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StefanJechel · Posted: Thu Apr 27, 2006 1:45 pm Post subject: Start-up guide

Every success story starts with a dream and with the courage to believe in your dream and to fight for it.

The quest of becoming a success entrepreneur may be long and difficult, but, just like any other quest, it begins with the first step.

And what I'll try in this post (and in a few others that will follow) is to present you the first steps of this "road to success" as I like to call it.

1) Aptitudes
Although they may came from many different places, although they may look completely different, all home-based entrepreneurs share a few personality traits. And I will mention here: being highly motivated, having a lot of self-confidence, having the ability to set goals, being willing to take risks, and maybe most of all being hard working and very responsible - because when you work from home there is no one else to supervise you, to force you to work or to be blamed if you fail.

2) Home based business types
When preparing to start a home business, keep in mind the fact that there are two basic types of home based business:
- Business that provides products
- Business that provide services.

Those that provide (sell) products can be separated in two sub categories:
- Those that produce the products by themselves
- Those that purchase them from a distributor or a manufacturer.
And here I come with a few popular examples: home base business that sell
books, cosmetics, jewelry, toys, magazines, fitness items, etc.

Those that provide services can also be separated in two sub categories:
- Those that provide services from the comfort of their own home office
- Those that provide services at the customer location.
And here I also come with a few popular examples: writers, IT professionals, astrologists, accountants, advisors, baby sitters, pet sitters, photographers, advertisers, etc.

3) Better understanding of the “Home Based Business” concept
Most people understand in the term "home based business" a business that is operated from and at home.

But that's quite wrong - many businesses who fall under the “home-based” category have only the administrative work completed at home, while the effective work is performed outside of home, at the customer's home or office (example: baby sitting, pet sitting, home repairing and renovating, home and office cleaning, delivery services).

(... to be continued ...)

StefanJechel · Posted: Fri Apr 28, 2006 9:28 am Post subject:

A new day... and a new part of the guide I started yesterday. Wink

4. Different types of Business Opportunities
When you're starting a home based business you can come with an original idea and draft your own blueprint or again you may subscribe to an already existing business model.

And here I present you the three models I identified:
a) Join a franchise
As an owner of a franchise business (called franchisee) you pay a big and well known company (called franchisor) for giving you the right to sell its products and/or services.
The main disadvantage is that generally these companies have quite high investment requirements and these together with royalty fees drastically increase the start-up cost (generally between USD 25,000 and USD 75,000).
The main advantage is that you sell a well known product or service and therefore there are probably a lot of interested people. Also another big advantage is that the franchisors generally offer lot of trainings and support.

b) Join a business opportunity
Business opportunities (also known as "Business packages" or "Network marketing opportunities") are quite like franchises - they give you some help (either by instructions or products) for starting and operating your business but to a certain lower costs (generally around USD 100).

c) Start you own business from scratch
This is the case when you don't join an existing business model and you don't pay any starting training or royalty fees, but instead follow your own idea. You make all of the decisions and take all your risks, but you also have all of the benefits.

5. Investment
Before starting a home based business you must calculate how much money you need to start and operate your business 'till the moment when it will pay for itself. Also you should add to this the money you need for yourself (food, rent, clothes, etc) during the period while your business will grow and won't produce benefits.
As previously mentioned there are three categories that you should calculate.
The first one is related with initial investment (setting up your home based office, start advertising your business, buy all equipment / products, obtain the required licenses, eventually any start-up taxes or royalty fees, etc).
The next one is related with business maintenance costs 'till the business will grow up enough to start pay for itself and even more bring you profit. Consider all your monthly costs and multiply with the number of months you estimate it will take to come on profit. Try to be conservative here so you don't run out of money later.
Finally the next is related with your own expenses. Calculate your monthly requirements and multiply again with the number of months 'till your business come to maturity.
Don't proceed further if you don't have enough financial resources (and even a little more because you never know what could happen)! Not having enough money is the reason why most home based business fail in the first three to six months!

StefanJechel · Posted: Sat Apr 29, 2006 1:25 pm Post subject:

A new day... and a new part of our start-up guide - the third one...

6) "Full Time" or "Part Time"
If you have enough resources to start and maintain your business over the first few months (check the previous section - 5. Investment) and you are confident that you have a great business plan that can't fail than you may start with full forces and devote all your time to the development of your home based business.
However if you have any doubts or you still want to test the waters than a better decision is to take the things slower and split your time between your home based business and a part time job. Although in this case the development of your business will be slower, at least you'll still have a steady income.
I suggest the second solution because its way easier to switch from a part-time home based business to full-time (all you have to do is to resign from your job) than to switch from full-time to part-time (case when you must search and find a new job). For myself not even now, at a few years after I start my own home based business, I didn't yet retired completely from my job.

