Before You Start a Home Business

Is a Home Business Right for You?

Man leaning against fence.
Image (c) Maskot/ Getty Images

Operating a home business can give you the best of both worlds. You enjoy the same benefits that all small business owners enjoy

But if you run your business out of your home, you also enjoy the benefits of being able to work flexible hours, of not having to commute, and certain tax advantages. In theory, you can run a successful business out of your home and have the flexibility to be there for your family, spending more time with your children or arranging your work schedule around your family's needs.

No wonder so many people are attracted to starting a home business. But is it right for you? 

Before You Start a Home Business, Consider:

1) Legalities

Like any other business person, you need to set up your business legally. You will have to choose a form of business ownership (such as a sole proprietorship, partnership or corporation), and register your business name, if your business has a name other than your own. 

You may also need a business license, depending on the type of business you're running. And you have to run your business according to provincial and federal laws, which means you may need to register for Workers' Compensation insurance with your province, or collect GST/HST and/or PST.

But you have to do all of these things no matter where your business is located (see Important Steps to Starting a Business in Canada), so let's look at factors specific to home-based businesses that you need to consider before you turn a room of your home into an office and start selling your products or services.

2) Location

You know how important a consideration location is to real estate (both commercial and residential). The location of your home-based business is extremely important, too. You may not even be able to start the business you want to start where you are now, because of issues such as space and zoning.

Before you start a home-based business you need to consider the suitability of your neighbourhood and house.

3) Zoning

Is your neighbourhood zoned for home businesses? If it's not, you're just asking for trouble down the road when the city catches up with you or a neighbour complains. Many municipalities don't allow home businesses at all, and others place severe restrictions upon exactly what kind of business is allowed to operate out of a family dwelling in a residential neighbourhood. Check the zoning bylaws with your municipality.

4) Neighbourhood suitability

How will your proposed home business fit into your neighbourhood? Most residential neighbours are not going to be very happy if you have noisy machinery running all day long, large trucks starting up early in the morning, or customers parking their vehicles all over the place. If your proposed home-based business involves manufacturing, or trucks or other vehicles arriving at or leaving your property on a regular basis, you should not be operating in a residential area. Unhappy neighbours can be bad for business in all kinds of ways.

5) Neighbourhood location

Will your neighbourhood's location work for or against your home-based business?

If you're delivering a product or service, it probably won't matter if you're located 15 km out of town down an obscure country road (except for the extra travel cost you incur). But if your home business involves people coming to you, then they need to be able to find it and get there easily. In many cases, you won't be able to put up any signage, although in others you will be able to have a small, unobtrusive sign by or on your door.

6) Your property's location and appearance

You don't have to live in a manor with a manicured landscape to run a home business, but your property does have to be attractive enough that it won't scare off prospective customers or clients.

Old cars cluttering the yard, knee-high grass, and dilapidated buildings with peeling paint are all turn-offs that can lose you business. A poorly maintained house and property gives people the impression you don't look after things - so why would you look after them? If you're going to run a business out of your home, your home has to look neat and respectable - at all times.

7) Your house's suitability 

If the only space in your home you can devote to your business is the kitchen or a corner of your basement, don't, unless your business is virtual and no one is ever, ever going to see your premises. People who visit your business will expect it to look (and operate) like a "real" business. They expect to be able to do things such as sit down and sign papers in a business-like environment. Any home-based business will need to have an entire room set aside as an office space.

Some home businesses will need even more space. For instance, if you consult with clients, you'll need an actual consulting room separate from your office. If your home-based business involves creating arts or crafts, or manufacturing, you'll need a suitable studio or shop. If you're in this position, and you don't have these already, it may be easier and cheaper to find suitable quarters for your business elsewhere then try to renovate your home to accommodate your business plans.

8) Your family 

You're not the only one involved if you start a home business; your whole family will be involved in the enterprise, for good or ill. You need to consider how running a business out of your home will affect them.

While many people start a home-based business thinking that they'll be able to spend more time with their family than they would otherwise, the lack of separation between your business and personal life can seriously interfere with family activities. How will you keep your family life and your work life separate and how much time can you realistically devote to both?

You also have to consider everyone's expectations. Will you expect your family members to pitch in and help with your business? How will your family members feel about this? Discuss your home business plans and expectations with your family first, and find out whether or not they're prepared to actively support your business. How to Run a Successful Home-Based Business With Kids provides tips on how to mesh your family and your business successfully.

9) Your work style 

As much as everyone likes to fantasize about it, working from home isn't for everyone. Before deciding to work from home, you need to think about your personality and your work preferences. The three main problems of working from home are:

  • Working from home can increase your feelings of isolation and lack of contact with colleagues. This is especially difficult for those who are used to working in busy office environments and being surrounded by people.
  • Working from home can cause increased family stress, because of the difficulty of separating business and home life. If you thought bringing a new pet into your home was stressful, wait until you start a home-based business!
  • Working from home calls for self discipline and the ability to plan and manage one's own time. On the one hand, being your own boss means that no one else is telling you what to do. On the other, if you don't keep yourself focused and on task, no one else will.

Thinking about your work style and devising strategies to deal with these potential problems ahead of time can make all the difference when you're faced with actually doing it.

10) Your personality 

Your personality is also a determining factor in whether or not you should start a home-based business. While many people start home-based businesses because they see it as a natural extension of the hobbies they love, having a hobby is not the key to running a successful home business.

Are you an entrepreneur? Do you have the qualities an entrepreneur needs to have to be a success? Research shows that successful entrepreneurs share certain traits and attitudes, such as perseverance, the desire and willingness to take the initiative,competitiveness, self-reliance, a strong need to achieve, and self-confidence (William Jennings, A Profile of the Entrepreneur).

Number one on my list of the personality traits you need to be a successful entrepreneur is determination. Enthusiasm is a great quality, but you won't get far with your plans to start a home-based business (or any other kind) if you don't have the determination to put your plans into action.

In fact, there are so many adjectives starting with the letter "D" that are associated with the attitudes shared by successful business people, that I've coined the phrase Type D Personality to summarize them. Besides determination, you need drive, discipline, and desire to run a successful home-based business. You also need to be adaptable and flexible; each day will bring new challenges you may or may not have planned to meet, and often, a multitude of tasks that all seem to need to be done at once.

See if you're ready to be self-employed; it takes a whole different attitude than being someone else's employee.

Then read Thinking of Starting a Small Business to determine if you "have the right stuff" to run a successful home-based business.

If You're Right for It, It's Right for You...

Feeling daunted? Don't be. 

Deciding to run a home-based business isn't a snap decision. But if you do decide to locate your business in your home, it can be the most satisfying, exhilarating thing you've ever done. And know that you're not alone. Thousands of others small business people are doing exactly the same thing - and operating successful home businesses.