I’m speaking in a few months to a group of women who are in the early stages of starting home-based businesses. Having been self-employed for years, I am a huge fan of the micro-business revolution, and of course, I’m familiar with the evidence that an hour spent commuting will probably be the most miserable hour of your day.
So yay, working at home. But in our excitement about working in our jammies, it’s easy to lose sight of the business aspect of home-based businesses. Here are a few questions and thoughts for people who are looking at starting a new form of cottage industry.
Choose work that interests you. A good question to ask is would I still be interested in this business even if I couldn’t do it at home? I’d still want to write books and articles even if I had to go somewhere to do it. Writing at home is more convenient, but it’s the substance of the work, not the location, that drew me to it. Asking this question will increase the chances you’ll stay motivated, even through rough patches with your business.
Choose work that’s remunerative. Another pet peeve: people get so excited about work that can be done “from home” that they don’t demand appropriate compensation. Even if you don’t have the same real estate overhead as a traditional office, you’ll have other expenses, and your time is valuable. When figuring out your rates, aim for compensation you’d be OK with even if you did have to commute.
Give yourself time. Just because you’re at home, if you’re planning on working, you can’t really be “at home” with your children at the same time. If your kids aren’t in school yet, you’ll need to figure out a system for getting adequate hours to invest in your business, especially as you’re starting it up. For most people that means paying for childcare, though if you have a partner or relative who’s up for watching the kids, that works too. Some people swap childcare with neighbors or friends. I’m not saying it has to be 40 hours a week, but starting a business is far less stressful if you know you can take a client call at 10 a.m. without interruption.
Think “food truck” innovation. One of my new favorite concepts. Some new businesses are like starting a restaurant: expensive and risky. You go out with one big idea, and if some element is wrong, it’s hard to retool. But other businesses are like food trucks. They’re less capital intensive, and the point is to try things, see what works, and do more of the things that work and less of the things that don’t. Retooling is much easier (you just move your truck if a location is bad, or change your menu board if yesterday’s grub didn’t sell). Blogging is helping me be more efficient in trying ideas out before I, say, write a book proposal on them.
How would you scale up? It is always possible that your business will become successful. Then what? You have 168 hours per week and you can’t work for all of them. Will you hire people? Will they come work in your house? Would you still work in your pajamas then? (answer: no. Not appropriate, unless the employees are related to you). Will they work from their homes? Do you know how to manage a virtual workforce? Would you ever rent office space? What if you have inventory — where are you going to be storing this? Your garage and basement have limited capacity. These are happy questions, but worth thinking about. You can make the choice to stay small, but then you need to figure out a plan for doing that.
What’s your exit strategy? You may intend to do the substance of your work until you retire or die, but maybe that’s not your goal. Would you ever think of selling your business? Would you pull the plug if revenue didn’t meet a certain threshold? How long are you willing to experiment?
I’m always looking for stories of business challenges and what people learned from them, so if you’ve got a home-based business and a story to share, please let me know.
In other news:
A few links. At CBS MoneyWatch, I’m blogging about How companies can make work less painful. I also ask Do you have a plan for flu season? We got hit with one of the nasty stomach bugs going around this week. I hope you all are staying well!
Photo courtesy flickr user Desiree Tonus
“But in our excitement about working in our jammies, it’s easy to lose sight of the business aspect of home-based businesses.”
I’m a big believer in the idea of dressing for success, and while I run 2 profitable businesses from home I never, ever work in my pajamas because I have to see clients via Skype and sometimes in person without much notice. But also when I’m dressed for sleep it is hard to adopt a mindset of being productive.
“Just because you’re at home, if you’re planning on working, you can’t really be “at home” with your children at the same time.” Amen! When someone with kids who are younger than school-aged tells me they work from home but don’t have childcare I honestly think they must be talking about their Etsy store a business, and that they’re not bringing in any serious revenue. I know that’s also how big employers tend to evaluate the seriousness of an employee’s proposed work-from-home arrangement: if there’s no full time childcare, you can bet there’s no full time work being done.
@Hush- re childcare: every time I hear someone say that working from home is a great way to save on childcare, I cringe. Sure, you might be able to pay for fewer hours if you used to have a long commute. But I don’t even advise trying to save on childcare $$ during nap time. Some people have preschool in AM and no sitter in PM because hey, the kid naps from 1-3, but if you want to be sure you can work during 1-3, then it needs coverage. It is inevitably the day you have a big presentation via Skype that your great napper elects not to nap.