7) Analyze your market - again and again
Before starting your home based business you should first take yourself lot of time to study carefully the market for the products you'll sell or for the services you'll provide - be sure that the demand is higher than the offer. Also check and be sure that the other companies operating in this niche market are making profit.
If you decide to join a franchise or a home business opportunity than you have to do even more research regarding that company before signing any contract. In this case try to do at least these investigations:
- Check the company’s history, credentials, reviews and testimonials.
- Do a comprehensive background check of the company on BBB (Better Business Bureau) or to the closest Chamber of Commerce.
- Get in contact with other people who have already been invested in this opportunity - the more the better; check what others said about it on different forums of blogs over the internet.
Also be very attentive to read all clauses in the contract and to have all promises made to you added to the contract. If necessary feel free to consult with an attorney - is better to pay a few bucks now than to lose a fortune in the end.

StefanJechel · Posted: Sun Apr 30, 2006 7:43 am Post subject:

Huh... one more day passed... and here we are on the fourth part of this start-up guide... and I'm somehow starting to run out of ideas...

8. Ownership - business structure
Now that you are decided with the type of business you want (offering products or services, join an existing business opportunity/franchise or start from scratch, part-time or full-time) there is one more decision you must take - the way you want to structure it (taking in considerations two major arguments: tax implications and liability protection).

And here are the main alternatives:
Sole Proprietorship
In the case you select this alternative than you and your home based business are in fact the same entity. It doesn't provide any liability protection and a separate insurance is needed in order to protect your own assets.
Partnership
In this case at leas two (but can be more) entrepreneurs share the initial investment, the work responsibilities and the profit. Every partner is responsible and liable for the other partner's business actions (for examples for incurring debts). Partnerships are way easier to start than corporations (less forms to complete) and there are not so many government regulations like in the case of corporations.
Corporation
Corporations are the highest level for a home based business, and the one that also is the most expensive to create and maintain (there are incorporating fees, annual costs and taxes, etc). At the same time they’re more tightly regulated by government and IRS.
The best solutions for a home based corporation are: LLC (Limited Liability Corporation) and S-Type Corporation.
LLC must have at least two owners and offers all tax benefits of a partnership, and also the persona assed protection for a corporation.
S-type Corporation has the main advantage that you don't have to pay tax for corporate income, but only for personal income - this way eliminating double taxation.

9. Insurance
I consider a must to have a good insurance which to cover for your home business.
In the most lucky and simple case all you need is to obtain a business rider appended to your already existing homeowner's insurance.
But there are some cases when you'll might need separate policies.
Also if you have any employees (even only one) you will have to obtain worker's compensation insurance policies.
Again if you plan to use your house as an office and invite clients you'll have to obtain special liability insurance.
You may also need later some other types of business insurance, but since they're not needed in the beginning I'll just enumerate them here: business interruption insurance, business property insurance, partnership insurance and disability insurance.

StefanJechel · Posted: Tue May 02, 2006 2:50 pm Post subject:

I missed a day, but don't worry - I'm back and I'll compensate today (I'll post enough ideas to cover and the lost day). Enjoy your reading!

10. Boost your communications resources
Any home-based business (even those operated mainly over the internet) is relying on the telephone / fax to conduct most of their business communications. And most probably your own phone won't be enough for this. What I suggest is to invest in a professional phone (with multiple lines, call forward, call identification, conference calling, voice mailing, etc). If it has integrated a fax machine is even better.
If you can afford it than an alternative is to hire a virtual assistant who could manage your phone calls and also help you with any secretarial work you have.

11. Understand your niche market
We previously talked about the fact that you must concentrate your business on a specific niche market (a small segment of population for which you'll customize your products or services).
You must do a lot of research regarding your niche market and understand your potential customers’ unique needs and expectations really well - this way you'll know how to plan your marketing campaign and how to customize your products or services...

12. Legal Issues
Although the services of an attorney are expensive, there is almost a must to consult one when you're starting a home based business - this way you obtain the required legal support and you avoid encountering and big problems in the future.
Also, after you are in business, it's good to consult an attorney before signing any contract and entering any business relationship.

13. Money Sources
You may not have always all money required to start a home based business so therefore you may need to look for alternative solutions for financing your business.
The most common solutions for rising founds are:
- Withdrawals from personal savings
- Loans from family or friends
- finding a partner / investor
- Loans from banks
- Loans from SBA
- Short/medium term credit card finances
- Borrows against home equity
Another common solution for improving cash flow is to apply your receivable accounts to credit suppliers (selling your receivable accounts to a third party for a certain discount).

