By Catherine Powell
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While much of the news surrounding COVID-19 has been bad, there was at least one positive note. More people got to work from home. If you were one of them and are looking to build your profit base, or you were sucked back into the corporate world and want to build a home-based business of your own, there are a few things you need to keep in mind. Like any business venture, there's a right way and a wrong way to go about creating, marketing, and growing what's known as a SOHO business. (Small Office, Home Office) Get it right and you'll be able to create a second income or even a primary income that will allow you to break those corporate shackles. Get it wrong and you could wind up deep in debt, or even in violation of the law. To help you steer through the minefield of running a profitable business from home, I've come up with a list of ten do's and don'ts that will make sure your ship of commerce doesn't wind up on the rocks.
#1: Make sure your SOHO is legal. - While you may assume that your business isn't going to get you into trouble with the law, make sure that your municipality and your homeowner's association allows you to conduct business from your home. If they don't, you could wind up being fined or forced to move your business. Also make sur'you find out what kind of business licenses are required to be filed to legally run a business from your home. The last thing you want to do is set up shop only to have a city inspector show up at your door to tell you to either move your business or shut it down. Last but not least, even if you're part of the gig economy and are only going to freelance from home, make sure you have a way to legally work as an independent agent. (You may need to create an independent agent agreement that shows the relationship between you and any agency you work for to be considered legal by the IRS.)
#2: Talk to your insurance agent before you open for business. - Even if you are permitted to do business from the comforts of your home, that doesn't necessarily mean your homeowner's insurance is going to cover it. In fact, some homeowners'policies specifically prohibit policyholders from conducting business in their homes. This could come as a rude awakening should you file a claim for damage to your business equipment or have a liability issue related to your SOHO. Your best bet is to call your insurance agent to discuss the matter before you open a business. Covering your business could be as simple as adding a rider to your policy. Better safe than sorry.
#3: Poor planning prevents peak performance - Instead of shooting from the hip, before you get started it would be a good idea to create a business plan that outlines your goals for the first few years of operation. Not only will this give you a road map to rely on as your business matures, it will help you determine how big of a market you potentially have, as well as how deeply entrenched the competition is. It will also give you another look at the viability of your business concept. Since two thirds of startups don't survive the first two years of operation, having a plan could cause you to make some course corrections before you start down the wrong road.
#4: How do you plan on marketing your business? - One of the other reasons so many startups fail is because they fail to plan how to promote their business. If you think that promoting your business is as easy as launching a website and a couple of social networks you could be in for a rude awakening. There are more than half a million websites websites and billions of social posts being spawned every day. To gain traction online takes both time and money. If you don't know how much time and money it's going to cost you to promote yourself online, it's time to go back to the drawing board. Depending on the type of business you launch, you may also need to budget for such things as printing, press releases, and other marketing essentials. If you're going to rely on word-of-mouth marketing, you need to budget time and money to join and meet with networking groups. The bottom line is there's no free lunch when it comes to working from home.
#5: You can't run a successful SOHO in a white noise machine - Clients won't take you seriously if they hear screaming kids or barking dogs every time they call you. You won't impress prospects if they see the kitchen stove in the background during a video conference. In short, if you're going to run a successful home-based business, you need to set up a dedicated business area to work from. This will also help you write the space off come tax time since having an office dedicated to your enterprise is a legitimate write-off.
6: Make sure you save enough money to cover your taxes. - Another thing that many freelancers and SOHO owners forget is they'll need to pay their state and federal taxes at the end of the year. If you don't put enough aside to cover your tax debt you may wind up going into debt when you need to cough up your annual tax payments. Even worse, you could wind up paying fines and penalties levied by the IRS.
7: Make sure you keep meticulous records. - One sure way to torpedo a small business is to fail to keep adequate records. Not only will you be in the dark as to your business' profitability, you'll have a heck of a time come tax time when you need to file your returns. If you can't afford to hire a bookkeeper, I suggest you look into services like QuickBooks Online, Xero, or FreshBooks. Each of these services are designed to help you keep track of business profits and losses, tax filings, receivables, payables, and more. Most of them even provide a quick and easy way for you to transact payments online without having to invest in additional equipment.
8: Always make sure you get paid. - This should be tattooed on every entrepreneur's wrist. This way they can look at it multiple times a day. Fail to get paid and your business is bound to fail. If you extend credit to clients, you could wind up being stiffed when you send them a bill. Even if you get paid up front, you can fall victim to con artists who give you stolen card numbers or who contest the charge with the credit card company. One of the services that some online bookkeeping services provide is a way to send an e-check, which is simply a secure way to wire money from one company to another. It's also much cheaper than the finance charges that credit card companies levy.
9: How can you finance a new business? - As they say, it takes money to make money. Another stumbling block to keeping a startup from crashing and burning is having access to credit. While most banks won't touch a new business and using your credit cards to finance your venture could be risky, there are a number of ways for startups and young businesses to get loans and grants. Look into crowdfunding, SBA loans, microloans, social lending, vendor financing, and peer-to-peer lending as part of your due diligence before starting any new business.
10: Beware of business scams. - I can't stress enough how you must keep from getting ripped off at every stage of business. It's all too easy for entrepreneurs to fall victim to every kind of scam if they use the Internet (and who doesn't?). Online scams abound involving everything from phony business loans and credit card applications, to phishing and fake franchises just to name a few. Before you click on any deal online, make sure you're dealing with a trusted entity and not a con artist.
Catherine Powell is the owner of A Plus All Florida Insurance in Orange Park, Florida. To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com