ESTEEM: the Self-Esteem Review Vol. 2, 1993

Setting Up a Home Office

By Jeffrey Babener & David Stewart

Most people approach a home office in a "seat-of-the-pants" fashion. However, by making the time now to do it right, you'll save yourself valuable future time and money. Depending upon your resources, you may have to follow this process in stages as you can afford it.

Did You Make the Right Decision?

Jeff Babener MLM Lawyer and AuthorBefore we start the list of what to do and what to get, let's talk just a bit about the very first problem facing every decision maker ... doubt. The minute we make a choice, the very next thing that happens is to experience doubt as to whether or not that choice was correct. It's natural. The adage that applies here is, "Don't sweat the small stuff." And the real secret to success is - it's all small stuff!

Someone-usually a close friend or family member - is bound to tell you that, "Many people feel that there is something unprofessional about operating a home-based business." They may also encourage you to take steps to hide that fact from the business community. Thank them for their help, and - don't believe it for a minute! Economic forecasters predict that by the early 1990s, as much as 20 percent of the entire U.S. work force will be exclusively home-based. Remember, we told you there are currently 18.3 million businesses operating out of the home - a 23 percent increase in only one year! Not only is there absolutely nothing to be ashamed about if you conduct business from your home - in fact, you are a genuine pioneer riding the wave of the future. As long as your dealings are honest and you conduct yourself in a business-like manner, you're home free. And freedom is what this is all about.

Smile When You Say "Uncle"

Many of the recommendations we'll be making in this article will enable your business relationships with the Internal Revenue Service to be much more "cordial." At one time (and to some extent, even today), a home-based business made IRS personnel sit up and take notice. In many cases, such a declaration meant an automatic audit. That IRS practice has diminished dramatically. Imagine, 18.3 million automatic audits - no way. It does not mean, however, that your business will not be subject to close scrutiny. It does not mean that you can avoid keeping good records. It does mean that as of this writing, home-based businesses may be one of the few kinds of tax-advantaged businesses around today.

Here's our list of things to do. Remember, we're not suggesting you spend lots of money or remodel your home to accommodate your new office. Although, you may establish such a successful business so quickly that you require a new 1600 sq. ft. addition with beamed ceilings and skylights, four more phone lines, two computers, audio-video system, paging system, car phone, training facilities to accommodate, say, 50 or 60 Networkers, a pool... well, you'll see.

Seriously, here's your list:

  1. Plan carefully when determining where your office should be located in your home. To satisfy IRS requirements, it should be an area - preferably a separate room or rooms-that you use exclusively for your business. If it is also used as a sewing room, a place for your children's model train layout, or a frequently used spare room, you cannot legitimately claim that entire portion of your home's square footage as business use for tax purposes.

    If you have children or pets in your home, we recommend a room that can be isolated by a closed door (a secure door is a must, a lockable door may be even better). It will be frustrating to return to your office one day and find that your important business papers have been scribbled all over with red crayon by a budding artist or chewed by a teething puppy. If you invite customers or associates to your office, it's important that children and pets respect your professional space and not interfere with the conduct of your business.

    Before settling on a location for your home office, consider a couple of things: foot traffic, machine noise (think twice about putting your office next to the laundry room), ventilation, heating and cooling, location of telephone lines, electrical circuits and windows. Too often, people select a location for a home-based office that is secondary to uses by other family members. That's a credit to your sense of fairness and consideration, but before you make that kind of decision, think about how much time you will spend in that office during the months and years to come.

    Think about the purpose of that office. If you are going to be spending one third or one-fourth of your waking hours in that environment - earning your and your family's living - it should be as comfortable and convenient a place as possible. Think, too, about different times of day and plan on avoiding conflict with other family members' routines.

    A dear friend of ours once located his home-based office in a downstairs room of his two-story house. Unfortunately, the room had no windows. Although it was well-lighted and quite comfortable from most standpoints, and attractively decorated as well, his inability to see outside bothered him greatly. He felt closed in, inhibited and constrained. Soon, he couldn't wait to get out of his office and go home! He eventually moved out - not of his home, but of that room. It became a wood-working shop where now he spends only a few minutes at a time.