StefanJechel · Posted: Tue May 02, 2006 3:11 pm Post subject:

14. Branding - your business name
The name of your business is very important - since it is one of the first (if not really the first) things a customer hear about.
If your business name is not relating with your product or service than customers may not even take the time to find more about your business (for myself I wouldn't be interested about "Fishing Joe's" company when I'm searching for someone to take care of my dog).
Also try to choose a memorable and easy to remember name - so people will remember you when they'll need a similar job done.
Also if you plan to expand in the future think at a brand able name (something like "Joe’s old auto painting shop" is not something brand able).

After you find that great name it should be wise to register it, or any other identifying marks with U. S. Patent and Trademark Office (to find more details visit their site at www.uspto.gov).

15. Set-Up your office
When selecting the place from your house where you'll build your in-home office take in consideration mainly if you'll receive or not customers there.

If you'll receive visitors than it must be somewhere where it is easy accessible and quite separated from the rest of your house (ideal with a separate entrance too) and it must look professional.

On the other hand if you won't receive visitors / customers than all it maters is to be in a quite section of your house, with less or none traffic or noise, with good lighting and ventilation, and with lots of storage options. Therefore a garage, a basement or an attic are all great choices. (Let's remember that during their first years Google operated in a garage Very Happy

)

The next step will be to buy proper furniture and equipment for your home-based office. Of course that every business comes with its own requirements - but I'll try here some of the most common required equipment and furniture for a home based business:
- (Computer) desk
- Ergonomic chair
- Computer and computer software
- Printer, copier, scanner, fax (here the best solution to save money and space is to buy a all-in-one machine)
- Credit card processor

16. Plan your home based business
It should be a good idea to also have a business clan which outlines what your resources and objectives are, and what's the plan to reach them. It will be a must if you plan to find investors, but even not it will still help you a lot, because it will serve you like a roadmap.

It should include:
- A history of your company / business
- An overview over the actual situation of your company / business
- An analyze over your general and niche market
- Marketing plan
- Sales plan
- Finances plan (including revenue, expense and profit estimations).

StefanJechel · Posted: Thu May 04, 2006 9:12 am Post subject:

Yesterday I had no inspiration so I didn't post anything, but today I'm back with my engines running at full speed, and again I'll make two post to compensate for yesterday. Wink

17. Pricing your product or service wise
Pricing your product or service is a continuous process - you must try different solutions before finding the best one. It sounds like a lot of work (and in fact it is Razz

) but it's a must. If you set a price too high than you won't make sales and therefore your business will fail; if on the other hand you will set your price too low than you'll make only minimal profit for the same work.
When setting your price you must have in mind a lot of factors, from which I mention:
- Your competition prices for similar products or services
- Your competition products or services quality comparing with yours (what advantages the competition has comparing with you; what advantages to you have comparing with them)
- Demand level (how many people out there are requesting your product / service)
- How much your potential customers are willing to pay for the product or service you're offering.
However while playing with prices to see which one is the best keep in mind one thing: regular customers don't like when you increase the prices, so it might be a wiser idea to start from a higher level and if you don't make enough sales to start reducing it or making discounts.

18. Keep your records clean
Once you start your own home based business you're on your own - so there is no one to do any part of the job for you. So you'll probably have to start doing a lot of things you were not familiar with before - and one of them is to keep your records / accounts in order and up-to-date.
Here is a list with the most important things you must keep track of:
- Revenues
- Expenses
- Profit
- Taxes
- Cash flow
- Payroll
- Inventory
It's wise to do all these on your computer, since (especially if you use specialized software) it makes everything way easier for you.

There are two ways how you can keep your accounts clean. You can use each one of them, just don't mix them. They are: "accrual" and "cash".
"Accrual" means that you'll operate in your registers and transaction (even income [charge] or expenses) in the moment when they occur and not when the money are effectively exchanged (received or paid).
"Cash" means that you'll operate in your registers when you receive or make a payment (when money are effectively exchanged), and not when an invoice is sent/received.

StefanJechel · Posted: Thu May 04, 2006 9:30 am Post subject:

19. Market your business so you increase your sales
With so many things to do as a home based business owner it's quite easy to miss the most important thing: in order to make profit you must make sales - and in order to make sales you must market your business.
I tried to collect here for you the most important marketing solutions for a home based business:

A) Advertising.
You can reach a lot of people via advertising (TV, radio, magazines, newspapers, Internet). Unfortunelly all of these are really expensive and the only ones that are affordable for a home based business starter are:
- Internet
- Local newspapers
- Local radio stations

B) Networking
You must have a family, a group of friends, an association where you are a member, etc; and each of those persons have other contacts and so one. You can't imagine how many people you can reach this way, and they'll tend to trust you more than in the case that they would find you from advertising.
That's why is wise to tell anyone what you do, what's your business about, and even more always have some business cards to give to anyone you meet - you can't know how or when you'll generate a sale this way.

