Home-Based Business Are Cheap, but No Sure Thing: Skills You Must Possess to Be a Successful Home-Based Owner

There are a lot of things to like about owning a home-based business.  You can be your own boss, and as the name suggests, you operate from home without having to make a daily commute into an office like so many other working Americans must do each day.  But before you have visions of going downstairs to start your workday at 10:00 a.m. and wearing sweats each day, there are several things you must know about operating a home-based business and what you will need to be successful. 

According to the SBA, about half of the small businesses in the United States operate primarily from one’s home.  There are many different franchises that are home-based as well, in industries such as commercial cleaning, painting, landscaping and extermination services.  For these businesses, owners operate from home because there is no need for a physical office building.  They bring their products or services to the customer.

When exploring franchise opportunities and conducting their due diligence, one of the first things people notice about a home-based business is they are considerably less expensive than other options.  For obvious reasons, brick-and-mortar franchises are typically the most expensive type of franchises and will often cost at least $200,000.  The primary reason for this is the cost of building out a location and making it appealing to the customer in its design, appearance and atmosphere.  That takes significant time and expense.

Most home-based businesses cost less than $150,000, with many of them being under $100,000.  That is due to a lack of expenses to establish and run the business.  Owners will need to create an office at home, equip themselves with a computer and phone, and purchase supplies, storage and shelves.  Depending on their field, they may need a vehicle.  Other than that, there are not many more costs involved, and it can be far less expensive than a brick-and-mortar franchise. 

In addition to the low startup costs, there are fewer operating expenses for a home business.  You don’t need to pay rent on a building and there may be very few, if any, employees.  As a result, it is also possible to open a home-based business in a relatively short amount of time.  With less fixed costs and the ability to quickly establish the operation, there is often an earlier opportunity for cash flow and a break-even point for the business.  For these reasons, it is easy to see why starting a home-based business is an appealing option for people who do not have much capital to invest in a franchise or are very conservative about how they want to spend their money.

With all the built-in advantages to operating a home-based business, some may wonder why people continue to purchase more expensive brick-and-mortar franchises. However, there are some unique challenges that come with owning and operating a home-based business that other franchise owners do not face.

Many people find it difficult to work from home because of the distractions that are constantly present.  It is not easy to separate home and work while under one roof, whether it be the physical layout of having your kitchen or family room steps away from your office or knowing you can take a quick break to tend to household chores in the middle of the workday.  Distractions can multiply if you have children in the house.  You need to have the support of your family because if others are constantly coming into your office at home and making requests of you, you will not be able to fully dedicate yourself to the business.  To effectively operate a business from home, one must have the discipline to eliminate these distractions and focus on the job.

While the intentions of sneaking into the office at 10:00 each night to get some work done may be good, its consequences could be counterproductive.  Many people recommend separating our business and personal lives to create the proper work/life balance.  Having strong time management skills are essential when mixing one’s personal and professional responsibilities under one location.

Home-based business encounter certain limitations that brick-and-mortar businesses do not face.  Sometimes customers may not take your business seriously if you do not have an office for meetings. You may want to consider renting space in a shared office setting to solve this issue and eliminate the problem of distractions at home. Generally speaking, home-based businesses have a hard time with re-salability.  They can be re-sold, but buyers are far more comfortable and will pay more money for a business with a physical infrastructure in place than for even a successfully-run business run out of a home. 

Perhaps the biggest challenge facing a home-based business comes in scalability.  Simply put, it is hard to grow a business while operating it from a house.  I am aware of several well-known franchises in which some franchisees work from home, and they have fewer sales than others in the system who operate out of physical locations.  There are many successful home-based operations, but in order to increase the customer base and grow the business, you will need to take it outside the home.

There are many attractive qualities to owning a home-based business, from lower costs and expenses to being able to quickly start the operation and make money.  Owning a business from home represents a lower floor for entry, but also signals a lower ceiling in terms of future growth for the business.

Rick Bisio is a leading franchise coach with FranChoice, the creator of the FDD Exchange and the Franchise Glossary and the co-host of Rick Bisio’s Franchise Focus.  


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