In today’s digital economy, more people than ever are starting businesses from their homes. There are several advantages to having a home enterprise — autonomy, flexibility, time efficiency and cost savings, to name a few. You don’t have to commute and you can deduct certain home expenses such as mortgage interest and utilities from your business income. You can choose when you want to work, and you won’t have coworkers or bosses looking over your shoulder. You can also test ideas with minimum overhead.
People often think it will be easier to balance work and family life by working from home. However, depending on what type of business you’re running, your home might not be the most ideal office and it may expose you to unforeseen risks without the right business insurance.
If you are thinking of starting a home-based business, ask yourself these five critical questions first:
1. Is your home the best place to operate your business?
This question might seem obvious, but it requires some deep thought about the kind of business you want to start. Carefully consider what your business needs and whether you can meet those needs from your home. For example, if your company needs to ship goods and keep inventory, you will need easy access to mail services and space for your stock. Not all homes can accommodate that.
Or perhaps you need to meet with clients frequently. Can you do this from your home, or do you have pets or kids who might be distracting? We’ve all seen the video where one working dad’s kids crash his BBC interview.
Do you live in a location that’s convenient for clients ? If not, you’ll need to consider the costs of traveling to visit clients or you’ll have to research meeting space elsewhere.
Also consider how your business will scale. If you get to the point where you need to add staff members, will they join you at home or will you need an office? What would that transition involve?
2. How will you balance work and family life?
Starting a business from home can allow for a more flexible lifestyle, but it requires discipline. You should be clear on what your priorities are and the hours you are going to devote to your work versus your family.
For example, perhaps you want to pick up your children from school every afternoon and spend time with them until they go to bed. Unless you are only going to work on your enterprise part-time, that might not give you enough office hours in the day. You may have to work later in the evening, or perhaps dedicate a few hours during the weekend to work. During summer school breaks, will your kids stay at home with you, or will they go to a camp?
You might also find that by working from home, you never truly stop working, and you may never leave the house. Again, this takes discipline to differentiate your hours and stay connected with the outside world.
The support of your family members is also critical to your decision to work from home. Where in your home you decide to work, when, and for how long can potentially disrupt existing lifestyle patterns. Involve them in the decision and make sure you draw a line between your work and family obligations.
3. How will you present yourself?
In the absence of a storefront or a reception area, consider how your customers, clients and suppliers will interact with you. Maintaining a professional image is even more important for home-based business owners, since you have to make sure clients see you as a high-quality business owner and not someone operating out of a garage.
Answer the phone in a consistent way and use an email signature as you would in any office. You may want to consider getting a PO Box instead of using a home address for business correspondence, as a well as a dedicated phone line. Quality business cards and a good website are also key. Strong SEO and social media are important for businesses that lack a physical presence, since the only place most people might encounter your business is online.
4. Are there any local zoning ordinances that will affect your business?
So you’ve decided your home is suitable for starting a business and you’ve figured out how to balance work and family life, as well as presenting yourself. You may also need to consider any local zoning ordinances that might affect your business or even prohibit you from operating out of your home.
For example, your zoning code might restrict the number of employees you can have working at your house. You might not be allowed to keep a commercial vehicle in your driveway or make changes to your home, such as creating a reception area, for the purposes of conducting business. Other regulations control whether you can post signage outside your home, or restrict the size and placement of signs. Check with your local authority to understand any potential impact of regulations.
5. How will you protect yourself?
When you work where you live, make sure you have extra protection in place. Make a clear distinction between your personal income and your business income, such as by establishing a limited liability company, so that you are not held personally liable in the event of a hardship such as a lawsuit. Then get clarity on what is or is not covered by a homeowner’s or renter’s policy. The answer is likely not much. For example, if a client visits your home for a meeting and slips in the driveway, injuries might not be covered by your homeowner policy. Also not covered: your work computer crashing, and losing valuable data that leads to a loss of income.
Insurance companies offer different levels and types of coverage for home-based businesses depending on your needs. At a minimum, you will want some type of home business policy to cover equipment and liability, or a business-owner policy to serve as a safety net.
Starting a business from your home can be exciting and rewarding. But make sure you understand — and plan for — the risks and impact on your home life before embarking down this path.