HOW DO I START A HOME BUSINESS?

The best advice I can give to someone who asks a question as vague as this is that they're asking wrong question. The first question they should be asking themselves is: "SHOULD I start a home business?", not HOW do they do so.

The person who asks how to start a home business has not given much, if any, thought to what they might do as such a business (otherwise, their question would be "How do I start an errand service home business?" or "How do I start a gourmet gift basket home business?").

So, first things first. Why do you want to start a home business? What are advantages as you see them? What are disadvantages? What entrepreneurial qualities do you bring to table that make you think you could make a success of your own business? What is your plan? What product or service will you market? Who are your customers? When will you give up your day job? Are you thinking about this because you just LOST your day job (if so, warning bells should be ringing very loudly!)? A home business is most definitely NOT for everyone and it's certainly not a solution to unemployment per se.

There are financial considerations too, obviously. How will you support yourself until you generate a profit? Where will you obtain financing?

For more thought starters, read "Look Before You Leap ... Is a Home-Based Business REALLY For You?" in AHBBO Articles Library at http://www.ahbbo.com/lookb4uleap.html .

Assuming you work your way through above considerations and conclude that you do, indeed, want to start your own home business, then, and only then, should you ask "HOW do I start a home business?"

There are as many answers to this question as there are individuals who ask it. There is no one answer that fits all sizes. Generally speaking, however, process of starting one's own home business can be broken down into seven broad steps.

=> IDENTIFY YOUR PASSIONS

If you're truly starting at ground zero and you don't already do something on side that you'd kind of like to see if you could make fly, your first step is to decide what it is you'd like to do as your business.

I'm a firm believer in following your passion, whether that be for gardening (start a herb and spice business or cultivate cuttings for distribution via mail order), lead- lighting (design and create stained glass lampshades), accounting (run a home-based small business accountancy service) or website design. It doesn't matter whether other people are equally as passionate about what you're passionate about. It's YOUR passion that counts and it's YOUR passion that will propel you towards success. Do something you love to do in other words. Make your work your joy and you won't be able to help but succeed.

=> IDENTIFY A NICHE MARKET FOR YOUR PASSION

Now, it's one thing to know what you're passionate about, it's quite another to identify an unmet need in that field. But that's what you must do if you want to turn your passion into a truly profitable business venture. Identifying your niche is a pretty straightforward process:

1. Identify your general category and sub-category

Let's say your general passion is gardening. Gardening is your general category. Let's also say that you're particularly interested in growing herbs and how they can be used for cooking and medicinal purposes. Herb growing is your sub-category.

2. Hang out with people interested in your sub-category

In order to identify unmet needs in your sub-category (step 3.), you must find out from people interested in your sub-category what they're looking for that they can't find. A good way to find out is to hang out where they hang out - offline and on. Offline, you may belong to a local gardening club or cooking class at which you hear that so-and-so has been looking high and low for a certain type of specialty herb that isn't commonly grown in your country. Online, you may sign up for mailing lists and hang out in newsgroups to listen to what people are asking time and again.

WHAT IS A FREELANCER?

Quite simply, a freelancer is an independent contractor who earns his or her living by contracting for projects on a project by project basis. A freelancer is not an employee of anyone and so he or she must actively seek out work, negotiate terms and conditions of project (the contract) and complete work to satisfaction of client. Once project is complete, freelancer seeks out and enters into another contract for another project.

Alternatively, freelancer may have obligations under a number of different contracts with different clients at one time.

Another variation involves freelancer producing work and then seeking buyers for that work. A freelance writer of magazine articles, for example, would fall into this category.

WHO HIRES A FREELANCER?

Those who hire freelancers are as diverse as freelancers themselves. In some cases, companies will hire freelancers to complete a short-term project as an alternative to hiring a new employee. This is often case where work in question is spasmodic or ad hoc and company cannot justify hiring an employee for such work. Companies also hire freelancers to help smooth out peaks and troughs of workload. Again, where there is a temporary oversupply of work, company will hire freelancer on a short-term basis to help cope with backlog.

In other cases, companies hire freelancers for their special expertise in a certain area. A company may want to create a new website, for example. Hiring a freelance website designer for such a project makes more sense than hiring a website designer as an employee since once website is complete, function will no longer be required.

Magazine and newspaper editors also hire freelancers or, more precisely, buy rights to freelancers' work. A freelancer in this type of situation may write a piece and submit it to a number of different editors in hope that his or her work will be "picked up" by that editor and published, in return for which freelancer receives payment. By its nature, such an approach is speculative since freelancer can't be sure that anyone will actually buy work. Of course, once freelancer has been published, it is relatively easier to get editor to buy freelancer's work in future and, as freelancer's reputation grows, so too do opportunities for future business.

WHAT QUALIFICATIONS DOES A FREELANCER NEED?

To be financially successful, a freelancer obviously needs marketable skills. A freelancer therefore needs same qualifications, skills and talents as someone who had been hired as an employee to do job would need. In other words, if you are seeking work as a freelance website designer, you must possess same skills and qualifications that a full-time employee website designer would possess.

IS A FREELANCER RUNNING A BUSINESS?

In short, yes. If you do not have an employer, if you have to source your own work and negotiate your own terms, if you have to chase payment, if you have to pay your own taxes (i.e. no one is withholding them from your check), you are, in essence, self-employed. Ergo, you are running your own business.

There are a number of consequences you need to think about. The first is taxation. You need to set aside from every payment you receive an amount sufficient to cover your state and federal taxes on income you receive. Likewise, you need to keep proper books and records so you can claim deductions and expenses you are entitled to as a self-employed person.

As a freelancer, like any independent contractor, you will also be expected to provide your own equipment and supplies. If you are a website designer, you need to have your own computer, software and other tools of trade. The party hiring you will not provide this stuff for you. Similarly, if you are a freelance editor, you will be expected to have all reference materials and style books, word processing programs and other sundry items any editor would need to do job.

From a legal point of view, you should also give some thought to legal entity of your business. Will you be a sole proprietor or will you incorporate? If you incorporate, will you choose S-corporation status? There are important tax consequences of each of these alternatives so be sure to get advice from your accountant before starting.

Think also about what licenses you may need as well as insurance (health, life and liability depending on nature of work).

WHERE DOES A FREELANCER FIND WORK?

OK, onto nitty gritty. You've decided to start work as a freelance website designer. You have appropriate qualifications, training, experience and equipment and you've consulted your accountant to determine most tax-effective business structure and your lawyer to set up your new company and advise you in relation to issues such as business licenses and fictitious business names. You're ready to hang out your shingle. Now what?

=> Approach Your Warm Market

Start with who you know. Where did you get your website design experience? If it was with an employer, consider whether that employer may not be a source of business for you. That will obviously depend on circumstances under which you parted company but if you left on good terms and didn't burn any bridges on your way out, by all means contact your former employer and let him or her know that you are now in business for yourself and ready, willing and able to take on new projects. If possible, get a reference or testimonial too. That will come in handy when it comes to touting for new business from strangers.

Next, turn to your network of business associates you developed while working for your former employer. Note, we're NOT talking about clients of your former employer, rather your own network of colleagues. Contact them and let them know about your new venture and your availability for project work.

Be extremely cautious about approaching clients of your former employer if your current business puts you in even indirect competition with that employer. You may be constrained from approaching former clients if you signed a non-compete covenant in your employment contract, for example.

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