Home sweet business

Base: A home office may be a good start but it’s best to get out early.

For the first year of operations, Charles Liu ran his corporate merchandising business Cubic Promote out of his home in St Ives on Sydney’s upper north shore.

By beginning in his study, Liu estimates he saved about $10,000 to $15,000 in office rental costs. He says he always had plans to move his business into a proper office but when the time came he realised there was a small yet crucial detail he hadn’t considered.

When starting his business, he used a local St Ives phone number. A move into the city required a new number. It was a hiccup easily fixed but he’s still not sure how much business he lost as a result.

“We’ve changed offices but I’m sure some customers are still using the old number and there’s not much I can do about that,” Liu says.

It’s common practice for start-up companies to begin at home and there are good reasons for it. At the same time, operating from a residential house for too long can stifle a business. It’s a delicate balance and the timing will vary for different founders.

Whatever the choice and whenever the timing, there are things founders should consider before they even sit down at their home desk or dining table to write that business plan, which will make the eventual move smoother and more successful.

Of the 2011 BRW Fast Starters, 53 per cent founded their business at home, while the federal government’s business assistance website says that 1 million businesses are run from home.

As for the reasons in favour, reduced initial capital outlay is top of the list but starting at home is a play on the side of caution. For those unsure of a business model, it’s smart to not jump in the deep end before knowing you can swim.

“I started the business at home to mitigate risk,” My Accounts founder Simon Allsop says. “I was renting an apartment anyway.”

Allsop set up his bookkeeping and accounting service for small and medium enterprises at the dining table in the living area of his two-bedroom unit, which overlooked Mona Vale beach on Sydney’s northern beaches. He admits that on good surf days the lunch breaks were longer than usual. “It wasn’t so conducive to productivity but it was a bloody awesome way to start.”

When it came time to move into an office about six months later, Allsop had to face his fears but at least then he had some revenue behind him.

“It felt rather daunting when it came time to sign the first lease,” he says. “All of a sudden, there’s over $20,000 a year that you have to find the money for. Those sort of numbers felt too big.”

As an accountant by trade, Allsop is well aware of the tax breaks that can come from running a business from home. “You’re able to apportion the rent of the apartment and obviously the phone and internet costs but I don’t think the tax savings were a key reason [to start at home]; they were just a handy thing on the side of that type of set-up,” he says. “The main drawcard of starting at home was to avoid the commitment of signing a lease.”

Then there is the convenience factor. In the early stages of a business, many founders are driven to spend all their waking hours finessing their operation.

Ash Aryal and his two co-founders set up their search-engine optimisation and marketing business QuantumLinx in the garage of one of their homes in the Sydney suburb of Ryde. The commute was a two-second walk and meals were made and eaten in the kitchen next door.

“You can live and breathe the business,” he says. “For a start-up, when you’re time-poor, every minute counts.”

After about seven months, however, the QuantumLinx founders realised it was time to move on. Ryde is not a central suburb, so meeting city-based clients was time-consuming and troublesome. As well, it was important to promote a professional image, Aryal says, to differentiate the business from people doing SEO marketing in their spare time.

Says Cubic Promote’s Liu: “Having the business’s address in a city location, it just gives instant credibility as opposed to having a residential address.”

As well, face-to-face meetings with clients builds a stronger pipeline of work.

“We should have probably gone [into an office] a little sooner,” Aryal says. “We underestimated the benefits of an office. A lot of our sales are phone-based sales but by following up with a face-to-face meeting it provides a powerful client relationship.”

The drain on personal and family time is a reason many founders make the move into an office. “Sometimes I would go to bed at 2.30am,” Aryal says. “You’re able to because you’re just sleeping next door. By the time you finish, your whole family has gone to bed.”

And of course there are the distractions at home. Anything from neighbours popping by for a coffee, magazines lying around and the lure of the fridge can disrupt work flow, founder of bookkeeping and accounting services firm befree, Vaishali Kanabar, says.

Working at the dining room table with her husband, Kanabar says having a new business is motivation itself but admits they did have to hide the television remote every now and then.

Kanabar chose to move when befree became busy enough to employ a staff member. Allsop from My Accounts tried having staff work in his apartment but it got squashy and a bit weird. “We were getting busier and I was giving out more and more keys to my apartment, to people who I trust, but it’s still funny to have people in your own home working while you’re not there,” he says.

Most founders say it was the right course of action to start from home. “Starting it from home is the cheapest and easiest way,” Allsop says. “It’s so easy to start a business for under $1000, you’d be crazy not to give it a go, if you’ve got a good idea.”

Nonetheless they agree there are benefits to moving on. Cubic Promote’s Liu says although he may have lost business by not setting up a transferable phone line in the first place, he definitely gained business from the move.

He now supplies merchandise to the recruitment company he neighbours, which has also recommended his business to its network, leading to about $10,000 in new revenue.

“Those were the opportunities that would have been missed if I had have remained at home,” he says.

BRW

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