
owners are surprised to see how profitable or enjoyable the venture has
become. The glimpse of a healthy market lures them into a full-time
venture. This low-risk, low-overhead, gradual kind of start-up is very
attractive to new business people.

Many home-based business people cite decreased commuting time and other
lessened business expenses as advantages for working at home. If your place
of work is just 30 minutes away, that's five hours a week in commuting
time, many dollars in gasoline and car maintenance or transit fares, and
untold stress fighting traffic. Getting out of the high-fashion rat race is
a plus for many who dislike having to dress up and continually buy new
clothes to feel comfortable in settings outside the home.

Homemakers--mostly women but also an increasing number of men--are choosing
a home-based business in order to have a more flexible lifestyle and to be
closer to family. A parent who has a home office can eat lunch with the
children or more easily attend special school or sports events. The
home-based business person has more control over work hours than someone
with a 9 to 5 job. Night owls who like to work until 3 a.m. can then sleep
late (remembering, of course, to turn on the answering machine and let
customers know the business hours). On the other hand, early birds can work
without the usual disturbance from the telephones.

The tax advantages of operating a business from home are numerous but
sometimes complicated. Wise business owners keep careful records and work
with accountants, attorneys, and financial planners to make sure they are
filing for the legal maximum write-offs and benefits.

The Disadvantages of a Home-Based Business

If you were hard at work in an office downtown, it is unlikely that three
children would come storming in to ask for snacks or that you would end up
using the ironing board for a bookshelf or have to think twice about hiring
others because they might resent working at your kitchen table. These are
just a few of the problems that make the glamour of working at home fade
fast. Some disadvantages of working at home can be minimized by
self-discipline, by setting clear limits with family and friends, and by
projecting a professional image. Other disadvantages "come with the turf"
and just have to be lived with. If a delivery man comes to the door, you
will probably be the one to interrupt your work and sign for the package.

It takes time and discipline to establish steady, at-home work patterns.
Often it seems easier to water the plants or do the laundry than to call a
client, design a new brochure, or prepare bills for customers whose work
you've completed. Without the deadlines imposed by supervisors or peers, it
can be hard to do the least appealing jobs on your list. To make matters
worse, others may not take you seriously. Neighbors may stop by to chat or
friends may call your business number knowing you will answer. Without
supervisors or managers, you are the one who must set limits and plan your
time. There also is the problem of isolation. While you are now your own
boss, you won't have the chats, the parties, the companionship of fellow
workers. Losing such social contact requires adjustments.

As the business grows and changes, the home entrepreneur has to put up with
cramped or inappropriate space. No more simply putting in a request for a
bigger file cabinet or a new copy machine; now you must visit showrooms or
garage sales, evaluate features, compare prices, and probably pick the item
up yourself.

Your teenager may resent having to keep the stereo low because you're
meeting with a client in the next room. Your spouse may be irritated by
having to fry that freshly caught trout on the backyard grill so your
office won't smell of fish. Your son may not want to give up the recreation
room pool table so you can cut out 100 doll patterns this weekend.
Neighbors may comment on the extra traffic your customers create on their
quiet street. Family privacy and lifestyle patterns may be disturbed. And
you will probably find yourself wrestling with laws and regulations you
never dreamed could exist before you went into business.

Your Professional Image

Developing a professional image may be hard if you work out of your home.
Projecting a businesslike image is an important part of building
credibility with your customers and contributes to your own professional
self-image. Design a logo or have one designed; order business cards and
stationery. Set regular business hours. Use an answering machine or
answering service. If other members of the family also answer the phone,
make sure they know what to say. Have a businesslike office or "showroom"
if you meet customers face to face. Consider referring to your apartment
number as your "suite number" or rent a post office box rather than using
your street address. Such practices might improve your chances of doing
business with potential customers.

Your Next Steps

Now that you have reflected on the characteristics of successful
entrepreneurship and assessed your skills, experience, and life goals, it's
time to plan your next steps. Ask yourself: Given the disadvantages of
working out of my home, do I still want to? Now that I know more about
what's involved in starting a business, is it still for me? Do I need
further training or experience? Should I begin part-time in order to test
the waters, check out market potential, or refine my product or service? Do
I need more time to research possible products or services? Have I decided
on a particular business? The next chapter will help you define your
business, the market, and the price to charge for your product or service.

Others Have Succeeded--Why Not You?

A former teacher tells how she started her own tutoring business:

I taught languages in high school for seven years. Whenever I needed a
little extra money, or during summer vacations, I tutored individual
students. As my reputation grew, people began to ask me if I could
recommend tutors in other subjects.

As my enthusiasm for teaching in public schools waned, I began to research
the possibility of a tutoring business. I started one summer by turning my
second bedroom into an office and having stationery printed. Summer is a
peak time because parents hire tutors to help their kids catch up on
subjects. By the end of that summer I was managing 48 tutors in 23
different subjects or grade levels all over the metropolitan area. I hired
a part-time assistant who worked at the kitchen table. We added other
services, such as classes to help high-school students prepare for national
exams. Operating from home was perfect for me since I needed to keep my
overhead low and keep a good cash flow to be able to pay my tutors.

A computer programmer tells his story:

I longed to get enough work doing computer programming so that I could
avoid the long commute to work and be closer to my two young boys as they
grew up. I started working in an office I built in the basement doing small
jobs and working for friends in the business who were up against tight
deadlines. When I got my first big contract, I took the leap and gave
notice. Now, two years later I've established a good track record with
clients and have hired two others who work at terminals in my recreation
room. I like being able to work late at night after the family is asleep.
And I enjoy being around when the kids get home from school. I don't need a
fancy downtown office. If I meet with a client. I make sure it's at his
office, not mine.

Answering The Big Question: What? Who? Where? How? and How Much?

What's the perfect home business for you? You've listed your skills. You've
outlined your interests. You've described your family's preferred
lifestyle. You've come up with a business idea. Next, consider such
questions as: Are there customers for my product or service? How do I know?
How will I find them? Who are my competitors? What will I charge? How will
I promote my product or service? Finding the answers to these questions is
the challenging and sometimes tedious homework that will help you determine
your chances for success, and whether you should look for another more
marketable idea.

What Is My Product?

