3 tips for home-based businesses

Q: : I'm getting ready to start a catering business out of my home. I'm really excited, but also very apprehensive. Any tips?

— Meredith

A: Welcome to the world of "home-preneurs." We like to think of home as the first frontier of entrepreneurship—and for many, it's the only frontier. Home-based entrepreneurs now account for 50% of all businesses in the United States—and this percentage is growing.

If you want your own home-based business success story, here are three tactics that can make a difference.

You started a home-based business because you wanted to do something unique, or perhaps better, than the competition. So you need to keep your eye on that ball, clearing the way for you and your company to focus on “core competencies” — just like larger companies do

The key is to do what you’re good at, and outsource the rest. For example, if you’ve designed a product to manufacture—but the key to your business model lies in sales and marketing—outsource its production.

If you’re a consultant whose magic lies in your vision and interaction with clients, outsource your accounting and other “back-office” functions. If you’re a Web retailer who is drawing customers because of your product selection and brand buzz, outsource fulfillment and shipping.

Taking advantage of the Internet can help you operate your home-based business far more efficiently than was possible five years ago.

These days, home-based businesses can send out e-mail blasts to their customer database – announcing a promotion or a new product – just as easily as any huge company. And home-based businesses can obtain merchant-bank authorization to accept credit cards online, so they can conduct e-commerce, just like the big guys.

What's more, a home-based business can use its Web site to position itself as a destination site that is superior to its competition. For example, a home-based plumber can set up a site that serves as an information resource on leaky faucets. Or a home-based dog-walking service can position its Web site as a repository of information on canine care.

Online services, such as Microsoft Office Live, can help you create and maintain a professional-looking site.

The Internet also offers freedom to work outside of the home. Donna Maria Coles Johnson, a home-based business owner, says: “I go to the local coffee shop a lot, and that’s where my daughter thinks that mommy works. I can work anywhere and not be interrupted.”

For years, federal tax policy wasn’t very helpful to home-based business owners. For example, only recently have people been allowed to deduct the entire cost of health-insurance premiums. Nowadays the biggest problem home-based business owners face with taxes is that they fail to avail themselves of deductions. Financial management software, such as Microsoft Office Accounting, can help you keep track of your tax deductible expenses

The biggest of failure, tax experts say, is that many home-based businesses don’t claim all the tax breaks allowed for using part of their home as an office, a manufacturing operation, or a warehouse space – or some combination of all three. There are regulations regarding these tax breaks, so be sure to consult with a tax advisor.

While many home-based business owners deduct utility bills and other expenses, they don’t always optimize these deductions. For example, you should consider claiming a “time percentage” of your heating costs rather than a “space percentage,” says Eva Rosenberg, a tax expert and author of Small Business Taxes Made Easy.

Good luck with your home-based startup, Meredith. Follow these three tips and you just may get a leg up on success.

Jeff and Rich Sloan are America’s premier startup advisors, creators and hosts of StartupNation.com and StartupNation Radio, and authors of StartupNation: Open for Business. Lifelong entrepreneurs, the Sloan brothers have a passion for helping others learn to run their own businesses. Do you have a question for Rich and Jeff? Send them an e-mail.