Starting a Small Business from Home

The one thing

Treat it as a business from the first day: separate money, written records, and prices that pay you. Most home businesses that fail do not fail because the owner lacked skill. They fail because the owner never knew whether they were making money: business and household money were mixed, nothing was written down, and prices were guessed. A business that is run as a business from the start has a far better chance. §1.2 explains why home businesses fail, and §1.6 helps you write a first plan.

What a Home Business Can Give You

Running a business from home can give a person and a household:

• Income: extra money alongside a job, or a full income in time.
• Independence: working for yourself, at hours you choose.
• Low starting costs: no shop rent, and often equipment you already own.
• Time with family: working where you live, without long travel.
• Using a skill: earning from what you are good at, such as sewing, cooking, repairing, tutoring, hairdressing or bookkeeping.
• A start: a small home business can grow into a bigger one (Chapter 12).

Many South Africans already run businesses from home: dressmakers and tailors, caterers and bakers, hairdressers, tutors, phone and appliance repairers, mechanics, upholsterers, bookkeepers, crafters, photographers and people who sell online. Some earn a little extra; some support whole families.

Worked Example 1.1 — Lindiwe’s spare room

Ms Lindiwe Khumalo, 41, trained as a dressmaker and worked for a clothing factory in Polokwane for twelve years. When the factory closed, she bought a second-hand industrial sewing machine with part of her payout and began sewing school uniforms and church wear in her spare room. In her first months she was busy, but at the end of each month she could not say whether she had made money. She bought fabric with the household’s grocery money, paid her electricity from the takings, and charged what a neighbour charged.

The lesson: Lindiwe has the skill and the customers. What she lacks is the business side, which this book teaches. We follow her through the book as she builds it.

Why Home Businesses Fail

Many small businesses close in their first few years. The most common reasons are:

• Mixing business and household money: the owner never knows what the business earns, and the business is quietly used to pay household bills (Chapter 6).
• Prices that are too low: the owner counts the cost of materials but not their own time, electricity, transport or wear on equipment (Chapter 7).
• No records: without a record of money in and out, the owner cannot see a problem until it is too late (Chapter 8).
• Cash flow: customers pay late, or the owner spends on stock that sells slowly, and there is no money for the next order (Chapter 8).
• Too few customers: the owner assumed people would buy without testing the idea (Chapter 2).
• Debt: equipment or stock bought on expensive credit (Managing Your Money, Chapter 5).
• Burn-out: working every hour, alongside a job and a family, until the owner gives up.
• Problems with the rules: a complaint from neighbours, a missing licence, or SARS (Chapters 4 and 5).

None of these is about skill. All of them can be prevented with the habits in this book.

Is It for You?

Before you start, check honestly:

• Skill. Can you make or do something well enough that people will pay for it, again and again?
• Time. How many hours a week, every week, can you give it, alongside a job, children and household work?
• Money. What will it cost to start (equipment, materials, registration, marketing)? Could your household survive if you lost it?
• Space. Is there a safe place at home: enough room, light, ventilation, power, and somewhere to store stock?
• Family. Does your household support it? Will it disturb them, or they it?
• Rules. Is your kind of business allowed at your home, and does it need a licence or certificate (Chapter 4)?
• Stamina. Can you keep going through quiet months, late payers and mistakes?

A “no” is not the end. It tells you what to fix or plan for. A dressmaker without space might rent a corner in a church hall; a repairer short of money might start with a small set of tools and buy more from profits.

Worked Example 1.2 — Kabelo’s backyard room

Mr Kabelo Molefe, 28, from Tembisa, taught himself to repair phones and laptops from videos and a short course. He works from a backyard room at his mother’s house. Friends and neighbours bring him cracked screens, dead batteries and slow laptops. He goes through the self-check. Skill: yes. Time: evenings and weekends, while he looks for a job. Money: about R4 000 for tools and a stock of common parts. Space: the backyard room, but it has one plug point and no lock. Family: his mother supports him but wants the room kept tidy. Rules: he does not know yet (Chapter 4). He decides to fit a lock and a safe multi-plug with surge protection before taking more customers’ phones.

The lesson: the self-check turned two vague worries into two things Kabelo could fix for a few hundred rand.