Starting a Home-Based Business

This document is a guide prepared by the Canada-Saskatchewan Business Service Centre and is intended to provide you with general information and suggested resources to assist you in researching your project. The extent to which this information will apply to you is dependent upon the circumstances related to your project.

For further information on individual topics identified herein, contact the respective governing body or the Canada-Saskatchewan Business Service Centre. Because this document is only meant as a guide, the Business Service Centre will not accept responsibility for business decisions made based on the information provided.

Before proceeding, reference should be made to the Business Start-up Info-Guide, which covers the basic steps involved in establishing a new business in Saskatchewan; as well as the document titled A Current Index of Business Fact Sheets. These fact sheets cover a wide variety of business topics. Be sure and also request the Sources of Information and Required Licenses for your area or view these on our Business Fact Sheets Web site.

TABLE OF CONTENTS

• Industry Overview
• Licenses and Regulations
• Managing Your Operation
• Associations and Contacts
• Recommended Books in Our Library
• Video Collection
• Recommended Internet Web Sites

INDUSTRY OVERVIEW

Tips on Starting a Home-Based Business
Doing something you enjoy in your favourite place - your home - and making money at it is a dream that many people have. Others are attracted to the idea of not having the daily commute to the office, no longer having to sit through rush hour traffic jams, not having anyone looking over your shoulder, choosing your own hours of work, dressing casually, or being more available for family members thanks to flexible hours. If any of this sounds appealing, we can help you on your way to becoming a home-entrepreneur. However, before you take any steps towards setting up a home-based business, it's a good idea to do an honest self-assessment of yourself and your situation to determine whether or not this is the best course of action for you.

• Pick a home business idea that interests you, for which you have a talent or expertise, for which there is a need, and which you can afford to finance.

• Ensure your type of business lends itself to a home base. Service industries such as consulting, freelance writing, or graphic design lend themselves very well to working from home whereas it's more difficult to run, for example, a retail business from home as you would need space to store and display your goods and have considerable customer traffic in your home. You should also think about whether your business would suffer from limited visibility in a residential location.

• Will running a business from home affect your neighbours? Is your business likely to create parking problems in your neighbourhood or create conflict with neighbours due to noise, traffic or changed use of space?

• Does your business require that you meet with clients? Many owners of home-based businesses simply choose to meet their clients at the client's office or in a neutral location such as a coffee shop. However, if this cannot be arranged and you must meet clients in your home office, consider whether or not it is set up to receive clients. For example, if a client would have to navigate through a cluttered playroom to reach your work area, you do not have the right setup to create a professional image. If you have no choice but to work out of a corner in your bedroom, find a neutral area to greet clients such as your living room or dining room and keep this area neat.

• Designate and design a work area that is separate from the mainstream of your home activities. Install a separate business phone, fax, and Internet connection.

• Check on any extra insurance needs. Shop around for policies, but make sure that you're adequately covered.

• Make use of free publicity. Send out news releases, present your product or service to a newspaper editor, radio or T.V. producer if applicable. Advertise. Scan and target T.V. and radio stations, newspapers, magazines, and newsletters geared to your market. Use public and special libraries to access this information. Canadian Advertising Rates and Data (CARD) lists Canadian publications, T.V. and radio stations, and their advertising rates. Self-market. Go to stores, companies, etc., to market your service or product in person. Be sure to spend some time finding out about your potential customers before you try to 'sell' to them.

• Don't overlook management/bookkeeping. Lack of managerial expertise is one of the single highest causes of business failure. Take courses, seek expert advice or hire help, but do learn basic management skills before you start.

• Talk to owners of similar businesses outside your market area to get an idea of the potential and status of that line of business.

• Join trade associations, business community associations, (i.e. chambers of commerce), business networks, or clubs to help establish contacts.

• Check both federal and provincial taxation requirements with Canada Revenue Agency and Saskatchewan Finance. Find out about allowable deductions for automobile expenses, business meals and entertainment, and home office expenses for self-employed persons.

• Do your market research. In a home business, as in any business, getting as much information as possible on your customers, competition, suppliers, and market area before you start is essential.

• Do a complete business plan, including financial planning, before beginning.

• Check on and obtain all necessary licenses, permits, and registrations for your line of business. This includes checking with your city/town/R.M. to see if it's legal to operate your business from home.

• Have business cards, stationery, brochures, etc., printed by professionals. A polished, professional look is particularly important for home-operated businesses.

Pros and Cons of Working at Home
Pros:

• Lower costs: office/store rental, commuting, tax deductions, child care.
• Time saved: work when most productive, combine work and home chores, commuting time.
• Own boss: set own priorities, direct financial benefit when doing well.
• Can be home with family.