"I bathe and groom poodles and small dogs." "I design, construct, and sell
roll-top desks." "I provide accounting services to small business clients."
"I make dried flower arrangements." "I teach intermediate and advanced
piano to children." "I design and implement direct mail advertising
campaigns for small businesses and nonprofit organizations."

The first step in creating a business is to decide what your product is.
What are you selling? Practice writing a short, specific statement
describing your product or service. Getting a clear idea of a business
concept is one of the most difficult tasks in creating a business. Your
statement may change several times as you experiment with the market and
test your skills. Instead of "I make toys," you may want to narrow your
product line to "I make wooden dolls." Instead of "I write software
programs for small business needs," you may decide to tap into a big market
and "provide training for employees of small businesses in the use of
accounting packages." See how it feels to describe your product or service
to family, friends, potential customers, and fellow business people. Is
your description clear and brief? Can you say it with confidence and
enthusiasm?

Who Will Buy It?

To develop and test your business idea, answer the question "Who will buy
my product or service?" Make a list of potential customers: individuals,
groups, segments of the population, or other businesses that need your
product or service. If you are making fabric-covered lap boards for people
confined to bed, how will you quickly and inexpensively find a market?
Through hospitals or home nursing care organizations? Through craft stores
by displaying them as gift items? In mail order catalogues? Is there a
market avenue that will reach children? Ask friends and colleagues for help
in brainstorming all the possible markets (customers) and uses for your
product or service.

Who Is the Competition?

Your business planning must also include an up-to-date analysis of your
competition. Why? Because you need to plan your market position--how you
will fit into the marketplace. Will your product or service be cheaper or
more expensive than that of the major competitions? Will it be more
durable? Will you be open during hours that your competitors are closed?
What benefits can you build into your product or service that your
competitors don't offer? Will you do rush jobs?

In planning your business, look for a unique niche that will give you
freedom from strong competition or that will make your product or service
more valuable than others in the market. If you plan to open a day-care
center and find that none in your area is open before school, early opening
might make your service more competitive. If you discover that local
caterers have overlooked the office party market, you might highlight that
in your brochure. The more you can learn about your competition, the better
you'll be able to decide how to position yourself in the market.

Newspaper ads and trade magazines are other good sources of market
information. Check also with the Chamber of Commerce, your county office of
economic development, the Census Bureau, and business and professional
organizations to gather market and pricing data.

Where Are the Buyers? How Can I Find Them?

As you become more familiar with the competition, you will also be
discovering where and how to find buyers. Whatever the type of home
business you want to open, you will need to do market research to determine
if there are buyers for your idea, where they are, and how to find them.
(And in the process, you will also be gathering information on pricing.)

Visit your local library to compile local and county statistics on the size
and makeup of your market. (While you are at the library, check out some
books on marketing research so you will know what you are getting into.)
Also, check those of the following resources that might have data about
your product or service or the people who would use it:

Encyclopedia of Associates. 17th Edition. Gale Research Company, Book
Tower, Detroit, MI 48226.

Ayer Directory of Publications. Lists trade publications by subject matter.
Contact the sales, marketing, or research departments for buying patterns
among their readers.

"Survey of Buying Power." Sales, Marketing, Management Magazine. July issue
each year.

Thomas' Register. Lists companies by product and service line, organized
geographically and alphabetically.

Directory of Business, Trade, and Public Policy Organizations. U.S. Small
Business Administration, Office of Advocacy.

Department of Commerce Publications. Data User Series Division, Bureau of
the Census, Washington, D.C. 20233.

County Business Patterns. U.S. Department of Commerce, Bureau of the
Census. Available for each state.

When your marketing research is completed you will have 1) identified your
potential customers; 2) found out all you can about their habits, needs,
preferences, and buying cycles; and 3) decided how to reach them to
generate sales.

How Much Shall I Charge?

Four main factors will help you decide what to charge for your product or
service: 1) your direct and indirect costs; 2) the profit you want to make;
3) your market research data on competitors' prices; and 4) the urgency of
the market demand. There is rarely an exact "right" price but rather an
acceptable price range within which you will want to fall. Avoid the common
mistakes made by many new business owners--charging too much or too little.
Use several approaches to arrive at a cost and "test" the price. If your
ego is too involved, your price may be too high. On the other hand, if you
have the attitude that "this is just a little something I do in my spare
time" or "anybody could do this," then your price may be too low.

Here is a formula for setting a fair price. Calculate your price using
other approaches, too, before you make a final decision on price:

Typical Pricing Formula

1. Direct Material Costs--Figure the total cost of the raw materials you
have to use to make up your item. Figure the cost of a group of items and
then divide by the number of items to find the cost per item. If you can
easily and immediately determine the material cost of a single item, fine.
Some items are produced in batches, however, and it is easier to get an
item cost by dividing the cost of a batch by the number of items eventually
produced.

2. Direct Labor Costs--Figure what you pay to employees to produce the item
(whether or not you have employees now). You must assign a wage figure,
even if you are the only one producing the item. Take the weekly salary you
pay someone to produce the necessary number of items and divide it by the
number of items. Add this figure to the Direct Material Costs total.

Materials + Labor = $__________.

3. Overhead Expenses--These expenses include rent, gas and electricity,
business telephone calls, packing and shipping supplies, delivery and
freight charges, cleaning, insurance, office supplies, postage, payroll
taxes, repairs, and maintenance. The accuracy of your costing depends on
estimating logical amounts for all categories of expenses. If you are
working at home, figure a portion of your total rent or mortgage payment
(in proportion to your work space and storage areas), or assign a
reasonable, competitive rent figure for the same amount and type of space.
List all overhead expense items and total them. Divide the total overhead
figure by the number of items per month (or time period you used above).
The answer is your overhead per item.

Overhead + Materials + Labor = Total Cost/Item

4. Profit--Include an amount added to the cost of each item so you won't
end up just breaking even or making the employees' wages. Check your
competition and see what they are charging. (Retailers generally double the
wholesale price.) If your product is a little better than the competition,
charge a little more. If your product is comparable, price it similarly.
Remember, you will get the profit from each sale, in addition to the salary
figure. Add the profit figure you have chosen to the total cost per item to
get your total price per item.

Profit + Total Cost/Item = Total Price/Item

Remember, the main purpose in operating a business is to make a profit.
Don't undersell your product or service just because "I'd be baking cakes
anyway" or "I'm just starting out" or"I work out of my home." If you have a
new, rare, handmade product or personalized service, the demand may be so
high that customers are willing to pay a little more.

