If you are interested in owning your own business, you have likely heard such things like “Fire your boss” or “Work in your pajamas.” While these things may sound good, the truth is it doesn’t really reflect the reality of opening a home-based business. Let’s take a look at some of the hard facts about opening your own home business.
There have been a few people who have been able to start a business on a shoe string budget and make them a success. Very few. Most have depleted their savings and maxed out their credit cards and often borrowed more money from family and friends to keep their business operating while waiting for the product or service to catch on and begin generating an income.
Even if you have done adequate research and know you have a viable offering to the public and know your customer base and have a perfect marketing plan to target that base, building trust among the buying public takes time…and money.
Since you’re working from home, the cost of a building isn’t an issue. However, keeping the lights on and food on the table can be real concerns. Additionally, if you have a family, their needs are not going to go away just because you have a dream of starting your new business. Bills still have to be paid, rent or mortgage payments are still going to come due and everyday expenses will remain a reality.
For most individuals, the best bet is to stay on their “real” job while the business gets off the ground. Once the money starts to pour in, allowing you to make at least as much as you and your family are used to having available, then you can leave your old job and focus on building the business.
When you do reach that step, it’s also a good idea to leave your employer on a good note, just in case the new business, or your ability to operate it falters and you are forced to go back into the job market. As the old saying goes, don’t burn your bridges behind you.
Beyond the everyday cost of living are business-related costs that are often overlooked by new business owners. When working for someone else, chances are an illness protection plan was available as well as unemployment compensation if a lack of business forced a layoff. When owning the business, there probably isn’t anything to fall back on if income stops flowing in.
Consider the need for:
• Life Insurance
• Liability Insurance
• Business Interruption Insurance
• Income Protection Insurance
Life insurance will help protect the family if the business owner is not longer there to provide for them. Term life, that offers lump sum payments is typically less expensive than whole life, consider the alternatives available with both types when deciding the needs of surviving family members.
Another consideration is homeowner’s liability insurance. If customers or clients are being invited to the home to conduct business and they are injured, the uninsured can end up financially devastated paying for injuries or other lawsuits. Additionally, if the business sells products, the owner can be held liable in the event a customer is injured by the product.
If performing work at a customer’s house and the work results in damage, the owner will be held liable for making the injured property whole again.
When storms damage a home used in a business, the business may not be able to function for a long period of time. Instead of working at the business and making money, the owner will be fixing up the house. Many companies offer insurance that will replace the business income lost during time of reconstruction. This can often be combined with an income protection plan that not only pays the bills of business while it cannot operate, but can also provide the owner lost income while the business is unable to function.
When considering the cost of operating a home business, it is important to consider all of the costs. While a viable business plan will bring many of these costs into light, talk to established business owners for hints to other costs your plan may have overlooked.
