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Small Business Blog

Brought to you by Steve Strauss

August 2012

Time for a New Start

With temperatures this summer being as high as they have been, it is somewhat difficult to realize that fall is right around the corner, and with it, the start of school, a chill in the air, and yes, end-of the-year taxes. Fall is a time of year when people start to think about change, and in the blogs this month, let’s look at fresh starts in business, specifically, fresh starts from home.

Take, for example, Bette Naismith. At age 19, Bette became a mother at age 19 when her son Mike was born (later to become famous in his own right as Michael Naismith of the Monkees.) That she couldn’t really type well didn’t stop Ms. Nesmith from applying for secretarial work and she went to work at the Texas Bank & Trust in 1951.

At the bank, Bette found a new breed of electric typewriters at her disposal that used carbon ribbons, but the problem was that mistakes typed in carbon are almost impossible to erase. And Bette made her share of typos. What to do?

Always the artistic sort, it was that while painting the bank’s windows for the holidays that she had her "Aha!" moment. On the bank’s windows, when she made a mistake, she simply painted over them. If she could do that on the bank’s holiday window, why couldn’t she do the same when typing? Bette Nesmith’s million-dollar realization was that she could.

So Ms. Nesmith began to sneak a small bottle of white tempura paint and a watercolor brush with her to work and, when she would make a typo, she would simply paint over the mistake. For five years, she kept this her own private little secret. But after a while, a great idea like this is bound to get around, and it did. Although other secretaries liked the paint, it was not perfect – it was too thin and dried too slow.

So Bette Naismith decided that she would turn her brainstorm into a product, but lacking the funds to do so, she decided to learn how to create the mixture herself. She went to the library and located a formula for tempera paint, and then went to Michael’s school and spoke with his chemistry teacher to learn how to modify it. A trip to a paint factory taught her how to grind and mix the concoction correctly, and a few more field trips turned her into an amateur chemist.

Thereafter, at home in her kitchen at night after work, Ms. Nesmith began to experiment. Mixing different concoctions eventually resulted in a formula that she was satisfied with. Her initial thought was to try and sell her product to a large company that had the resources necessary to manufacture and market it properly. A friend knew someone in IBM’s advertising agency, but IBM turned her down.

But an idea as great as Liquid Paper, even being as new as it was, was just too good to ignore. A few loans here, some good PR there, and sales grew. By 1968, grosses topped $1 million. In 1975, the company that began in Bette Nesmith’ s kitchen, moved into a 35,000-square-foot building in Dallas. The plant produced 500 bottles a minute, and in 1979 Bette Naismith sold her company for $47.5 million dollars (and royalties on every bottle sold through the year 2000.)

The Home-Based Revolution

In my last blog, I shared the inspirational story of how Bette Naismith turned a good idea into a great product, and she did so by starting a business at home, part-time, after work. While what Naismith did in the 60s was very unusual, today the home-based revolution is in full swing, and something that anyone looking to make a big change this fall should consider.

I tell you this because I know from whence I speak. Many years ago, I worked from home and back then it was still a bit unusual. Today of course it is a lot easier. Not only is it more common, but there are all sorts of tools available to make it easier - everything from smartphones to email to tablets.

There are plenty of reasons why working from home is a growing trend:

  • It's affordable
  • There is less risk because there is less overhead
  • Sweet tax deduction

Of course, there are downsides too. Back then, my standard joke was that when working from home, there is good news and bad news. "The good news is, you see your kids a lot. The bad news is, you see your kids a lot." Other downsides to working from home include:

  • A feeling of isolation
  • The blending of home and work life
  • Being taken seriously

The important thing to understand is that it takes a certain temperament to run a successful home-based business. Here are some of the important things to consider:

  • Do you have the space at home to create an office?
  • Do you have the self-discipline to be able to work when your family is around?
  • Are you willing to work by yourself?
  • Can you resist the temptations of the refrigerator, television, kids, etc.?
  • Will your customers take you seriously if you work from home?
  • Does your family support your plan to work from home?

That last question is almost the most important. Having the support of your family can make or break your home-based endeavor, so be sure you are all on the same page before you ever start.

The other two pieces of valuable advice I can give you are these:

  1. Don’t look small: Even though you are at home, there is no need to look small. Use an executive suite to meet clients. Have a great website. Have a separate phone line for the business installed. Look professional.
  2. Create some office hours. The last thing about working from home is that it is very easy to get distracted. Having office hours counters this. Everyone will take your venture more seriously if you do, including you.