    One other thing. Your family members will have to accommodate your new location and your new routine. They may even have to make some sacrifices to make your home office a reality. Involving everyone in your decision making process will make it much easier - and you'll probably get some great ideas from them as well. Once your family understands the reason for the change and what positive benefits it will mean for them, they will accept the idea with grace. If you're like most of us, when your family is behind you and truly supportive, there's nothing you can't accomplish.

  2. Selecting a name. As an individual, you can begin simply with your name, followed by your business. However, the name you choose for your business can be very, very important. So give it a lot of thought. Here's why:

    You only get one chance to make a first impression. The name of your business is what most people see or hear first. Your name is what marketing experts refer to as your position. Positioning is the image you and your business have in the mind of the public. And it's in the mind that your name gets its first chance to create a customer.

    A bad position can break a business - even a rich and powerful one. Would you buy a Xerox computer? Or how about an Exxon office system? Both of these Fortune 500 giants lost a fortune because of poor positioning. Xerox means copiers. Exxon means gas and oil. Nobody wanted computers from either of them - even though their products were excellent! A good position cannot promise to make a business successful, but it will help tremendously. Shake'n'Bake says it all, and so does Taster's Choice, to name just a few. Our recommendation is that you choose a name that gives your potential consumer a clear idea of what your company does and that you do it better than anybody else.

    Please, don't be tempted to use only initials. The public grants the privilege to use initials to businesses when their fame and reputation deserve it. IBM was International Business Machines for years before we started calling them IBM. The same was true for GE and AT&T. Spell it out for now.

    In any case, be sure you are aware of all the regulations in your state regarding filing a business name. If filing a DBA is necessary, be sure you do it before opening your business checking account. Some banks require a copy of the DBA filing before they will open an account for you. If you choose to incorporate, the first part of the process is "clearing" the corporate name in your state. A bank may want a copy of these papers as well.

  3. Opening a business checking account is very important. Most of the time, people in network marketing buy and sell products. They might send a personal check to pay for those products, and when they sell them, they put the money back into their personal account and spend it for groceries or other needs. They may make a good profit, but they won't know how much, when, or from what source. What do most people do when they have money? They spend it.

    If you are serious about your business, you need a separate business account. You will need that account for tax purposes, but opening a business checking account is also visible evidence of your commitment and your decision to go into business for yourself.

    Don't waste money on fancy checks or checkbooks. The cheapest are often the best. If you have a business name, consult the bank officer handling your account about the way your name should appear on the account and on the checks themselves. Some states have requirements that your name be listed first, then the initials "d/b/a" (doing business as), followed by your business or company name. For example:

    Bill Smith d/b/a Smith's Home Products 500 Main Street Anytown, U.S.A.

    Your bank officer will know how to handle this procedure. Incidentally, all banks are not created equal. Choose your bank with the same care with which you'd choose a car. Shop around. Kick the tires by comparing fees, services, and most important of all, compare personal chemistry. It will be important for you to establish your account with a bank that welcomes you and your small business. Look for a small, solvent bank or a local neighborhood branch of a big, solvent bank. Find a bank that will take the time to help you and that will provide you with business tools that will make your banking activities easier and support your growth. If you feel a little shy about this, if you have a "Gee, I'm not a big deal. I feel funny asking for so much of their time" attitude - just remember: That banker may be looking at a future millionaire - you.

  4. Get a business telephone line installed. Do not use your home phone for business calls - unless you're a single person with a limited social life. Having a business number allows you to deduct the entire phone bill as a business expense. You will also get a free listing in the business section of the telephone directory and Yellow Pages, which can be a very big plus. Having a phone line dedicated to business use will help everyone (including yourself) to think of you in a business-like way.

    An answering machine is a must for your business phone. The once-detested device is now generally accepted by business people and just about everybody else. Some models allow you to check your messages from an outside phone. If you plan to travel, get one of those. Also, get a machine that records the date and time of the incoming call as well as one that allows for longer messages. You don't want an important message to be cut short by a trigger-happy answering device.

    An alternative is a good telephone answering service where your phone is answered by a "live" person. This is very professional and makes a great impression. It may be too expensive at first, but if it's affordable - do it.