Promotion

Promotion is an overall, long-range plan designed to inform potential
customers about what you have to sell. Advertising is usually thought of as
the paid communication part of the promotion program.

To develop a total promotional campaign you must answer these questions: 1)
What image or message do I want to promote? 2) What are the best media and
activities for reaching my potential customers? 3) How much time and money
can I spend on the effort?

Develop a long-range, consistent program for building image and reaching
customers. Your image should be reflected in your business card, logo,
stationery, brochure, newsletter, telephone answering service, signs, paid
ads, and promotional activities.

Word-of-mouth recommendations from satisfied customers are the very best
promotion any business can have. Consider which promotional tactics will
build the confidence and image you are looking for--giving speeches and
interviews (often good for counselors, teachers, lawyers, consultants),
having an open house or holiday home sale (for craftspeople), holiday
recitals or shows (for music and dance teachers or day-care operators),
free demonstrations and samples (for retailers, decorators, caterers).

Several small ads may have more impact than one large, splashy ad. Conduct
a campaign rather than having a one-shot ad or event. If you hire a public
relations firm, look for one that can give you personal attention and
develop a total marketing plan for you, not just a couple of ads. The plan

Managing Your Business: Structure, Recordkeeping, Taxes, and Insurance

You're The Boss.

A telling sign on a new businessowner's desk read: "Yesterday I didn't even
know how to spell ENTREPRENEUR and now I are one!" Now that you have
decided to open a home-based business, all decisions will be your
responsibility, not just those you previously enjoyed because they involved
your area of expertise. Of course, as a day-care operator you already knew
how to soothe an upset child, but as the owner of that business, do you
know when to file your taxes? As a consultant you have over 20 years'
experience advising organizations on personnel matters, but do you know if
it's to your advantage to incorporate? You are an expert at word
processing, but do you know how to develop an efficient recordkeeping and
billing system? You are the boss now and the good health of your business
depends on your management skills.

Choosing Your Form Of Business Organization

One of the most important decisions you will make is how to set up the
business as a 1) sole proprietorship, 2) partnership, or 3) corporation.
Remember, the small business owner risks it all, no matter what form of
organization.

The forming of a business organization depends on the following factors:

* Legal restrictions
* Need for capital
* Liabilities assumed
* Number of people associated in the venture
* Kind of business or operation
* Tax advantages or disadvantages
* Intended division of earnings
* Perpetuation of the business

Most home-based businesses are sole proprietorships or partnerships, but a
comparison of the advantages and disadvantages of each type of organization
follows:

A sole proprietorship is the least costly way of starting a business. You
can form a sole proprietorship by finding a location and opening the door
for business. There are the usual fees for registering your business name
and for legal work in changing zoning restrictions and obtaining necessary
licenses. Attorney's fees for starting your business will be less than for
the other forms because less document preparation is required.

Sole Proprietorship

Advantages Disadvantages

* Easiest to get started * Unlimited liability
* Greatest freedom of action * Death or illness endanger
business
* Maximum authority * Growth limited to personal
energies
* Income tax advantages in * Personal affairs easily
very small firms mixed with business
* Social Security advantage to
owner

A partnership can be formed by simply making an oral agreement between two
or more persons, but such informality is not recommended. Legal fees for
drawing up a partnership agreement are higher than those for a sole
proprietorship, but may be lower than incorporating. You would be wise,
however, to consult an attorney to have a partnership agreement drawn up to
help resolve future disputes.

Partnership

Advantages Disadvantages

* Two heads better than one * Death, withdrawal, or
bankruptcy of one partner
* Additional sources of endangers business
venture capital
* Better credit rating than * Difficult to get rid of bad
corporation of similar size partner
* Hazy line of authority

You can incorporate without an attorney, but you would be unwise to do so.
You may think a small family corporation does not need an attorney, but an
attorney can save members of a family corporation from hard feelings and
family squabbles. Attorney's fees may run high if organization problems are
complex. The corporate form is usually the most costly to organize.

Corporation

Advantages Disadvantages

* Limited liability for * Gives owner a false
stockholders (while true sense of security
for big business, may not
be for small business) * Heavier taxes
* Continuity * Power limited by Charter
* Transfer of shares * Less freedom of activity
* Easier to raise capital * Legal formalities
* Possible to separate * Expensive to launch
business functions into
different corporations

Recordkeeping

Keeping accurate and up-to-date business records is, for many people, the
most difficult and uninteresting aspect of operating a home-based business.
If this area of business management is one that you anticipate will be hard
for you, plan now how you will cope. Don't wait until tax time or until you
are totally confused. Take a course at the local community college, ask a
volunteer SCORE (Service Corps of Retired Executives) representative from
the Small Business Administration to help you in the beginning, or hire an
accountant to advise you on setting up and maintaining a recordkeeping
system.

Your records will be used to prepare tax returns, make business decisions,
and apply for loans. Set aside a special time each day to update your
records. It will pay off in the long run with more deductions and fewer
headaches.

If your business is small or related to an activity that is usually
considered a hobby, it's even more important that you keep good records.
The IRS may decide that what you are doing is only a hobby, and you won't
be allowed to deduct expenses or losses from your home-produced income at
tax time. So keep records of all transactions in which you spend or bring
in money. Pick a name for your business and register it with local or state
regulatory authorities. Call your city hall or county courthouse to find
out how.

Your records should tell you these three facts:

* How much cash you owe,
* How much cash you are due, and
* How much cash you have on hand.

You should keep five basic journals:

1. Check register--Shows each check disbursed, the date of disbursement,
number of the check, to whom it was made out (payee), the amount of money
disbursed, and for what purpose.

2. Cash receipts--Shows the amount of money received, from whom, and for
what.

3. Sales journal--Shows the business transaction, date, for whom it was
performed, the amount of the invoice, and the sales tax, if applicable. It
may be divided to indicate labor and goods.

4. Voucher register--A record of bills, money owed, the date of the bill,
to whom it is owed, the amount, and the service.