Setting Up a Home-Based Business

This month, I have been sharing various stories and strategies of people who wanted a change and found it by successfully starting their own business out of their home.

Doing so may sound easy, but it’s not. To make working from home work for you, it is critical that you set up your home office properly.

Doing so takes some thought and careful planning. Sure, choosing where you’ll spend the majority of your day, arranging furniture and supplies, and decorating your walls should be enjoyable, but there is a bit more to the logistics of choosing a home office than putting up pictures.

First, you really need to have a separate room for your business. Not only is having space to yourself critical, but if you want to claim the home office tax deduction, you need a specific room for business only. By having a room dedicated to work only, you are sending a signal to yourself and those around you that, that even though you are at home, this is about work. Sure, you can cordon off space in a room using dividers, but if you can avoid doing that, avoid doing that.

You also need to consider that you will require a place where you can work peacefully. Barking dogs, construction, and kids playing in the street can drive you to distraction. As such, insulating your new office may be worth the cost. Wall-to-wall carpeting is great for reducing sound, but even an area rug will help as long as you spring for good padding. Other sound-reduction tools include weather-stripping, double-glazed windows and solid doors.

Other home office infrastructure requirements can include:

  • Electrical: It's usually worth the money to install extra outlets. If you do, consider installing them at desk level. If your office is going to be relatively equipment-heavy, consider placing those electrical outlets on a separate circuit breaker.
  • Phone lines: You should have at least two phone lines, one for work and one for home.
  • Lighting. Try and use as much natural light as you can. Add in a mix of ambient lighting (ceiling lights) and task lighting (a desk lamp).

Equipping a home office is not an inexpensive proposition. A desk, chair and computer are, unfortunately, just the beginning. Of course you will also need a multi-function copier, file cabinet, bookshelves, and computer and Internet functionality. The important thing to remember is that you will be spending a lot of time in this space, so make sure it reflects your temperament. The office items you buy and how you arrange them can make a world of difference in your productivity.

The bottom line is that starting a business from home can be one of the best decisions you may make. By drastically reducing your overhead, you correspondingly increase your chances of success.

If They Did It, So Can You

It may be surprising to learn that many businesses you know well started out as a home-based business:

  • Disney
  • Microsoft
  • Xerox
  • L.L. Bean
  • Apple

Interestingly, all of these now huge businesses started out as very small mom and pop type operations and yet eventually became global brands. This is not to say that if you go the home-business route you need to think that big, but rather, as a reminder of what is possible.

Take for example Jeff's story: One day in the spring of 1994, Jeff was sitting at the computer in his 39th-floor office in midtown Manhattan, looking at something very few people had even seen – the Internet. Jeff happened upon a Website that said that the Internet was growing at a rate of 2,300% a year. As he later told Time Magazine, "it was a wake-up call. I started thinking, O.K., what kind of business opportunity might there be here?"

Jeff Bezos knew that whatever he created had to be unique; offering something people couldn't get elsewhere. "Unless you could create something with a huge value proposition for the customer, it would be easier for them to do it the old way," Bezos told Time in 1999. That is what finally led Bezos to books. He figured that selling books online would in fact be unique because online he could offer every book that is out there. There were no giant mail-order book catalogs because such a catalog would have to list millions of books to be complete. Only on the Internet could Bezos offer every book.

So, Bezos quit his job, and he and his wife MacKenzie set out for Seattle. Why Seattle? Because the city had two big huge book distributors and plenty of computer geeks he could hire. As MacKenzie drove across the country, Jeff wrote his business plan on his laptop.

When they arrived in Seattle, Jeff and MacKenzie rented a two-bedroom home in a suburb of Seattle, Bellevue. It was there that they started their company. Converting the garage into a workspace, Amazon.com was born.

Or what about Lillian Vernon? Born in Leipzig, Germany, she escaped to New York with her family during World War II. Newly married, Vernon used the $2,000 that she had received as wedding gift money and started a mail order business in the early 50’s in an effort to help pay household bills. Her office was the kitchen table in their apartment.

Ms. Vernon placed a sixth-of-a-page ad for a "personalized handbags and belts" in Seventeen magazine and waited. The ad was a hit, bringing in more than $32,000 in orders. With success like that, the Lillian Vernon Company grew, and then outgrew her home office in three short years. These days, Lillian Vernon has sales in the hundreds of millions.

So this fall, as you plan ahead, keep in mind the many benefits of working from home. The advantages are numerous, and the commute is tough to beat.