Classic Computer Magazine Archive COMPUTE! ISSUE 149 / FEBRUARY 1993 / PAGE 84

On your own. (entrepreneurship)(includes related articles)
by Rosalind Resnick

Back in the seventies and eighties, starting a business from home had an aura of mystery and glamour. Bright, young entrepreneurs taking on the stodgy corporate world. The two Steves starting Apple Computer from their garage. Ben & Jerry's. That sort of thing.

Nowadays, with American's corporations downsizing and the economy slowing to a crawl, starting a home-based business has become more of a necessity than an adventure for millions of reluctant entrepreneurs. Today's home business owners are less likely to be high-tech whiz kids chasing he American Dream than fortysomething out-of-work former corporate employees with mortgages and kids. While they may fantasize of one day getting rich, for the most part they're content just getting by. Often, the transition from office-based employee to home-based entrepreneur is a difficult one. Apart from the marketing, capital, and cash flow problems endemic to any startup business, there's also the potential for loneliness and isolation.

But a growing number of people are stepping off the corporate track and starting businesses from home-people as diverse as Atlanta greeting card designer Lee Grey, Kentucky freelance writer Peter Lloyd, and California horse breeders Ken and Eugenie "Oogie" McGuire.

Grey, 31, formerly a software engineer, put his consulting projects on hold in June to devote his full attention to his fledgling business. Lloyd, 45, quit his job at an ad agency nearly three years ago to start a freelance writing business that includes radio voice-overs and commercials for car dealers. The McGuires, a husband-and-wife business team, still toil at full-time day jobs while building their business on the side.

And what about you? Are you still sitting on the sidelines, afraid of leaving your dead-end job to leap into the unknown? Or has your boss already made that decision for you?

Here's a guide to starting your own business from home:

1. Choose a business. There are hundreds of businesses you can start from home--everything from desktop publishing and computer consulting to running a mail-order company. The key is to find the business that's right for you, the one that will turn your own unique blend of skills, experience, and interests into a profitable company selling products or services the marketplace demands.

It's also important to find out if working from home on your own is right for you. If you're the sort of person who needs a boss looking over your shoulder, then working from home may not be right for you. Supportive friends and family members are also important--specially when you're starting out and clients aren't yet banging down your door.

Lloyd says that after he quit his ad agency job, he got lots of calls from headhunters trying to lure him back to the off ice-based world. Fortunately, he says, his wife wouldn't hear of it.

"She said, ~Now, don't you dare take that job,'" Lloyd recalls.

2. Consider the legal implications. Do you need a permit or an occupational license? Will you be required to register your business, get a tax ID number from the internal Revenue Service, or file articles of incorporation? Check your local zoning laws, too. Many communities frown on home businesses in residential neighborhoods but make exceptions for professionals such as doctors, lawyers, artists, and writers. As a rule, retail stores and manufacturing operations run from home are taboo.

3. Make a business plan. Most people wouldn't think of setting out to visit Aunt May in Iowa without a road map, but many entrepreneurs set out in their new ventures without even the sketchiest business plan. That's often a mistake because a well-written business plan can establish your company's goals and help you achieve them. When writing your plan, ask yourself what business you're really in, how market conditions can affect your business prospects, and how you intend to marshal the human, financial, and technological resources at your disposal.

"Drafting a business plan was vital," Oogie McGuire says. "We're looking at such a long time frame from starting our business to being profitable that, without the business plan, I wouldn't be able to judge if we were going in the right direction."

When it comes to writing a business plan, there are plenty of helpful files available online in places such as CompuServe's Working from Home Forum. There are also a number of off-the-shelf software programs that walk you through the steps of creating a professional-looking business plan. These include How to Write Your Own Business Plan, BizPlanBuilder, Entrepreneur Magazine's Developing a Successful Business Plan, and Tim Berry's Business Plan Toolkit 4.0.

How to Write Your Own Business Plan consists of four sections. First, a questionnaire containing approximately 200 questions covering every phase of business operation helps the user understand what a business will require and whether it's likely to succeed. The second part of the software is aimed at projecting profits and losses to determine where the break-even point will be. This part of the software allows you to play what-if, so you can see the effect of unexpected events.

The third area walks you through writing your business plan. It includes sections such as Mission Statement, Competition, and Research and Development. The fourth section contains a sample business plan.

How to Write Your Own Business Plan was created by Max Fallek, a member of the Small Business Administration National Advisory Council and author of How to Set Up Your Own Small Business.

BizPlanBuilder is a set of templates to be used in your own word processor and spreadsheet. The business plan itself is prewritten in the form of modules, many of which are applicable in most situations. There are built-in comments providing ideas, suggestions, and questions to help you decide what information to include in your business plan. All you have to do to create the actual business plan is to fill in the relevant details and values in the files where XXX appears in the examples. The file format is a generic one that can be imported into most word processors. The financial spreadsheets help you make projections based on your best guesses about how your business will grow. To supplement these libraries of text files and spreadsheets, the manual includes a reference that explains many of the terms used and the strategies you should employ.

Business Plan Toolkit 4.0 follows the pattern of providing worksheets for use with your figures, but its approach to the actual writing of the plan is a little different. Instead of providing a boilerplate business plan to be edited, Palo Alto Software provides a business plan processor--sort of a cross between a database input form and a word processor--that lets you use your own language in your business plan while making sure the words are in the right place.