5. General journal--A means of adjusting some entries in the other four
journals.

Choosing a Recordkeeping System

Set up your records to reflect the amount and type of activity in your
particular business. There are a wide range of pre-packaged recordkeeping
systems. The SBA's pamphlet Small Business Bibliography No. 15 (see "For
Further Information") lists many such systems. The most useful system for a
small, home-based business is usually based on what is called the
"One-Write System." It captures information at the time the transaction
takes place. These One-Write Systems are efficient because they eliminate
the need for recopying the data and are compatible with electronic data
processing if you should decide to computerize.

Even though you may be small and just beginning, it is probably wise to
consult an accountant to help you decide which recordkeeping system is best
for your business. Once it is set up, you can record the daily transactions
or periodically have a bookkeeper post your daily transactions in your
General Ledger and prepare your financial statements.

Be sure to establish a separate bank account for your business--even before
the first sale. Then you will have a complete and distinct record of your
income and expenditures for tax purposes, and you won't have to remember
which expenses were business and which were personal.

It is important to choose a recordkeeping system that you understand and
will use. It will help you see how well the business is doing and is the
first step in responsible financial management.

Tax Obligations And Benefits

Significant tax savings are available to the home-based businessowner in
the form of deductions, credits, and depreciation allowances. The time,
money, and energy you put into keeping good records and keeping current on
tax laws will be worthwhile and ensure that you operate within the law. You
will need to plan for income tax, social security (all self-employed
persons must pay a federal self-employment tax), employees' taxes (if you
hire anyone), property tax on your home and business-related taxes, such as
sales tax, gross-receipts or inventory tax (in some states and localities),
and excise or individual item taxes (on certain commodities).

The Internal Revenue Service supplies the following free booklets (and runs
free workshops) to give you details on your specific obligations:

* Your Federal Income Tax (Publication 17)
* Tax Guide for Small Business (Publication 334)
* Business Use of Your Home (Publication 587)
* Employer's Tax Guide (Circular E)
* Self-Employment Tax (Publication 533)
* Tax Information on Retirement Plans for the
Self-Employed (Publication 560)
* Tax Information on Depreciation (Publication 534)
* Information on Excise Taxes (Publication 510)
* Tax Withholding and Estimated Tax (Publication 505)

There are various federal and state forms you will need to fill out to
start a small business. The federal government requires you to fill out
several forms including the following:

* Application for Employer Identification Number
(Form SS-4) (If you have employees or are subject to
excise tax)
* Employer's Annual Unemployment Tax Return (Form 940)
* Employer's Quarterly Federal Tax Return (Form 941)
* Employee's Withholding Allowance Certificate (W-4)
* Employer's Wage and Tax Statement (W-2)
* Reconciliation/Transmittal of Income and Tax
Statements (W-3)

As a home-based business owner you should be aware that every business
decision--each purchase and transaction you make--has tax implications or
built-in tax advantages or disadvantages. Deductions may be available for
home maintenance and improvements; automobile expenses; telephone expenses;
office and work space; inventory space; major purchases, such as a
computer; and a wide variety of other items such as uniforms, coffee
service, trademarks, a safe deposit box, credit bureau fees, and business
cards.

Each business situation is different and tax laws change, so consult
up-to-date references, a trusted attorney, and an accountant who can advise
you on your particular obligations and benefits.

Insurance

Insurance helps to safeguard your business against losses from fire,
illness, and injury. You cannot operate without it. Talk with an insurance
representative about your business needs. Check with the insurance carriers
on your home policy and make sure business use of your home is compatible
with your homeowner's policy. In addition to a homeowner's policy (personal
plan), now that you have a business, you will need a commercial policy for
full protection. Discuss these other possible needs with your agent:

* Product Liability Coverage--to protect you in case
your product causes injury to the user

* Auto Liability and "Non-owned" Auto Liability
Insurance--if a car is ever used to support the
business in any way

* Medical Payments Insurance--payable if someone is
injured in your home whether or not it was your
fault

* Worker's Compensation--if you have employees

* Business Interruption Insurance or Earnings
Insurance--in case your business is damaged by fire
or some other cause and you must totally or partially
suspend operations

* Disability Income Protection--a form of health
insurance in case you become disabled

* Business Life Insurance--to provide funds for
transition if you die

Be sure to keep all your insurance records and policies in a safe
place--either with your accountant or in a safe deposit box. If you keep
them at home for convenience sake, then give your policy numbers and
insurance company names to your accountant or lawyer or put it in your safe
deposit box.

Final advice for the wise business person is to read and understand the
fine print in all policies and to reevaluate business insurance needs about
every six months.

Other Considerations

Another aspect of planning is sheltering tax dollars through a Keogh Plan
or corporate pension and profit-sharing plans, if your business is
incorporated, or a retirement plan.

If you have a partnership, consider making a Buy and Sell Agreement with
your partner(s). This agreement requires the surviving partner(s) to buy,
and the heirs to sell, the deceased partner's interest. The surviving
partner(s) then becomes the sole owner(s) and the heirs receive cash for
their share of the business.

Dealing With Laws: Zoning, Licensing, Permits, and Others

Unfortunately, many home-based business people try to "slide" into
business, saying "I'll just try it for a few months and see how things go"
or "It's not really a business. I have only ten clients." This attitude can
lead to a lack of planning and big disappointments. If you set up your
studio, print business cards and flyers announcing classes, and then find
that regulations make it illegal to operate out of your home, you may have
to start all over.

Zoning

Before you start your home-based business, do a thorough investigation of
the zoning laws in your community. Zoning regulations spell out activities
permitted and prohibited in specific portions of a city or county. Call
your town hall, zoning office, or local library to get a copy of zoning
laws. Find out the structure of your local zoning groups. Most areas have
Planning, Zoning, and Appeals Boards.

If the home business you are planning conforms to zoning regulations, then
all you need to do is keep abreast of new proposals that may affect your
situation. It's a good idea to stay in touch with others operating from
their homes by joining business organizations or neighborhood groups in
case you ever need to band together to propose or oppose new regulations.
Maintaining a low profile and friendly relations with your neighbors will
result in more support from them should adverse regulations affecting your
business ever be proposed.