Cons:

• Work space: may be hard to set up a permanent, separate work space. If you must see clients/customers in your home it can involve costly renovations or you may have problems creating a professional image.
• Time: can be difficult to find quiet time to work or, conversely, work may cut into your family/personal life; it may be hard to "get started".
• Travel: if you visit clients in their office/store it may require a lot of time and will involve higher costs.
• Isolation

Franchising
As a potential business owner, you may be considering buying an existing or opening a new franchised store. As a franchisee, you enjoy the benefits of "Good Will" that the name and reputation of the franchise already possesses. You also have, in many cases, the support of the parent company in issues such as location selection, management training, free advertising and support during the start up phase of your operation. Also you have the advantage of capitalizing on an already profitable concept. However, as a franchisee, you must pay the franchisor for the benefits provided, and these costs come off the top of your sales revenue and may add up to more than 10%. Also your freedom is somewhat restricted when you own a franchise. You must adhere to the standards set by the franchise.

For further information regarding Franchising, see the document Checklists For Franchisees.

Visit the Franchising section on our Links Sectors Web site.

Links and resources for Franchising

Canadian Franchise Association
The Canadian Franchise Association represents over 350 franchise companies and the professionals who support this way of doing business.
Publication: Franchise Canada Magazine

International Franchise Association
IFA provides information and resources on franchising and the Virtual Franchise Opportunities Mall--one-stop-shopping place for obtaining your franchised business.

Canadian Franchise Opportunities
Franchise Opportunities provides the Web's largest directory of franchises and franchise business services available on-line.

Marketing/Advertising
Failure to develop a strong marketing plan is one of the main reasons new businesses fail. Elements such as pricing your product or service, carefully defining your target market, and methods of promotion need to be considered when developing your marketing strategy. These methods include brochures, ads, web sites and trade shows, to name just a few. And don't forget your business image...everything from the speed in which you return business calls to your company logo to how you present yourself at meetings are all forms of marketing your business.

Word-of-mouth advertising and good public relations are often the best ways of promoting your business. Depending on your market and its size, also consider flyers, newspapers (especially for holiday promotions), radio, TV, the business pages of the telephone book and the Internet. Also bear in mind that a satisfied customer is good advertising. Contact your local city/town/RM office for bylaws on signage.

If you are planning to have a Web site you should have details to describe the location (your business' address, telephone and fax numbers), hours of operation, and anything else you think may be of interest to potential customers. However, once you launch a Web site, you must update it on a regular basis. For more information on this subject see the document E-Business Info-Guide , see the document E-Commerce - Exploring Your Options or visit the E-business Sask. section on our Web site.

The federal Competition Act governs misleading advertising and deceptive marketing practices for all businesses in Canada. The Act defines which marketing practices are illegal and the process of complaint investigation. For more information see the document Competition Act - Misleading Advertising and Deceptive Marketing Practices or refer to the pamphlet on this subject administered by Industry Canada - Misleading Representations and Deceptive Marketing Practices or visit the Competition Bureau Web site.

For further information regarding Advertising, see the document  Signs and Your Business,  the document Plan Your Advertising Budget, the document Advertising Do's And Don'ts,  or the document Ways To Promote Your Product Or Service.

The Online Small Business Workshop - Marketing Basics listed in Session 2, covers the basics from developing your customer profile to promoting your business.

Market Research
Successful businesses have extensive knowledge about their customers and their competitors. Acquiring accurate and specific information about your customers and competitors is a critical first step in market investigation and development of a marketing plan.

In developing a marketing plan, your primary functions are to understand the needs and desires of your customer, select or develop a product or service that will meet customer needs, develop promotional material that will make the customer aware and ensure product or service delivery.

For further information regarding marketing see the document Market Analysis, the document Guide To Market Research and Analysis, the document Marketing Plan Outline, or the document Recommended Information - Demographics/Statistics.

For more information on marketing and advertising refer to our web site; Links Sectors and Business Fact Sheets.

LICENSES AND REGULATIONS

One area of rules and regulations that all new businesses must comply with is that of licenses and regulations. When creating a business, the entrepreneur must contact the municipality involved, along with the provincial and federal governments.

Each municipal government has the authority to issue its own business licenses within its jurisdiction. Since there is no uniformity throughout the country regarding municipal licenses for businesses, you should consult with the appropriate local officials to determine whether your business will be affected by local regulations and licensing requirements. Businesses (including home-based businesses) must also meet the zoning by-laws that control property uses in their municipalities.