    The way you answer your business phone is important to your business start-up. First, give callers your business name. Then, tell them who is speaking. "Smith's Distribution Co. this is Bill Smith," is a simple but professional way to answer your business phone. Please, don't be cute or clever. Be a pro and play it straight.

  5. Get a sales tax license if necessary. If you buy products at wholesale and sell them to retail customers, your state may require you to collect, report and pay state sales taxes. In most states, the license is available from the state department of revenue. If you live in a city of any significant size, it also may require a sales license or permit. Make sure you check all your local government entities in order to comply with their regulations for new businesses. Having a sales tax license may have some advantages. Some companies will require a copy of your sales tax license before you can make wholesale purchases for resale. Also, any item you purchase that you intend to re-sell should be bought without state sales tax. You'll need your tax number in lieu of paying that tax. And having a sales tax license further legitimizes your new business.
  6. Order a rubber stamp with your business name, address and phone number on it, so that every brochure, flyer, order form or piece of correspondence is clearly marked as coming from you. Otherwise, you'll be giving out literature to people who won't know who to contact for more information or for placing orders.
  7. Set up files for prospects, sales, follow-up, distributors, tax information, expense receipts, etc. Setting up files doesn't need to be an expensive or complicated proposition. Buy a box of manila folders and some 3 x 5 index cards with alphabetical dividers and a box to put them in. If money is a factor, you can go low budget and buy a temporary cardboard filing box, folders, index cards, plus dividers, all for under $25.
  8. Join your local Chamber of Commerce as soon as you can afford to. Not only will you learn first hand about what is happening and what will happen in your community, but also, most Chambers have mixers, meetings and business breakfasts that will give you an excellent opportunity to meet new people and to make many new business contacts.
  9. If you're affiliated with a larger corporation, read all company brochures, training materials and information your company provide. There is a good reason why your company spends so much money developing training materials and providing these brochures. It is so you can learn from them and not have to reinvent the wheel. Starting your own business is hard enough without having to be a pioneer.
  10. Develop an action plan and write it down. Set specific goals for your new business. Each goal you write down should have a desired result and a timetable for completing it. Have one plan for the first 30 days. Have another for the next six months. Have yet another for your first year. This kind of planning may be the most important thing you do in getting started. You cannot succeed without knowing where you are going or without having a benchmark or standard to measure your progress. These plans are not ideas carved on stone tablets. You'll need to revise them - often. There will be many unknowns, especially for your one year plan. Don't let that stop you! It's vital that you begin thinking about the future immediately. It will save you endless frustration in the months to come.

    Some notes about planning and goals: Both goal setting and planning work best backwards. What we mean is, reach out into the future, as far ahead as your imagination can go, and set those long-term goals first. Now ask yourself, "What would be the step just before achieving this last goal?" Keep working backwards from there until you get to today. Then make that call or get ready for that meeting. And please remember, "It's not just how you plan your work - it's how you work your plan."

  11. Finally, develop daily routines and disciplines to establish a business-like attitude and atmosphere. This may seem elementary, but it needs to become a part of your new mind set. If you previously worked for someone else, getting started in your own business may be difficult for you. There is no one to care whether you get to work on time. There is no one to nag you about getting a project, task or assignment completed. There is no one to review your performance - no one to scold you for a poor job or praise you for a good one. No one whose job it is to make sure you're motivated. No one, that is, but you. You must begin to fill an of those roles. Opportunity is one side of the coin. Responsibility is the other. Commitment is the key, discipline the tool.

    Establish good work habits from day one. A great way to begin is to pick a time that your office opens each day and be in it faithfully at that time. Treat your home and your office as two separate places that just happen to be in the same building. Don't mix activities between the two.

    When you announce that you're getting started in your own business, you are telling the world that you are ready to accept new risks and new responsibilities. You're telling everyone you know that you are willing to work harder and smarter than ever to make your dreams come true. You are letting everyone know that you are going to be successful in your new endeavor and that you mean business.

Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
Jeffrey A. Babener, the principal attorney in the Portland, Oregon law firm of Babener & Associates, represents many of the leading direct selling companies in the United States and abroad.

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