If through your research you discover that the home business you are
planning would violate the zoning code, there are several possible ways to
proceed. You might wish to check with an attorney who specializes in zoning
law to look for a legal way around the regulation. You might decide to
apply to the Zoning Board for a variance or exception. Or you may be able
to change your business enough to make the operation fit the law. If the
regulation outlaws businesses that employ people other than the owner at
home, maybe you can have employees take work to their own homes. If your
business will create too much traffic, consider another strategy for
product distribution. If your business will create too much noise, maybe
you can soundproof your house. At last resort, ask yourself "Is it worth it
to organize a drive to change the law?" Considering the rapid growth in the
number of home-based businesses, you just might find other entrepreneurs
who are also interested in submitting a change in the regulations to the
Zoning Board. Go to meetings of the Board and try to identify the person
who appears most active and most sympathetic to your position.

In the unfortunate and unlikely (most zoning officers don't have time to
chase people who aren't bothering anybody) event that you are issued a
"cease and desist" order, you should: 1) file an appeal immediately with
the Appeals Board (if you interpret the regulations differently than they
do); or 2) submit a change in the regulation to the Zoning Board to allow
your business, which may enable you to continue to operate without fines
until the Board reaches a decision. You may need a lawyer if you are not
entirely familiar with the regulations and the workings of the Board.

Cultural and national trends point in the direction of zoning regulations
that allow quiet, nonpolluting, low-traffic kinds of home businesses. More
and more corporations are employing people to work at home. Most
neighborhoods will adopt a "live and let live" attitude if you keep your
premises neat and quiet and don't create traffic and parking problems.

Keeping Up With Zoning Legislation

There are two ways to keep up with zoning legislation in your community
(and with other topics of interest to home-based entrepreneurs). One way is
to read local newspapers, especially the business section and the local or
"neighborhood" sections. Be sure you notice local items about such things
as proposed subway stations or the county's plan for revitalization.
Changes like these could eventually influence zoning in your area. The
other way to keep abreast of trends and zoning issues is to join the local
chapter of a business group, such as the Rotary Club, the National
Association of Women Business Owners, the National Family Business Council,
or a Business and Professional Women,s Club. Through newsletters, meetings,
and friendships that develop, you will hear all the latest local (and
national) issues discussed while you learn valuable business skills and
make useful contacts.

Working With Professionals

Even the smallest and newest business needs help from at least two kinds of
specialists: an attorney and an accountant. Depending on your type of
business and your skills you may, from time to time, ask the advice of
other professionals, such as a direct mail or marketing specialist, an
insurance representative, management consultant, a computer specialist, a
realtor, a public relations expert.

Several guidelines will hold true no matter what type of expert you are
dealing with: 1) Interview professionals to see if you will be comfortable
working with them. Make sure they have served other small businesses
similar to yours. Find out ahead of time exactly what service you are
buying, what the working relationship will be, and what fees will be
charged. 2) Be completely honest about your business situation. Advice
based on partial or incorrect information is no advice at all. If you are
having problems, don't be embarrassed. If your sales are down, give the
experts all the information you have and work as a team to solve the
problem. If business is good, don't be afraid that professionals will steal
your idea or expect a raise. Build a trusting, businesslike relationship.
3) Expect the professionals you hire to spend at least some of their time
teaching you and explaining complex concepts. But don't expect to be
spoon-fed or delegate all decisions to them. Take a course at the local
community college in recordkeeping and taxes or public relations to develop
more skill in areas where you are inexperienced. 4) Keep your appointments
and pay your bills promptly.

Your Lawyer

To find a lawyer who is familiar with businesses of your size and type, ask
for a referral from a business colleague, your accountant, the local

A lawyer can help you decide which is the most advantageous business
structure (sole proprietorship, partnership, or corporation). He or she can
help you with zoning, permit, or licensing problems; health inspection
problems; unpaid bills; contracts and agreements; patents, trademarks,
copyright protection; and some tax problems. Because there is always the
possibility of a lawsuit, claim, or other legal action against your
business, it is wise to have a lawyer who is already familiar with your
business before a crisis arises. A lawyer experienced with your type of
venture should also advise you on laws, programs, and agencies--(federal,
state, and local)--that help small businesses through loans, grants,
procurement set-asides, counseling, and other ways. He or she will tell you
about unexpected legal opportunities and pitfalls that may affect your
business.

In choosing a lawyer, experience and fee should be related. One lawyer may
charge an hourly rate that, at first, looks cheaper than another lawyer's.
However, because of a lack of experience in some area, the less expensive
lawyer may charge a larger fee in the long run. Ask for a resume and check
references. If you feel overwhelmed, take a trusted friend to the initial
meeting to help you keep on track as you interview the lawyer about
services and fees.

If you retain a law firm, be sure you understand who will work on your case
and who will supervise the work. If junior lawyers handle your work, the
fees should be lower. That's fine as long as you know an experienced
attorney will be reviewing the case periodically.

Let your lawyer know that you expect to be informed of all developments and
consulted before any decisions are made. You may also want to receive
copies of all documents, letters, and memos written and received in your
case or have a chance to read them in the lawyer's office.

Ask the attorney to estimate the timetable and costs of your work. You may
wish to place a periodic ceiling on fees, after which he or she would call
you before proceeding to do work that would add to your bill. Always have a
written retainer agreement, describing just what you and the lawyer expect
of each other.

Your Accountant

Most businesses fail not for lack of good ideas or good will, but rather
for lack of financial expertise and planning. Look for an accountant as you
would an attorney. Get referrals from trusted friends, business
associations, or professional organizations. Discuss fees in advance and
draw up a written agreement about how you will work together. Your
accountant (along with your lawyer) can advise about initial business
decisions, such as the form of the business. Your accountant will help set
up your books, draw up and analyze profit and loss statements, advise on
financial decisions (e.g., buying a computer), and give advice on cash
requirements for your start-up phase. He or she can make budget forecasts,
help prepare financial information for a loan application, and handle tax
matters.

Accounting firms offer a variety of services. If this is not an easy area
for you, the fees you pay will be well worth it. Most firms will maintain
books of original entry, prepare bank reconciliation statements and post
the general ledger, prepare balance sheets and income statements on a
quarterly or semi-annual basis, and design and implement various accounting
and recordkeeping systems.

They will also get your federal and state withholding numbers for you, give
instructions on where and when to file tax returns, prepare tax returns,
and do general tax planning for the small business person.

Your accountant is your key financial advisor. He or she should alert you
to potential danger areas and advise you on how to handle growth spurts,
how to best plan for slow business times, and how to financially nurture
and protect your business future.

