Rich Sloan's Amazon Blog

And getting an LLC or some other form of corporate ID is easier than ever, and cheaper than ever. So why not? Loved your book. Wish you'd write a follow-up.

2 reasons against:
* Tax complexity (vs vanilla W2)
* Nagging receivables

It's never fun to be on the hook for 30-60 days before receiving payment for good/services rendered, though it may be a matter of whether or not you're good/comfortable with nagging clients...

What kind of home businesses are there? I've looked into this, on and off for years, but everything seems to be either outright frauds or very shady. Any ideas?

John,

What do you do for a living currently? Odds are there are people doing the same thing on a "consulting" basis from their home. I can only think of a handful of things that can be done based out of a home office.

Mathew,

I've been doing my own taxes while freelancing, now running my own shop, for several years. As long as you keep good records, it's very easy to do (especially with all of the tax software available). Now, where most people fail, is they don't keep good records. Using something like QuickBooks and having a good filing system are a must.

As far as receivables, that's only a problem if you only have one client. Most people and businesses pay their bills within 15-30 days. Between those and smart money management, this should never be more than an inconvenience IMO.

Starting then building a business can be very fun, the start-up stage being when you are learning faster than ever and problems are simply tonic, like when you loose a few points at a sport. But...after the startup stage, if YOU are the type of person who does not have a temperament for routine, then suddenly you realize that you are not only utterly alone in the world, not even having a janitor to say hi to, or any colleagues at all except maybe one or two employees who if and only if you are lucky you can both afford and who you like to live with for 8-10 hours a day several times a week, and chances are, though such employees (usually starving student types) being in their early 20s, have psychotic boyfriends who start calling your business line, upsetting your worker so much that a work day is basically ruined. In yourself, you can go 2-3 years until those few skills you utterly lack start to catch up to you. Sure, you can job those out or hire then in, but cheap employees are always best considered as "temps" since they always shop around for higher pay, or worse, you become emotionally dependent on them, and when they graduate from school become worth three times as much and by simple logic (and a want of free health benefits), quit. If you have a girlfriend, and you hire nubile females (in my case product design students), a single catty episode can erode your employee's "male/female" respect in you. The alternative is to hire boring people, but what fun is that?

To find assistants I highly recommend Facebook over Craigslist since you can SEE what the person is like. This lets you hire young (cheap) people, who don't have many references, safely.

What I didn't know at first I will spell out in a literal New York Minute:

To start a business requires no paperwork except a single page registration at City Hall. To start with you can be a "sole proprietor" so you just end up with a registration card with your social security number followed by 'SS', but your business must include part of your actual name. That number is great since two tax forms from your state ('Resale Certificate' and 'Exempt Use' forms) lets you buy things, tax free. It also means you don't have to set up a separate bank account or "merchant account" for credit card payments (early on you can use PayPal or CCNow etc. to accept them) and AND you merely save receipts on a skewer and you can tax deduct all business specific items by merely listing them on your taxes (big ticket items over several years). That total is erased from your taxes, so often, early on, when you are growing, your tax burden is zero since you are burning money on new stuff and R@D. Zoning can be a problem if you have a home business in a large apartment where your boxed mail suddenly starts dominating the lobby, ha ha, but if you call yourself an artist (and in NYC register as one) it helps. Actual commercial space is cheaper (and has no kitchen) than residential, but often wont let you live there too, so that's a huge expense issue unless you really need street space to attract customers.

I guess what I mean to say is that things change. A lot. For one thing, a decade into it, you, I guarantee, will be a decade older, and a decade makes you not bolder, but bored. The good news is that you can then CHANGE your business in ANY way you damn well please.

Finally, a fact that few know: most small businesses fail not for lack of customers but at the point where the entropy of finally getting too many arrives and you trip up because of it and then start losing not only new clients but the ones who you have considered best friends from the start. My only advice is to stay out of debt, so you can buffer through such setbacks and start again from scratch.

Running a business isn't necessarily stressful, but, uh, more like humbling and unpredictable. If a supplier you have relied on for six years changes a product and wont tell you where to get the original one or even who made it, not only does a five minute order become a six week course in navigating Chinese web sites, but you, over time, realize that the world gives not one wit for your plight.

Another effect is ironic and would be hard to imagine, even though it's obvious after the fact: friends close and especially casual can no longer relate to you. First, they only want to know how much money you are making and whether any "gallery opening" type of events are on the calendar for them to get a VIP pass to. But worse, especially if you are a man, dating becomes a mind probe in which your date tries to size up your social status, but can't, especially if you have a college degree in a field unrelated to your business, which I very much do, namely a Ph.D. in Chemistry. You hardly even think of your career apart from your life, so you are likely to not even relate to the concept of "income" any more. This is dating disaster. Growing a business is a CHOICE so you can in good circumstances choose your income, but that means more work, more hassle, so it can become simply comfortable to stay "small" since once you reach over a dozen employees, the government suddenly sends inspectors and forces you you withold taxes and basically offers you a free strip search every month. What I mean is, starting a home-based business and skirting minor legal issues becomes impossible, including zoning laws.

