Home-based businesses on the rise

The Small Business Administration estimates that 13 million Americans work from home, comprising 53 percent of all small businesses in the country. The service and construction industries account for 60 percent of those home-based businesses.The SBA defines a home-based business as “a business that is conducted out of a residence with no other headquarters location.”Some businesses are well matched to the home location; others are “incubators” and will eventually move to a commercial space.Since El Paso County does not require a license for home-based businesses in unincorporated areas, there’s no data kept on the number of home-based businesses in the Falcon/Peyton area. Tom Cline, president of Falcon Professional Development League, said that recent estimates indicate about 1,500. Don Root, branch manager of Farmer’s State Bank, agreed with Cline’s count. “Just look at the Falcon/Peyton phone book, and almost all the addresses for businesses are homes,” Root said.The pros and cons of a home-based businessAccording to the SBA’s Web site, the advantages to working at home are numerous: “A desire for independence, convenience, financial gain, low overhead and low risk, decreased commute time, getting out of the rat race, more control over work hours, low business expenses (for example, money saved on commuting, lunches out and a professional wardrobe) and more time with family are positive factors most often cited.”The disadvantages of running a home-based business include feelings of isolation and or failure because the worker lacks the self-discipline to get the job done, and frustration in dealing with government restrictions and regulations. An article, “Home Based Businesses Restricted by Regulation,” by the SBA’s Office of Advocacy stated, “At the federal level, the report found that IRS regulations penalize home-based businesses in their treatment of deductions. In particular, claiming a home-office deduction is complex, the depreciation is spread over an unrealistically long time, and returning the space to full residential use generally entails penalties.”Some small business owners forego the tax deduction for a home-based business to avoid the hassles. A home office must be used exclusively for business, according to the tax code. The SBA says that type of requirement “ignores the realities of family life and offsets many of the advantages of running a home business.” According to a 2004 article in the Small Business Advocate, Chris Krupinski, a Fairfax, Va. business owner, built a 350-foot addition to her home for her business, but is unable to take the tax deduction because her son watches TV there after school.Local RestrictionsResidents of El Paso County who wish to operate a home-based business need to adhere to zoning ordinances. Mark Gebhart, principle planner for El Paso County Development Services Department, said unincorporated areas of the county fall into two categories with respect to home-based businesses.The first category, regular home occupation, includes most homes in the Falcon area. Businesses operated in these homes may have no outside employees and no inoperable vehicles or heavy construction equipment stored on the property. The businesses may have no more than three customers on the property at one time.The second category – rural home occupation – applies to areas zoned A35, (agricultural). There are a few A35 parcels in the Falcon area. Most of the Peyton area is zoned A35, although some parcels are less than 35 acres. Restrictions in the rural home occupation category are more relaxed. Businesses may have two outside employees, for example. Some industries are prohibited, such as heavy commercial, heavy industrial and solid waste disposal, i.e. industries that cause an excessive impact on the neighborhood, including noise, vibration, dust, etc.Businesses in both categories are allowed an exterior sign with a maximum size of two square feet. Many homeowners’ associations, however, prohibit exterior signage.Neither category requires a permit or registration from the county, although the county will issue one for $150 if the business owner requests it for taxes or legal purposes. Some businesses, such as cosmetology, child care, food preparation, etc. may require a special license from the state or a licensing authority like the health department. Heavily regulated businesses, such as gun sales, may require a federal license, according to SCORE, the Service Corps of Retired Executives.Three home-based business owners in FalconDeanna Patrick, who owns and operates A Flair for Hair in her Falcon Hills home, rented a booth in a salon for 13 years. She moved the business to her home for convenience and an anticipated need in the community. She said she has benefited from the lower overhead expenses; booth rental was more than $500 per month. The main disadvantage for Patrick is a lack of exposure; the covenants in her neighborhood don’t allow a sign, so she relies on word of mouth and newspaper ads.Don Hartlaub, who works full-time as a systems engineer for a defense contractor, has a part-time home-based business, Falcon Coins, which grew out of a childhood hobby. Hartlaub has collected coins for years and began selling some of his collection in 1993. He now buys and sells through his Web site, at coin shows and flea markets. Hartlaub said his home-based business provides extra family income and a potential retirement job.Nicole Moran, a health and wellness coach and Isagenix representative, recently moved her business from an office in Monument to her home in Peyton. Moran wanted to spend more time at home with her family and less time commuting. She said her biggest challenge is scheduling time for herself away from home. Moran added a phone line for the business because she does most of her business by phone and on the computer.Advisors to the home-based businessSCORE, the Service Corps of Retired Executives, is billed as “Counselors to America’s Small Business,” helping small business owners and budding entrepreneurs. SCORE lists several recommendations for home-based businesses on its Web site at www.score.org.

1. Check local and state zoning requirements and requirements for special licensing.
2. Use a post office box; it is more professional than a residential address.
3. Dedicate a phone line to your business and use an answering machine.
4. Make sure you have enough space for your business and keep it well organized.
5. Schedule appointments away from your home when you can.
6. Join an association and network with others in related businesses.
7. Keep good records for the IRS.
8. Discipline yourself to do what’s necessary.

Mark Sievers, a SCORE counselor from Teller County, said a major mistake many small businesses make as they’re starting out is to worry about mechanics rather than marketing. He said beginners tend to focus on questions like “what is deductible” and “what type of company should be registered” rather than “who will buy the product.””A business is only successful if you can market your product and bring in the people who will purchase it,” Sievers said.