State and Federal Laws That May Apply to Your Business

Most localities have registration and licensing requirements that will
apply to you. A license is a formal permission to practice a certain
business activity, issued by a local, state, or federal government. You may
have the type of business that requires a permit from the local
authorities. There is often a small fee for licenses and permits (usually
$15-25). A license may require some kind of examination to certify that the
recipient is qualified. Your business name must be registered and a sales
tax number must be obtained. Separate business telephones and bank accounts
are usually required. Of course, you will want to have the latter anyway
for accurate bookkeeping purposes, If you have employees, you are
responsible for withholding income and Social Security taxes. You must also
pay worker's compensation and unemployment insurance and comply with
minimum wage and employee health laws.

If your operations are intrastate, you will be concerned primarily with
state and local, rather than federal, licensing. Businesses frequently
subject to state or local control are retail food establishments, drinking
places, barber shops, beauty shops, plumbing firms, and taxi companies.
They are primarily service businesses and are subject to regulations for
the protection of public health and morals. Your attorney can help you make
sure you have complied with all licensing and permit requirements.
Depending on your type of business you may have to comply with building and
safety codes, too.

Think twice about the liabilities of operating without proper licenses and
registrations. If you begin to advertise or are fortunate enough to "make
the news" in some way, you will probably hear from a local official. You
will pay with embarrassment, time, and money if your business is not
properly licensed.

If you find legal regulations, permits, and licenses confusing, make sure
you find some way to get the information you need to operate legally. Get
help from your lawyer, accountant, business partner, or even your local
librarian. This is not an aspect of business operations that can be delayed
until you "get around to it." Your business reputation and financial
standing are at stake.

Understanding the Financial Side

Who Needs Financial Planning? You do! All businesses run on money for the
purpose of making money. A major reason for business failure is the lack of
financial planning. Although it is nearly impossible to make exact
estimates, approximate ones will help. The very process of thinking through
these financial questions will develop your business acumen and lead to
solid planning. Get your accountant involved in reviewing your plans and
advising you, too.

Estimating Start-Up Costs

Begin your financial planning by estimating your initial or start-up costs.
Include all items of a nonrecurring nature such as fees, licenses, permits,
franchise fees, insurance, telephone deposit, tools, equipment, office
supplies, fixtures, installation of fixtures and equipment, remodeling and
decorating, funds for your opening promotional event if you plan to have
one, signs, and, of course, professional fees for your attorney and
accountant.

Depending on your type of operation, the amount of money you invest, and
the energy you expect to put in (part-time to full-time) can determine how
much working capital you will need. Many business experts say if you expect
a profit in six months, double that time and be ready to operate without
profits for twelve months to give yourself a cushion in case of
unanticipated expenses or delays. Study the growth patterns of other
similar business and ask for advice from your accountant and attorney.

Projecting Operating Income and Expenses

Next, estimate the "working" capital you will need to keep operating for
six to twelve months. Operating expenses include salaries; expenses for
telephone, light, heat, office supplies, and other supplies or materials;
debt interest; advertising fees; maintenance costs; taxes; legal and
accounting fees; insurance fees; business membership fees; and special
services expenses, such as secretarial, copying, and delivery service.

It is a good idea to obtain typical operating ratios for the kind of
business in which you are interested. Among the sources for such ratios are
Robert Morris Associates, Dun & Bradstreet, Inc., the Accounting
Corporation of America, trade associations, publishers of trade magazines,
specialized accounting firms, industrial companies (for example, National
Cash Register Co.), and colleges and universities. The typical ratios for
your type of business combined with your estimated sales volume will serve
as benchmarks for estimating the various items of expense. However, do not
rely exclusively on this method for estimating each expense item. Modify
these estimates through investigation and quotations in the particular
market area where you plan to operate.

In addition to business operating capital, you will need to plan for
reserve capital to cover personal expenses. This estimate will include all
your normal living expenses, such as food, household expenses, car
payments, rent or mortgage, clothing, medical expenses, entertainment, and
taxes for you and your family.

After you have estimated start-up costs, working or operating capital
needed for six to twelve months, and personal expenses and obligations, you
may see that you need more start-up capital than you thought. What will you
do? Discuss this with your accountant, attorney, and trusted business
associates and family. Entrepreneurs secure needed capital in a variety of
ways. You can:

* Get loans or gifts from family members or friends. Make
businesslike, written agreements and be sure to disclose
fully the potential risk as well as the possible profit.

* Apply for a bank loan. For this you will need a
comprehensive statement of your personal financial condition
and a business plan with financial projections to present
to the loan officer. If you need help in preparing your loan
application, take a course for small business people at a
local community college or visit your nearest SBA office
to get assistance from a SCORE counselor.

* Apply for an SBA loan guarantee. The SBA is not a bank,
but it does extend guarantees and may rarely participate
in a loan when the bank is unable or unwilling to provide
the entire financing itself. The SBA loan officer will ask
you the same hard questions as a loan officer in a
commercial bank and require the same carefully considered
data on your personal finances, start-up costs, and
business projections.

* Search for some sort of venture capital. For start-up
entrepreneurs some prior managerial or entrepreneurial
track record is usually necessary in order to get venture
capital. The main disadvantage of venture capital is that
you will probably have to give up between 50 to 90
percent ownership of the new business in return for the
capital. A home business is extremely unlikely to attract
venture capital.

Understanding Your Balance Sheet

Your Balance Sheet is a summary of the status of your business--i.e., its
assets, liabilities, and net worth--at an instant in time. By reviewing
your Balance Sheet along with the Profit and Loss Statement and Cash-Flow
Statement, you will be able to make informed financial and business
planning decision.

The Balance Sheet is drawn up using the totals from the individual accounts
kept in your General Ledger. It shows what you have left when you pay all
your creditors. Assets less liabilities equal capital or net worth. The
assets and liabilities sections must balance--hence the name Balance Sheet.
It can be produced quarterly, semi-annually, or at the end of each calendar
or fiscal year.

While your accountant will be most helpful in drawing up your Balance
Sheet, it is you who must understand it. Current assets are anything of
value you own such as cash, inventory, or property that the business owner
can convert into cash within a year; fixed assets are things such as land
and equipment. Liabilities are debts the business must pay. They may be
current (such as amounts owed to suppliers or your accountant) or they may
be long-term (such as notes owed to the bank). Capital (also called equity
or net worth) is the excess of your assets over your liabilities.