That's not the worst though. The worst is that people with normal jobs IDEALIZE your lifestyle, even though you are emptying your own garbage, punching zip codes into your postal meter, using a scanner and laser printer as a copy machine since your single real one is broken.

Finally, besides overgrowth while in debt, the major reason small businesses fail is because they are idiotically started with a PARTNER instead of as a sole venture. Such "partner" types inevitably see YOU as a creative cash cow who raises his social status for doing NOTHING. And it's likely they will edge into "boss" status, or try to. If this happens, simply eject them, completely and utterly from your life.

The world of business isn't Bambi and Unicorns. You need to retain the ability to abruptly eject anybody whose brain or personal life may fall apart at any time. Being in business will harden you, making you utterly immune to fear of being outspokenly politically incorrect. This intimidates people, which in complex ways effects your social status. I used to be shy, for instance (a classic introvert). I have no time for that now.

Would I do it again, placing a ten year "blank" spot on my resume? ABSOLUTELY!!! The stress involved isn't the type that ages you. Ambition may fade to comfort level, at worst, but you can pop a beer open any time you want.

Finally a word of learned wisdom: politeness to a supplier who is screwing you over does wonders. One day I had a small case of paper towels delivered. It came packed in a box the size of a refrigerator. After opening it, I was literally trapped in my apartment when I unboxed it. Long story, but the company made it up to me.

Another word of wisdom. The process of creation and creativity is utterly different than that of being a customer. Just accept this. Do not think you can PUSH SELL instead of PULL SELL. You cannot "market" a dud product into a gemstone. Nor, as a creative person, can you easily predict which product will be which, and rich "early adopters" can create an initial illusion of product popularity that then dries up, forever, because really, it's a dud.

-=N=- (Proud Product Design Studio Owner)

I have partnered with a publicly traded company that has been in business since the mid 90's. Strong company with breakthrough technology in their product line. Would love to talk with you about it. The business model used to distribute is Network Marketing and has proved to be very profitable.

For those of who have never owned their own business, there is a WORLD of difference between signing the front of a paycheck and signing the back.

Thats something I didn't understand when I first hear Lou Holtz say it 10+ years ago. Now I know the stress of having 50+ people who depend on you. Try, you may love it. Of course, you may also hate it.

Hey, WD, thanks for the response. I've been long time in outside sales in pharmaceuticals, but now out of work. I'm doing substitute teaching. I went out and got my claims adjuster's license. I'm open to all ideas.

I have a small home-based business making and selling, of all things, hand-crocheted baby booties. I used to make all of them myself but now I have half a dozen others making them too, and I've shipped them all over the world.

I second getting Quickbooks, and I would add that you should get a Quickbooks For Dummies guide too if you've never done double-entry bookkeeping. Mine was my bible when I was starting with Quickbooks. Quickbooks exports directly into TurboTax so it's no trouble at all to do your Schedule C at tax time.

Ten Reasons for not starting a business:
1) The last time I looked, the failure rate is around 98%, with around 50% or so failing the first year.
2) If you went to college, you were trained to be a good employee.
3) Most people make an emotionally based feel-good decision about going into business. Didn't it feel good reading the article?
4) It will be a long time before you can ever take a vacation again and enjoy yourself.
5) Be prepared to drop a lot of your savings and when you apply for a replacement job, you can look forward to those all-knowing looks by those lacking your foolishness.
6) It's about a 100 times riskier that you think it is.
7) You can buy an existing successful business or a great franchise, do . If you lack the financial resources to do so, take the hint it is highly probable out of your league.
8) If you have a serious "day" job, you don't have the time to play business.
9) If a monthly magazine was written about business failures, it would be about the size of an old set of bound Britannicas every month. Call it the fortune less 50,000.
10) If you fail, nobody wants to hear about it, sort of like a dead man walking...gambler style.

A chicken in every pot was Henri IV

[Deleted by the author on May 13, 2008 7:20 PM PDT]

I definitely agree Rich,

I started out with running a small painting franchise, and loved being my own boss. Made some good money (for a guy in college), and learned a lot about small business management. Now I work as a partner in a design firm, and still reap many of the benefits.

To answer the gentlemen below, almost any idea you can come up with can be turned into a business. Just do your due diligence with a feasibility and a business plan, which both help you get EVERYTHING necessary down on paper, and then work extremely hard.

Cheers!

-Salem Honey
VP Marketing, Design My Idea

Hi Rich,

I most certainly agree with everything you said. The online marketplace has made this easier and more efficient then ever. I personally started our in college owning a small residential painting franchise, which gave me the opportunity to learn what a 90 hour work week was like! This helped me learn to manage a small business and reap the benefits (when I was through, I was only working ~10 hours a week making good money).

Now I am a partner in an invention design firm, and still enjoy the benefits of running your own company.

As to the gentlemen below, almost any idea you can think of can be realized as a business. You just need to do your due diligence; create a feasibility and a business plan, even if you are not planning on attempting to get financing, if only to get on paper EVERYTHING you may need for the business. Then work your butt off, double all the expenses, and prepare for the most fun, stressful and rewarding time of your life.

Cheers!

-Salem Honey,
Vp Marketing, Design My Idea