C) Public Relations
Sometime for promoting your business and selling your product or service you must create an image for yourself and sell it at a later time (build popularity for yourself and later on pass it to your business).
This can be achieved by becoming an expert in your niche market - write books, articles; teach in a seminar; be invited in a radio / TV talk show; participate to conferences; etc.

D) Direct Marketing
Direct marketing is the most common business promotion / marketing solution. The principle is that you must have a mailing list (a list of persons with full contact info to whom you can send your promotional materials - sale letters, sale brochures, ads, flyers, samples, etc). This can be either real mailing list (with street address, phone number, etc); either virtual mailing list (with e-mail addresses only).
Either way you must pay a special attention how you obtain this mailing lists, because you're not allowed to send unsolicited information (especially in the Internet world) to people that didn't subscribe specifically for this kind of materials.
A good idea to build this list is to give a material for free (course, tips, samples, etc) and at that moment also ask people contact info and permission to send future materials.

StefanJechel · Posted: Sat May 06, 2006 3:14 pm Post subject:

I think I already start getting used with posting two posts once at every two days instead of one per day. Wink

20. Tax Deductions
There are a lot of possibilities for an entrepreneur to obtain some tax deductions.
The most common ones are:
- Auto expenses
- Fuel
- Office equipment and furniture
- Supplies
- Professional membership fees
- Phone expenses.
In some certain situation you may also obtain a deduction for your mortgage rate, rent, insurance, utilities expenses, house repairing costs or any other real estate taxes.
You may find more information about this from any professional accountant, but I must tell you that in order to qualify for them, your home-based office must be located in a separate section of your home, which is not common with your living space.

21. Employees or contractors?
In the beginning, when you just start your home-based business and the budget is small, you'll probably have to play a lot of roles: CEO / general manager, accountant, secretary, salesperson, marketer, etc.
But hopefully, your business will grow and one day you will come to the point where you'll can't handle everything by your own and you'll have to extend. At this moment you have several solutions:
- hiring a part-time employee
- hiring a full-time employee
- outsourcing some of your work to another individual or company
- linking with a contractor

If the afflux of work is only temporary than I suggest as the best solution outsourcing the extra-work to another individual or company; this way you don't have to worry about finding people for hire; or finding solution for firing them when the work will be completed.

O the other hand if the quantity work exceeds your possibilities on a regular base than I highly suggest hiring a part-time employee (and later even a full-time one) because the costs are way smaller.
Every time when you hire a new person take in consideration how much you will pay him/her, how much extra taxes, insurances, etc you must pay and see if you can still make a profit - and if you don't than don't hire; it's wiser to reject some projects instead of hiring someone who won't help you make profit. Also think twice before expanding and hiring a new person, because generally is harder to get rid of someone (you can't fire them without a reason) than it is to find that person.

StefanJechel · Posted: Sat May 06, 2006 3:41 pm Post subject:

22. Keep track of your finances - always know what's your position
As previously mentioned (at 18. Keep your records clean), it's very important to have your records in order a clear overview of your financial situation (track your payable and receivable accounts, keep track of your taxes and rates, manage cash flow, calculate your business' parameters - income, expenses, profitability, etc).
You have three solutions for doing this:
- hiring an accountant (very expensive)
- do it by yourself (takes a lot of time)
- using a computer program (I definitely recommend)

23. Build popularity and trust with a web site
The budget for a home based business is generally always stretched, so most of us can't afford a lot of marketing (newspaper ads, magazines ads, radio clips, TV clips, flyers, brochures, etc).
But I think we all can afford a web page - after all we pay for it only once (when it is created) and after that only maintenance (hosting, domain name, etc) costs which are really low.

There are two main advantages of having a web presence:
- you can gain visitors / customers
- you build trust to a potential customer
With these two things in mind I doubt we can say that having a web site is a luxury any more - it's more and more evident that it is a must. We can make a comparison - not having a web site today is just like not being listed in Yellow Pages in the early 90's.

And here's a short guide of what a home based business' web site must contain:
- A short description / history of the company
- A presentation of your products / services
- Contact information
- Testimonials from other customers
- A shopping cart (to let your customers place their orders online)
* the items marked in red are the most important ones

24. Build trust, respect and credibility
Unless they were referred from trusted persons, people are generally quite suspicious when it comes about small, home based business. That's why you must build trust, respect and credibility for your business. You must always have these things in mind. And here are some ways you can do that:
- do always a top quality job so people will talk about you
- have a web page
- be listed in Yellow Pages and other similar publications
- answer all mails and e-mails fast
- have professional designed logo, business cards, etc
- pay attention to every detail.

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