Prepare a Balance Sheet for your new business during the planning phase to
estimate its financial condition at that time and also a projected one for
the first year of business. This will help you decide on the feasibility of
your venture and make modifications to ensure profitability. You can also
use these statements as part of the documentation in a loan application.

Understanding Your Profit and Loss Statement

Your Profit and Loss Statement is a detailed, month-by-month tally of the
income from sales and the expenses incurred to generate the sales. It is a
good assessment tool because it shows the effect of your decision on
profit. It is a good planning tool because you can "try out" decisions on
paper before actually going ahead.

The Profit and Loss Statement includes four kinds of information:

* The Sales information lists the number of units sold and
the total revenues generated by the sales.

* The Direct Expenses category includes the cost of labor,
materials, and manufacturing overhead (but not normal
overhead).

* Indirect Expenses are the costs you have even if the
product is not produced or the service is not delivered. They
include the fixed costs or normal overhead of salaries,
rent, utilities, insurance, depreciation, office supplies,
taxes, and professional fees for your lawyers and
accountant.

* Income or Profit is the last category on the
Profit and Loss Statement. It is shown both as pre-tax and after-tax
or net income. The IRS will look at your pre-tax figure,
whereas your loan officer and you are more concerned
with your after-tax figure.

Your Profit and Loss Statement should be prepared at the very minimum once
a year--and more often in the beginning or growth stages of your business.
It is a key document from which the economic health of a business can be
determined. Make certain you do it properly and understand its meaning.

Understanding Your Cash Flow Statement

Your business must have a healthy cash flow to survive. Cash flow is the
amount of money available in your business at any given time. To keep tabs
on cash flow, forecast the funds you expect to disburse and receive over a
given period of time. Then you can predict deficiencies or surplus in cash
and decide how to respond.

A cash flow projection serves one other very useful purpose in addition to
planning. As the actual information becomes available to you, compare it to
the monthly cash flow estimates you previously made to see how accurately
you are estimating. As you do this, you will be giving your self
on-the-spot business training in making more accurate estimates and plans
for the coming months. As your ability to estimate improves, your financial
control of the business will increase.

The creative business owner works with his or her accountant to use the
information gleaned from all of these financial tools to make a variety of
managerial decisions--decisions on buying supplies, expansion, when to hire
more employees, how to get the best tax breaks, and many other important
steps that will shape the future of the business.

Make it Easy on Yourself

Successful home-based business owners learn from experience--their own and
that of others. In Jeffry A. Timmon's study of entrepreneurial personality
characteristics (New Venture Creation: A Guide to Small Business
Development), he notes that entrepreneurs are disappointed but not
discouraged by failure. They use failures as learning experiences and try
to understand their role in causing the failure in order to avoid similar
problems in the future. Furthermore, Timmons asserts, entrepreneurs seek
and use feedback on their performance in order to take corrective action
and improve.

How to Learn From Experience

You can learn from experience in several ways:

First, work closely and creatively with professional advisors, such as your
lawyer and your accountant. As you continually review your business
records, you will see "mistakes," but you will also begin to develop skill
in planning and managing.

Second, continue to learn about all areas of business operations,
constantly acquiring new ideas. Most community colleges have short,
inexpensive, practical courses for business owners in topics like
"Financing a Small Business," "Choosing a Small Business Computer," and
"Starting and Operating a Home-Based Business."

Third, get to know other business owners with similar needs or problems.
Talking with others may be a way to avoid repeating the mistakes they have
made and benefiting from their experience. Local and national organizations
offer membership, social events, networking opportunities, newsletters, and
seminars for homebased business owners. Through these organizations you can
often advertise your product or service to other business owners. They also
provide a way to learn about services you may need, such as accounting,
public relations, or a responsible secretarial service. These organizations
offer updates in such areas as taxes and zoning in their newsletters and
workshops.

Finding and Using Resources, Networks, and Support Groups

Start out with the attitude "Whatever my current business problem, I can
find the solution. Somewhere there is information, a book, a person, an
organization, or a government agency that can help." A word of warning
though: finding resources and building networks can be very time-consuming.
Joining organizations can turn out to be expensive, especially if you are
too busy to use their services and support once you join. So use this list
to organize your search for resources useful to you, then pick and choose
carefully what you decide to read, join, buy, or attend:

Your Public Library: Visit your local library. Get to know its resources.
In addition to books, many libraries offer free workshops, lend
skill-building tapes, and become a central place to pick up catalogues and
brochures describing continuing education opportunities for business
owners. Ask the librarian for current copies of zoning regulations. Get
familiar with new books and resources in your field (computers, health
care, crafts, etc.) as well as in business skills (advertising techniques,
financing, etc.) Look for magazines such as In Business, Black Enterprise,
Venture, or The Journal of Small Business Management. Reading selectively
is free. Subscribing to too many magazines may be expensive.

Organizations: A wide variety of local and national organizations have
sprung up to serve the informational, lobbying, and networking needs of
business entrepreneurs. Through meetings, services, or newsletters, groups
such as the National Association of Women Business Owners, American
Entrepreneurs Association, Business and Professional Women's Club, National
Alliance of Home-based Businesswomen, and the National Association for
Cottage Industry offer members everything from camaraderie to valuable
"perks," such as group rates on health insurance. David Gumpert's book, The
Insider's Guide to Small Business Resources, has addresses of many of these
groups and other information on such resources.

Government Resources: Contact your local or district office of the U.S.
Small Business Administration (SBA) to learn about SBA services and
publications. The SBA also offers free or inexpensive workshops and
counseling through SCORE is a volunteer program sponsored by the SBA
through which retired executives who have management expertise are linked
with owners/managers of small business or prospective entrepreneurs who
need help.

The Department of Commerce, Bureau of the Census, Department of Defense
(procurement), Department of Labor, IRS (ask for the free "Business Tax
Kit"), Federal Trade Commission, and the Government Printing Office all
have publications and services to inform and support you. Local and state
government offices may also have services to help you. Addresses will be
available in your telephone book, under U.S. Government, at your public
library, or at the SBA office near you.

