3 Keys for Making the Most of a Home Business
If you operate your business in the friendly confines of your home, you may still be padding around in your slippers at lunchtime and darting out mid-afternoon to pick the kids up from school. But you also know how difficult it can be to live and work effectively in the same place, and you’re looking for every possible edge to help you succeed in your home business.
Three tactics can make a huge difference for your home-based startup business. They’re not going to rescue you from a poorly thought-out business model, or turn your company from a five-figure to a seven-figure affair. But fully leveraging these three tactics can ensure that how you actually operate is giving your home business strategy every possible chance of succeeding.
Outsource everything but the core functions in your home business
You started up a home business because you wanted to do something unique, or perhaps better than the competition. So you need to keep your eye on that ball, continually clearing the way for you and your company to focus on this “core competency” – just like larger companies do.
The difference, of course, is that as a home business owner, you’re just one person. Just to do business, your startup must handle lots of things beyond focusing on your founding idea, especially if you have larger competition.
“But you should do what you’re good at, and you can’t be good at everything,” says Barbara Weltman, a small-business expert based in Millwood, N.Y., and author of The Complete Idiot’s Guide to Starting a Home-Based Business. “Small businesses have so many different responsibilities that you should outsource whatever you can so that you can make the most money doing what you do best.”
So if you came up with a product to manufacture, but the key to your business model lies in sales and marketing, farm out production. If you’re a consultant whose magic lies in your vision and your interaction with clients, outsource your accounting and other “back-office” functions. If you’re a web retailer who is drawing customers because of your product selection and brand buzz, outsource fulfillment and shipping.
Your home business should fully leverage the internet
Taking advantage of the internet can help you operate your home-based business with far more efficiency than was possible five years ago.
In fact, the biggest challenge for home-based operators is to keep up with the many new ways they can make the internet work for them. These days home-based businesses can send out e-mail blasts to their customer database – announcing a promotion or a new product – just as easily as any huge company. They can obtain merchant-bank authorization to accept credit cards online so they can conduct e-commerce; that wasn’t always the case.
And even home businesses can make themselves seem bigger than their local niche by setting up a website that positions themselves as an information resource on leaky faucets, or canine care.
Maybe Donna Maria Coles Johnson has found the ultimate application of the internet for her home-based business: getting away from her Washington, D.C.-area home and working from someplace that has a wi-fi hotspot. “I go to the local coffee shop a lot, and that’s where my daughter thinks that mommy works,” says Johnson, who is, among other things, author of several books on how people can make their own natural cosmetics. “Because of the internet, I can work anywhere and not be interrupted.”
Take greatest possible advantage of home business tax breaks
For many years, federal tax policy wasn’t very helpful to home business owners; for example, only very recently have individual business owners been able to deduct the entire cost of their health-insurance premiums.
And nowadays the biggest problem most home business owners have with taxes is that they leave too much money on the table by not availing themselves of many fully legal deductions.
The biggest of these, tax experts say, is that they don’t claim depreciation or the full extent of their expenses that are attributable to taking up part of their home with their office, or manufacturing operation, or warehouse space – or some combination of all three.
And while many home business owners take a deduction for the utility bills and other expenses that are attributable to their home business offices, they don’t always optimize these deductions. For example, you should consider claiming a “time percentage” of your heating costs rather than a “space percentage,” says Eva Rosenberg, a tax expert and author of Small Business Taxes Made Easy.
“It’s a matter of calculating how much more electricity and gas you’re using to heat the place in winter because you’re there working, compared with what you would use otherwise,” Rosenberg advises. “That’s normally going to come out to a lot more than just taking a percentage of the overall bill that matches the square footage occupied by your office.”
Our Bottom Line
Getting a home business idea off the ground can be challenging enough in itself. But by maximizing outsourcing, the internet, and your tax advantages, you can quickly add momentum and sales that will elevate your home business into a force in your marketplace.