In today’s struggling economy, more and more aspiring entrepreneurs are looking closer to home for answers – as in, the home-based business. The advantages are many, including a reduction in overhead and start-up expenses. But as any successful “homepreneur” can attest, a lucrative home-based business is more than simply setting up shop in one’s house.
One of the biggest issues facing these fledgling businesses is branding, according to Herb Caesar, president of CED Solutions, LLC, in Englewood, N.J. “You have to create the perception that you are an entity unto itself, that you are bigger than you are, and not a Mom & Pop shop,” he said. “You only get one chance to make a first impression.”
Caesar was on hand to share tips, as well as the special requirements and circumstances affecting the home-based business, in a workshop, titled The Home-Based Business, on April 3 at the New Jersey Department of Labor Business Resource Center in Elizabeth, N.J. Sponsored by the New Jersey Small Business Development Center (NJSBDC) at Kean and Bank of America, the seminar was the latest installment in a series of free workshops for Elizabeth residents and small business owners.
When establishing any business, Caesar advised guests to identify a certain niche for a product or service in the market, and determine if the venture is viable and sustainable. A carefully crafted business plan should then spell out the mission and specific goals. This plan of execution will also help when approaching lenders for funding.
Entrepreneurs must likewise identify who their target market is, and understand what motivates these consumers. He advised guests to limit their target markets, ideally to a three-county area. Even with regards to Internet sales, he noted that there are certain advantages of being in close proximity to customers, such as the ability to address their complaints face to face. By offering exceptional customer service, he said, this will translate to repeat customers and word-of-mouth referrals.
But why go it alone? Caesar noted the innate benefits of forming partnerships, where each member of the team has a specialty that contributes to a greater whole. “The synergy of working together is stronger than you are individually,” he said. “Colleagues bring something different to the table. A true test is not how smart someone is, but how smart he or she can make you.” Furthermore, he said, it is imperative to foster collaborative alliances with other entities in the same industry.
So now you’ve identified your product or service, as well as your customer. You’re ready to launch your business, right? Not so fast. Caesar cautioned that first it is important to create an environment that reduces the risk for liabilities. Among the proper measures, business owners should form a limited liability company (LLC), which, just as the name implies, provides limited liability to its owners.
He also recommended hiring an accountant and an attorney who will advise any legal and financial issues as they pertain to operating and buyer agreements. Owners should likewise speak with his or her homeowners’ insurance agent to determine what is covered under the policy. Ideally, owners should meet with the attorney, accountant and insurance agent together as an advisory committee.
When setting up the business in the home, Caesar advised using a room that will be used exclusively and regularly for the business, in order to be eligible for the full tax deductions. One must know the square footage of that room as a percentage to the square footage of the entire house. Failure to report these figures accurately can result in an IRS audit.
In order to appear professional, Caesar suggested adding a separate phone line, available at a minimal cost, which will help keep the business affairs separate. He also recommended that, for both marketing and practical purposes, one shouldn’t use their own address as the business address.
He also cautioned business owners against some of the pitfalls of a home-based business, such as becoming too isolated from consumers, networking opportunities and current trends in the market place. In addition, it is imperative for entrepreneurs to “maintain a big picture perspective,” he said, as well as to acquire new skill sets by conducting research and/or attending seminars and continuing education courses. Furthermore, business owners need to stay organized, maintain accurate record keeping and learn to multitask so that different facets of the operation are working in harmony.
He stressed that one of the main differences in the haves and have nots is the discipline to manage cash flow and credit. “If that bothers you, then go take an Aspirin and take a nap,” he said with a laugh.
Caesar said that he advises his clients to “stay lean and mean,” in order to stay abreast of a rapidly changing environment and, just as importantly, to anticipate what changes are around the corner. “You don’t want to use a lot of capital to buy inventory that will sit around,” he said. “It runs the risk of becoming obsolete. Buy enough inventory to last 30 to 60 days.”
Above all, Caesar said that business owners must have passion for what they are doing, even in light of minor setbacks. “Don’t be afraid to fail; don’t be afraid to play the game,” he said. “Failure can be difficult, but it is not devastating. You get back up and you move on.”
Remaining workshops in the seminar series are as follows:
May 1: Financing Your Small Business
Guests will learn the current programs, requirements and procedures for obtaining financing for your business, whether it is established or a start-up.
May 29: Developing a Winning Business Plan
This session will teach attendees how to research and prepare a solid business plan in a motivational environment.
To register for a seminar, please contact the NJSBDC at Kean at email@example.com or 908-737-4220.