Community colleges: Most community colleges now have short, inexpensive,
noncredit programs for entrepreneurs. The classes usually are convenient to
business owners and are taught by experienced owners and managers.

As a home-based business person you can overcome feelings of isolation and
give and receive valuable information if you tap into networks and
resources. Being active in professional and trade associations will help to
build a good marketing network for your service or product. Take the time
and invest the money for memberships. Then continually evaluate which
organizations and resources best serve your business information and
networking needs.

Managing Time and Stress

Expect to encounter stress and time problems similar to those of other
business owners but accentuated by the fact that you work at home. Follow
these guidelines to make it a little easier on yourself:

1) Plan your time and establish priorities on a daily "to do" list. Decide
what your "prime time" is and do your most important or difficult tasks.
Set "business hours," specific times when you are at work and times
when you turn on the answering machine because you are "on duty but off
call." You, your customers, and your family will appreciate knowing your
set routine, even though you know that for special events or emergencies
you can break that schedule.

2) Notice what your four or five big time-wasters are and learn techniques
to eliminate them or compensate for them. Some common ones are: telephone
interruptions, visitors, socializing, excessive paperwork, lack of policies
and procedures, procrastination, failure to delegate, unclear objectives,
poor scheduling, lack of self-discipline, and lack of skill in a needed
area.

3) Stay in contact with people. Even though you prefer to work at home, you
should plan work-related or social activities that provide frequent contact
with others. This will help your morale if you feel isolated. Even for
home-based business owners who like feeling isolated, keeping up with
business and professional contacts is a must.

4) Build a fitness program into your day. Many successful entrepreneurs
exercise in order to think creatively because physical activity sends
oxygen to the brain and helps the mind function better. With regular
exercise your health will improve, your stress level will go down, and your
trim look will inspire people to have confidence in your abilities.

5) Give your home business as much of a separate and distinct physical
identity as possible. Although you might save a few dollars by using the
ironing board as a bookshelf and a cardboard box as a file cabinet, the
stress and strain of operating without proper space and supplies will take
its toll. Have a separate room or area for your business, with a separate
entrance if customers or suppliers visit. Consider soundproofing so your
family won't be bothered by your noise and vice versa. (In addition to the
psychological and physical comfort of having a separate office, the IRS
requires it in order for you to make a legitimate claim for tax deductions.)

6) Take care of your major business asset: YOU. Being the boss can be
exciting, fulfilling, and rewarding. It can also be lonely, stressful, and
demanding. Learn to balance your professional and personal life. Go on
vacation. Get a weekly massage. Join a health club. Take a class in
meditation. Attend a business owner's breakfast club. Your business depends
on you to be at your best.

Profile: Jeanette's Day-Care Center

Jeanette wanted to return to work when her two children started school.
Since her degree was in child psychology, she applied for a job as an
assistant at a neighborhood day-care center. When she heard the salary, she
decided there must be a better way. After several months of planning and
researching, she decided to open her own day-care center in her basement
recreation room. With remodeling she could accommodate the children and
meet the zoning and licensing regulations. Four years later, her center has
an excellent reputation and a long waiting list. She likes being "at home"
and working in the business half-days while attending school for a graduate
degree in business administration.

Profile: Wallflowers, A Wallpapering Partnership

Thirteen years ago Jane and Rachel bought a van together and formed
"Wallflowers," a wallpapering and painting business. When they started,
Rachel was recently divorced and wanted to test her entrepreneurial wings.
She had quite a reputation with her friends for doing beautiful
wallpapering and was often asked by them to help out on weekend remodeling
jobs. Jane had little wall-papering experience but had handled all the
accounting for her uncle's contracting firm and knew local suppliers and
business owners.

They have never had to advertise. Word-of-mouth referrals have kept them
busy ten months of the year. They close for two months in the summer so
Jane can be with her kids and Rachel can go to Maine. Jane likes working
"around" her family; if a child is sick or has a school program she'd like
to attend, she doesn't have to apply for leave or fear losing her job. Her
clients, mostly family-oriented people such as herself, understand that her
children come first and the job will get done.

For Further Information

U.S. Small Business Administration Publications

The following Business Development Booklets, are available from the
Superintendent of Documents, U.S. Government Printing Office, Washington,
D.C. 20402. Write for current prices on order form SBA 115B.

Handbook of Small Business Finance--Small Business Management Series No. 15.

Ratio Analysis for Small Business--Small Business Management Series No. 20.

Guides for Profit Planning--Small Business Management Series No. 25.

Starting and Managing a Small Business of Your Own--Starting and Managing
Series No. 1.

The following Business Development Pamphlets are available for a small
processing fee. Write the Small Business Administration, P.O. Box 15434,
Fort Worth, TX 76119 for order form 115A, which lists the publications and
fees.

Management Aids

The ABC's of Borrowing--MA 1.001

What Is the Best Selling Price?--MA 1.002

Keep Pointed Toward Profit--MA 1.003.

Basic Budgets for Profit Planning--MA 1.004.

Accounting Services for Small Service Firms--MA 1.010.

Analyze Your Records to Reduce Costs--MA 1.011.

Getting the Facts for Income Tax Reporting--MA 1.014.

Budgeting in a Small Business Firm--MA 1.015.

Sound Cash Management and Borrowing--MA 1.016.

Keeping Records in Small Business--MA 1.017.

Checklist for Profit Watching--MA 1.018.

Simple Breakeven Analysis for Small Stores--MA 1.019.

Profit Pricing and Costing for Services--MA 1.020.

Problems in Managing a Family-Owned Business--MA 2.004.

Business Life Insurance--MA 2.009.

Planning and Goal Setting for Small Business--MA 2.010.

Checklist for Going Into Business--MA 2.016

Thinking About Going Into Business--MA 2.025.

How to Get Started With a Small Business Computer--MA 2.027

Techniques for Problem Solving--MA 3.010.

Learning About Your Market--MA 4.019.

Incorporating a Small Business--MA 6.003

Selecting the Legal Structure for Your Business--MA 6.004

Women's Handbook--MA 5.

Small Business Bibliographies

Home Businesses--SBB 2.

Selling By Mail Order--SBB 3.

Marketing Research Procedures--SBB 9.

National Directories for Use in Marketing--SBB 13.

Recordkeeping Systems--Small Store and Service Trade--SBB 15.