MANAGING YOUR OPERATION

Insurance
Insurance needs for businesses vary greatly. It is best to choose an insurance agent or broker familiar with your size of business and, in particular, an agent familiar with your type of operation. If you don't have an insurance agent, it could be a wise decision to ask other business owners in your area to recommend one.

The following list is included to remind you not to overlook the complex areas of business insurance. It is best, however, to discuss your specific requirements with your insurance agent.

Basic insurance:

• fire insurance (extended coverage on buildings and contents);
• liability insurance;
• burglary protection (theft coverage);
• dishonesty insurance (covers thefts by employees).

Accounting/Bookkeeping
A good record keeping system should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis.

The legal requirement concerning financial records specify only that they be a permanent, accurate and complete record of your daily income and expenses. There are many types of record books and bookkeeping systems available. For example:

• double entry bookkeeping;
• commercial bookkeeping systems;
• one-write systems;
• computerized systems;
• single entry bookkeeping.

For further information see the document Basic Bookkeeping, or the document Bad Cheque Control.

Selecting Professional Services
The use of professional services is essential to the success of a small business. Professionals can provide knowledge and expertise in the areas where you may have little. They can round out your management team to ensure your business is operating efficiently.

As an entrepreneur, there are four main areas of professional services with which you may consult:

1. lawyer (contact a lawyer about legal issues);
2. insurance broker;
3. accountant;
4. banker - for tips and pointers on dealing with your bank, see the document Dealing With Your Banker & Other Lenders.

Furnishings and Equipment
The type, size and kind of service will determine the type of equipment you will require. For assistance in this area, you may get the advice of a sales representative or consult trade publications and manufacturers' Web sites. List that equipment and its cost to you. An important factor to consider when choosing equipment is the after-sales service and repair and their affordability.

Used Equipment - Consider buying used equipment as a cost-saving measure. Sources of used equipment could be a business that is closing or dealers in second hand equipment. The drawback to this approach is that, often, there are no guarantees with the purchase.

Leasing Equipment - Another alternative is to lease equipment to help keep start-up costs down. To obtain financing for capital leasing for new or used equipment for the creation of your business, see the document Capital Leasing Pilot Project.

Setting Up A Pay System
Pay administration is a management tool that enables you to control personnel cost, increase employee morale, and reduce workforce turnover.

Checklist For Profit Watching
Making a profit is the most important -- some might say the only objective, of a business. Profit measures success. It can be defined simply: revenues - expenses = profit. So, to increase profits, you must raise revenues, lower expenses, or both. To make improvements, you must know what's really going on financially at all times.

For additional tips and general information, see the document Home-Based Business In Saskatchewan or the document  Expansion Of Your Home-Based Business.

Do you Need to Hire Others?
Keep in mind that you cannot employ others in your home unless they are family members who reside in your home. For all those other jobs you need done, your best option is to sub-contract to someone with the expertise you need. For example, if you are a graphic designer working on a brochure and need a professional writer to help you with the text, you can make an arrangement with a person with this expertise to complete a specific job for a set fee. This person could be a friend, acquaintance, former business colleague, or complete stranger. However, no matter whom you make this arrangement with, make sure it's in writing. Also, be aware that Canada Revenue Agency has strict guidelines on what constitutes an employee/employer relationship. If you are hiring people on contract, make sure that your business dealings do not cross the line and become an employee relationship. For example, a contract employee is free to work for others, supplies their own materials and equipment, cannot be supervised and cannot be given scheduled hours. These are just a few examples of the difference between a hired employee and someone working for you on contract.

Taxes and your home-based business
Money that you spend for the purpose of producing income can be deducted from your business income. If your home is your principal place of business, you can deduct a percentage of home expenses equal to the percentage of floor space that is used exclusively for business. Deductible home expenses include:

• heat, light, water and business phone
• rent or mortgage interest (not principle payments)
• home maintenance
• insurance
• property taxes

Contact Canada Revenue Agency for more information at 1-800-959-5525 or see a detailed information piece located on their web site at http://www.cra-arc.gc.ca/tax/business/topics/solepartner/menu-e.html  which explains, among other things, what business owners can claim as deductions. The appropriate tax forms are also included at this location.

ASSOCIATIONS AND CONTACTS

Membership in the Saskatchewan Home-Based Business Association (SHBBA) may be an option for those Home-Based businesses that wish to belong to an association. There are currently six chapters of the SHBBA available to both home business owners, and supporters of Home-Based businesses, to join. Members enjoy many privileges, which are outlined in the Home-Based Business Association's brochure. Some of these include: a free listing in the provincial directory of members' products and services; educational sessions on the important aspects of starting and running a Home-Based business; a quarterly newspaper; annual conference and others. If you choose to become a member of the Saskatchewan Home-Based Business Association, phone 1-877-887-4222 .

