As you speak with people about the reasons for running a business from a home, one of the top responses is always the reduced cost of doing business. I’ve said it many times about our business; the lower overhead gives us a slight advantage. And it’s true. But you’re probably familiar with the theory, ‘for every action there’s a reaction.’ This is also true. And it also applies to running a business from your home.
For every savings you achieve in your home office, there is an unexpected expenditure. I experienced one of these items just this week – and believe me, I would never have thought to calculate it in my projected profit and loss statement. Of course, I’m speaking of the school fundraisers my children participate in each year. Apparently there is one other theory, ‘for every dollar the school budget is cut, parents must raise two dollars to help replace it.’
If you’re still surrounded by plenty of co-workers, instead of tucked away by yourself in a home office, you might not have noticed the impact of such an unexpected expenditure. But as I sit looking at the stack of 40 count boxes of candy bars (at $1 a pop), I am readily reminded of my oversight. Having just recently recovered from the wrapping paper drive and the Math-A-Thon, I am really feeling the impact of this situation. I have seriously considered showing up at the workplace of friends and family and pretending I’m a new employee – at least long enough to unload a few cases of candy on my new- found co-workers. Don’t worry. I realize this is not a good plan.
As much as I enjoy letting out my frustrations about selling candy, school fundraisers are not the only unexpected expense for a home-based business. There is another, bigger expense in running a business from home – marketing. Some of you may be asking why this is an unexpected expense. After all, there is the other well-known theory, ‘you have to spend money to make money.’ (Okay, I’ll stop with the theories.) My point is that many home businesses set aside a little money for a newspaper ad or maybe a radio commercial. Perhaps, the only money you allocate for marketing is the cost of printing your company brochure and business cards.
Unfortunately, you’re running a business from a spare room in your home. There’s probably not a big flashing neon sign in your front yard letting people know you’re open for business. This means you need to be more aggressive in your marketing efforts. And if you’re operating on a limited budget, you may not have planned for a big marketing blitz. You’re probably counting on reaching new customers through those well-known marketing alternatives: networking, public relations, community outreach and maybe even a few low cost cross-promotions with another business entity.
And this is exactly what you should be doing. However, don’t forget to include the underlying cost of these marketing activities in your expenses. It takes someone’s time to get out and meet new people at all those Chamber of Commerce functions and to write those press releases. If you’re in a home office, it’s typically your time that is being used.
Having a home office is a juggling act. You have to distribute your time effectively to ensure every aspect of the business is managed – from operations to marketing. But if you don’t remember to analyze and account for the time you spend on creative marketing strategies, you may be surprised to learn the unexpected impact it has on your overhead.
Tip: Designate an hourly rate for your time. Determine the number of hours you are comfortable spending marketing your business. Multiply those two figures and include the final number as a definitive dollar amount in your budget.