4. Line up financing. Many of today's big businesses started out on a shoestring. While banks often hesitate to loan money to small, untested businesses, there are other sources at your disposal--your savings, your credit cards, the equity in your home, your retirement plan, or even your parents' nest egg.

Your suppliers can also be a source of credit. The McGuires, for example, bought many of their Arabians at rock-bottom prices after the horse market had crashed. The sellers were more than happy to provide generous payment terms with little money down.

5. Invest in technology. Unlike in a corporate office, there's no secretary to type your memos, no bookkeeper to keep tabs on your accounts receivable. That's why it makes sense to leverage your efforts by enlisting technology to do these clerical chores for you. Most likely, you'll need a computer, some kind of word-processing and financial software, an answering machine, a telephone with speed dial, a fax machine, possibly a modem, and a copier. While that may sound like a tall order, with PCs and fax machines plunging in price, you can probably get everything you need for under $2,000. (See "Quest for Perfection" in the June 1992 issue of COMPUTE for more information about assembling the perfect PC for various home business applications.)

Oogie McGuire says she tracks her business with an Excel spreadsheet and a specialized database program that keeps tabs on her horses' health records and expenses. "I know to the penny how much it costs per horse to produce," she says.

6. Polish your image. Professional-looking business cards and stationery often separate the successful companies from the wannabes. Remember: Being small doesn't mean you have to look small-time. Luckily, there are numerous desktop publishing programs on the market that make creating good-looking letterheads a snap. (Check out "First and Lasting Impressions" in the May 1992 issue of COMPUTE for pointers on putting together your own business documents and designs.) And if graphic artistry is not your forte, you can always hire a professional to do the job for you.

Grey, the greeting card designer, helps promote his colorful, computer-generated cards with a business card that reads, "Grey Matter," in boldface type, followed by the words, "A Huge Conglomerate in the Mind of Its Sole Proprietor." Underneath this phrase is a showy black ink blot.

7. Set-up your office. It's important to set aside a place where you can work in peace and your business proposals won't accidentally get tossed out with yesterday's newspapers. A good-size desk, a comfortable chair, a file cabinet, and a well-stocked bookcase are all important aspects of a successful home business. You'll get more work done if your surroundings look businesslike.

8. Decide on a work schedule. One of the advantages of being your own boss is that you can set your own hours. Even so, it's important to set up a daily work schedule to give yourself some discipline. And if your clients are large companies, you may find yourself working business hours in order to accommodate them.

Actually, many home business owners don't run into trouble because they work odd hours or too few hours but rather because they work too many hours. Working long and hard can be a key to success, but if you don't pay attention to your personal need for rest and recreation, you might become a drudge. Drudges get the work done, but they often lose their creative edge, along with the self-confidence and energy needed to take on challenges. With your PC only a few steps away, it's tempting to spend all day (and all night and all weekend) toiling away. Remember to take breaks.

9. Market your services. No matter how terrific your business plan is, the world generally won't beat a path to your door unless you get out and do some marketing. While you may not have the money to take out a big ad in the Wall Street Journal, you can get yourself noticed by lecturing about your specialty to local business groups and networking within your industry.

If you have a modem, consider logging on to CompuServe and joining the Computer Consultant's Forum and the Working from Home Forum. McGuire says she's even used CompuServe to meet potential buyers for her horses and mules.

10. Plan for the future. While much of your time will be taken up with the day-to-day concerns of running your business, it's important to have a long-range plan. That will probably mean expanding your business (unless you're committed to staying small), either through hiring employees and moving into office or warehouse space outside your home, teaming up with another company in a joint venture, or selling stock and going public. You may also want to consider selling your business someday.

While nothing you do will necessarily guarantee the success of your home business, following the ten steps listed above will give you a fighting chance. The most important thing to remember, seasoned business owners say, is that you shouldn't give up. No matter who you are or how many things you do right, there's nothing you can do to stop a market from shrinking or a major client from filing for bankruptcy. Even Apple Computer wasn't built in a day.

Common Sense

Thinking of starting a business from home? Often, the little things mean the difference between success and failure.

Here are some tips from Chuck and Sue DeFiore of DeFiore Home Business Solutions, a consulting firm in Rancho Cordova, California, that specializes in advising small and home-based businesses.

1. Read, read, and read some more. That's the only way to keep learning about your business--and yourself. Become a com-pulsive reader, reading things other people ignore. Don't stop reading when you think you've run across something that has nothing to do with your business.

2. Pick a business name that describes what you do. A name that doesn't tell what products or services you offer can hurt your efforts to get your business off the ground. Avoid using just initials until you get as big as, say, AT&T. Also, when the time comes to create a logo, leave the abstract symbols to the faceless multinationals. Your logo should say what you do.

3. Sock away some money for a rainy day. Few businesses are profitable from day one. That's why it's important to have at least six months' living expenses in reserve before you quit your job and take the plunge.

Business Plan Software

BizPlanBuilder--$129.00 Jian Tools for Sales 127 Second St. Los Altos, CA 94022 (800) 442-7373 Business Plan Toolkit 4.0--$149.95 Palo Alto Software 2641 Columbia St. Eugene, OR 97403 (503) 683-6162 Entrepreneur Magazine's Developing a Successful Business Plan--$99.99 Virgin Games 5070 Santa Fe St. San Diego, CA 92109 (800) 874-4607 How to Write Your Own Business Plan--$125.00 American Institute of Small Business 7515 Wayzata Blvd., Ste. 201 Minneapolis, MN 55426 (800) 328-2906