Whether you’re in North America, Britain or any other advanced economy, working from home has become more and more common over the past decade or so. If you’re managing your own business or planning to do so, the following advice should help you.
1. Before taking this important step, you need to ASK SOME KEY QUESTIONS.
a) Is it right for your line of work? You need to consider:
• Is your home suitable for connecting with clients?
• Would a residential address put some clients off?
• Were you previously reliant on office meetings and networking to maintain contacts and keep up with developments in your field? If yes, how will you do so from home?
• Have you researched the success rates of your line of business when operated from home? As many as half of all small businesses fail within their first few years. That shouldn’t put you off completely, but it’s a fact to consider. Background research is essential to maximise your chance of success.
b) Is it right for your home? Consider these points:
• Is your house big enough and suitably configured for your line of business? If you don’t have a separate area to devote to it, there’ll be a sizeable impact on the ‘home side’ of home.
• Can your home life cope with your work timetables and random demands? With any extra visitors or deliveries? With demands on phone lines, download limits and other facilities?
• Would your home-based business comply with local government zoning regulations?
• How about other legal issues: public liability, other insurance, mortgage provider requirements, etc?
c) Is it the right choice for YOU? Reflect upon these questions:
• Will you enjoy the relative peace or will you miss the camaraderie of an office? Isolation is often cited as the biggest downside of homeworkers.
• Do you have the self-discipline to overcome procrastination and put in the hours without the impetus of a boss or fellow workers?
• Or, are you workaholic with a tendency not to switch off? Many homeworkers leave their PCs running almost 24/7, along with fax and business phone. Would this unduly interfere with your home life?
• Is the timing right for where you are in life? Are you prepared mentally, emotionally and professionally, or do you need more gestation time before launching this venture? Not least, is your family ready for it?
• Are you prepared financially? Do you have enough savings (or a kind-hearted Significant Other) to carry you through the lean start-up months or years? Could you cope with the loss if it doesn’t work out?
Obviously, a whole lot of reflection, planning and organisation is necessary before you make The Big Leap.
2. YOUR BUDGET
Can you afford to work from home? Yes, according to Anna Wright, who reports that 93% of homemorkers’ costs are equal or lower than when they commuted to an office. The single-most important thing here is to do all your relevant calculations in advance.
First up, look at the potential SAVINGS. You could be pleasantly surprised.
a) Travel. Calculate the bus/train/petrol/parking costs you’ll be relieved of – nearly always substantial. Have you added them up lately? Do so, and see how money slips through your fingers each week. Also, consider the time saving: time which you could be using to make money.
b) Meals. If you regularly buy lunch, snacks and coffee/tea at or near the office, these could add up to a bundle, sometimes as much as $100 per week or more. Multiply that by 48 to get the total for a year! Even if you only buy these things sporadically, the cost adds up. Sure, when working at home you’ll be paying for the food you eat, but most likely it’ll be a great deal less.
c) Business clothes. If you have a job where you’re expected to look smart, chances are you’ve been spending significantly on clothes, shoes and accessories. Now, you needn’t and shouldn’t become tatty-looking when working at home, but quite likely you’ll be able to make some savings in this area.
d) Tax breaks. Depending on where you live and what line you’re in, there most likely are certain tax breaks for equipment and other expenses. Of course, you should only claim rebates (or whatever the system is) for those items that are legitimately used for your business, but almost inevitably that means savings on utilities, equipment and perhaps furniture and other items that you can still benefit from for personal use.
e) Premises. This area of savings applies to those who would otherwise be renting separate premises for their business. Savings include money that would be spent on rent/mortgage, insurance policies, higher utility bills, extra phone lines/broadband/wifi/equipment, and so on.
Secondly, of course, you must consider COSTS. The range of spending options for any line of business can be vast, so you need to consider them carefully.
a) Setting-up costs. If you dream of total conversion of a shed, loft, garage or what-have-you into a fully functional office, it will clearly cost substantially. Better to postpone this dream while you test-run working at home, by making do with your study-room or other spare space.
Even so, there’ll be start-up expenses. If you don’t have them already, you’ll need at a minimum a phone, computer, appropriate software, printer, stationery, suitable desk & chair, filing system, proper lighting and sufficient heating & cooling.
Depending on your business, you may also variously need a dedicated phone, a fax facility, an answering service, reference works, storage space, equipment, materials, signage, advertising, visitors’ parking, revamped decor, or physical modification of your home. You may also be liable (in some countries) for provisional tax in your first year of operation.
b) Utility bills. Energy and phone expenses rise when you start working from home, typically by more than 10%. You’ll need to keep careful record of these increases in expenses in order to claim tax breaks, and may need to have separate metering installed.
c) Insurance. You’ll need to add any new business equipment to your household policy or take out a separate policy. Also, you should consider cover for equipment such as laptops when away from home. Also, perhaps investigate some sort of business insurance.
d) Support services. You need to factor in estimated expenses for support services (including repair) that are often part and parcel of working in an office for a firm; for example, legal services, book-keeping and accounting, financial advice, publicity & marketing, IT support and ‘cloud’ back-up of your digital records. These people all know how to charge – they’re not charities!
e) Taxes. These depend, of course, on where you live. Some local governments may charge you business rates on part of your property; there may be state, county or provincial imposts; and the national government may be happy to hit you for personal, company or VAT taxes. And, depending on your circumstances, there could be import/export duties, payroll taxes or other government charges. Check with a reputable taxation consultant to ascertain your tax liabilities.
[Written by the site administrator. Loosely based on "Making it Work at Home" (Anna Wright, 2008, Crimson Publishing, Surrey, UK), which goes on to discuss reducing costs, rules and regulations, creating a 'green' office, work-life balance, and more.]