For additional information see the document Selecting a Business Association.

RECOMMENDED BOOKS IN OUR LIBRARY

Canada-Saskatchewan Business Service Centre resource library search engine can be viewed at the Saskatoon Reference Library Web site. Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you. Material is available to view in our Saskatoon office or regionalization site where available.

Start and Run a Profitable Home-Based Business
BUSINESS HOME .002S-1
International Self-Counsel Press Ltd., 1996

The Everything Home-Based Business Book
BUSINESS HOME .045S-2
Savage, J., Adams Media Corporation, 2000

Starting A Home-Based Business
BUSINESS HOME .015S
Entrepreneur Magazine, John Wiley & Sons, Inc., 1999

Guerrilla Marketing For The Home-Based Business
BUSINESS HOME .016S
Levinson, J., Godin, S., 1995

More 101 Best Home-Based Businesses for Women
BUSINESS ENT WOMEN .006S
Prima Publishing, California, 1998

Easy to Start, Fun to Run & Highly Profitable Home Businesses
BUSINESS HOME .025S
Adams Media Corporation, MA, U.S.A., 1998

101 Best Weekend Businesses
BUSINESS HOME .020S - 1
Franklin Lakes, NJ, U.S.A., 1996

199 Great Home Businesses You Can Start (and Succeed in) for Under $1,000
BUSINESS HOME .026S
Prima Publishing, California, 1999

203 Home-Based Businesses that will Make you Rich
BUSINESS HOME .027S
Prima Publishing, California, 1998

Shoestring Entrepreneur's Guide to the Best Home-Based Business
BUSINESS HOME .027S
St. Martin's Press, New York, 2000

VIDEO COLLECTION

Canada-Saskatchewan Business Service Centre resource library search engine can be viewed at the Saskatoon Reference Library Web site.

Once you have located a particular resource you think might be useful, please contact us at the CSBSC office and we will discuss the material with you. Material is available to view in our Saskatoon office or regionalization site where available. Videos and audio cassettes may be loaned out to residents in the Saskatoon area.

We have many videos available in the following categories: aboriginal, customer service, sales, marketing, training, entrepreneurship, business planning, financing, e-business, starting a business, business skills, home-based, management, intellectual property, trade, quality, computer skills, and miscellaneous. Search the A/V Library on our web site for descriptions.

Some videos of interest may include:

The Mission Statement and The Payoff for the Home Based Business
VIDEO HOME BASED BUSINESS .013S, 30 mins, 1997

Technology for Home Based Business and The Business Plan
VIDEO HOME BASED BUSINESS .012S, 30 mins, 1997

Reasons for Opening a Home Based Business and The Importance of Planning
VIDEO HOME BASED BUSINESS .003S, 30 mins, 1997

Hobby Home Based Business and The Voices of Experiences
VIDEO HOME BASED BUSINESS .009S, 30 mins, 1997

Market Research and Separating Business and Home
VIDEO HOME BASED BUSINESS .007S, 30 mins, 1997

Home-Based Business: A Winning Blueprint
VIDEO HOME BASED BUSINESS .001S, 55 mins, 1991

Accounting Basics and Lifestyle Changes
VIDEO FINANCE .005S, 30 mins, 1997

RECOMMENDED INTERNET WEB SITES

More links available on our Links Sectors Web site under Home-Based Business.

Business Know-how
This site includes information on how to succeed in your home-based business.

Biz Office
This site provides business links to franchises, opportunities, financing, marketing, references, services, news, and more.

Managing for Business Success

The Entrepreneur's " For Home Business  " Information Web Site

SOHO Business Report
This quarterly magazine is also available in the CSBSC (Free).

For further information regarding starting a business, contact the:

THE INDIVIDUAL/BUSINESS/CORPORATION/PARTNERSHIP (HEREINAFTER REFERRED TO AS THE CLIENT) ACKNOWLEDGES AND UNDERSTANDS THAT THE CANADA-SASKATCHEWAN BUSINESS SERVICE CENTRE DOES NOT WARRANT OR REPRESENT THE ACCURACY, SUITABILITY OR APPLICABILITY OF THIS INFORMATION AND ASSUMES NO RESPONSIBILITY OR LIABILITY FOR THE USE THEREOF BY THE CLIENT AND ANY THIRD PARTIES AND THAT THE INTERPRETATION, USE AND APPLICATION OF SUCH INFORMATION SHALL BE THE CLIENT'S SOLE RESPONSIBILITY.

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.