Nice post. I totally agree about needing childcare while working from home if you’re planning to work when the kids are around.
However, you *can* make real money with an Etsy shop and since it’s online, it can be done without outside childcare if you have a partner to deal with the kids in the evenings or weekends.
With little effort and while working full time at my “real job”, I was able to make low five figures in my Etsy shop and it was significantly more than what a 40 hour a week minimum wage job would pay and higher than the poverty line income for a family of 4.
If I put some effort into it, I could easily double that, once you consider selling wholesale, craft fairs, etc.
Granted, none of this is even close to what I make in my real job, but as a 2nd income for someone to stay home with kids, it’s not a bad gig at all.
Laura, I’d be happy to chat about details offline if you’re interested.
I love your comment. I think the commenters are bifurcating into people who are talking about work-from-home jobs as serious careers (say, high 5 figure or 6 figure incomes) and people, like me, who are happy to fund a 401k working 6-8 hours a week and not having to pay for childcare for multiple children.
Now if only we can persuade the federal government that $5k is an inadequate deduction for childcare for multiple children, especially in urban areas, maybe the economy could grow, because more people would choose paid instead of unpaid jobs.
Oh, heck yeah. That $5k is a joke where we live – it covers maybe 2.5 months of infant daycare at a large center if you’re lucky enough to get a spot there in the first place. And that’s for one kid only.
@ARC – very true that the childcare deduction is wholly unmatched with the actual cost. From a political perspective, I doubt it will get changed soon, though, because you’ve got an unholy alliance between people on opposite sides of the political spectrum who either don’t want mothers to work, or don’t want them to keep much of their money if they do. Also, from a sheer efficiency perspective, I’d prefer lower tax rates and minimal deductions. The fact that health insurance is deductible for businesses has certainly not led to lower costs – even more rampant daycare inflation wouldn’t help families much either.
The reason for deductions (that is, the reason for government intervention) is to encourage the thing that is being deducted. So government deductions on health insurance to businesses is to encourage businesses to offer health. Government deductions on daycare is to encourage women to stay in the labor force.
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Market efficiency can be increased by deductions/taxes if the deductions solve a market failure problem.
@TG – true, it’s probably a split population. So the question for me is which group will dominate in my audience. Guess I should try to figure that out! I kind of imagine that you wouldn’t attend a conference unless you were thinking it would be a pretty reasonable gig.
I’d be unlikely to attend a conference, mostly because I think I understand my market and have found most work-at-home pitches to be unrealistically optimistic, especially for people who don’t already have middle/upper middle class connections/educations/career backgrounds/locations to work from.
I would REALLY like to see working class women from rural areas have successful work-from-home jobs outside of childcare and housecleaning services. The best idea I saw at a recent conference was a dental hygienist who visited people’s homes to clean their teeth, often because they had special needs that made it hard to visit an office. She had no office to rent, a fixed initial cost for equipment, and the flexibility to set her own schedule.
@Anandi- nice work on the Etsy front! I am fascinated by the world of side gigs, and what it changes about the world of personal finance. I know I’ve belabored this point on the blog before, but much personal finance literature treats household income as an unchanging constant. But you clearly have flexibility on the income front. An hour invested in the Etsy store would have a higher return than an hour spent cutting coupons. Even if people are just looking for a small side project to make a little extra money (fund the 401k or take a vacation) there are so many more profitable things one could do than fill out surveys and ideas like that you see on frugality blogs.
Working from home has been a big adjustment for me. I completely agree with not wearing pajamas all day. I even like to wear shoes in my house because there’s something about shoes that makes me feel more in charge.
I’ve also had to make an effort to get out of the house and interact with other people since it’s isolating working alone all day.
@Sage – I don’t wear shoes, but yes, I get dressed. It’s not so much that I need to get dressed to work, but the age of Skype and Google Hangout has definitely been having me do my make-up and hair more days than I thought I’d need to. I, too, am working on trying to get out of the house more. It cuts down on one form of efficiency (cranking through my work) but on the other, in the interest of “broadening my scope” it’s probably a good idea to see the world.
Such great points Laura! And I love the comment in this thread that an hour on an etsy store is far more valuable then an hour couponing. We are thrilled to have you bringing all this brilliance to the Mom Gets A Business Conference in April!