It makes sense that this is one the questions most frequently asked by new Homeowner Referral Network (HRN) business owners. After all, you want to launch a home-based business for flexibility and independence but ultimately, the goal is to generate more income for your family or possibly transition out of a full time job.
The short answer is that most new HRN business owners turn a profit within the first 6 months of operation. That’s pretty appealing since most new businesses can take up to 3 years to turn a profit! The reason HRN owners are able to make money so soon is that the start-up expenses to launch a contractor referral business are minimal.
To give you an idea, I’ve outlined the major expenses below:*
- Fax and/or Scanner
- Telephone Line
- Answering Machine/Service
- Direct Mail Printing
- Mailing List Subscription (1 year)
- Promotional items
- Fees for Establishing Legal Structure
The expenses listed above will vary based on a few factors. For example, fees to set up a legal structure (LLC, Corporation or Sole Proprietorship) are different from state-to-state, you may currently have an office set up in your home, outsourcing printing or doing it in-house, etc. Each start-up is different but the average HRN business owner can launch with a budget of approximately $750 to start over the first 3 months.
And, the monthly operating costs for an HRN business are minimal as well. This is a word-of-mouth business that doesn’t require expensive advertising, there’s no merchandise or production costs and best of all, operating a business from home can be tax deductible!
Below are few of the monthly HRN business expenses:
- Direct Mail
- Printing Expenses
- Association Membership Fees
- Office Supplies
On average, monthly expenses for HRN owners are no more than $300/month.
Those are the expenses, now let’s discuss income. Contractor commissions vary based on the dollar value of the job and type of service. Also, in some cases material costs will be considered. (Complete commission tables are outlined in the HRN Business Manual.) So, let’s say an average commission paid by a contractor to your HRN business is 10%. If you refer one job for $5000-$10,000, that’s a pretty good profit with no overhead!
So, if you’re still thinking about starting an HRN or Aging-in-Place Referral Network in your area, don’t let the cost deter you. Not only is this a rewarding business personally, but it can be a very rewarding business financially as well!
*Based on HRN owners who start with the Best Value Business Package which includes a website, forms, management software and graphics.
If you think you can’t afford to quit your day job or don’t have the funds to launch a home based business, think again. It may seem like finding the money to start a business of your own is impossible but, if you take a minute to break down your finances (and are willing to cut back a little) launching a home based business might not necessarily be out of your reach.
1. Mortgage: With interest rates so low, it may be time to refinance your mortgage. A lower interest rate could save you several hundred dollars each month.
2. Tax Deductions: Did you know that a portion of your home’s expenses are tax deductible if you’re operating a business from home?
3. Car: If you decide to work from home, you may be able to live with one car which is a significant savings on not only your monthly car payment but gas and insurance.
4. Childcare: Full time childcare may not be necessary if one parent is working from home.
5. Tax Bracket: If you’re a two income family and reduce to one income, your tax bracket may be lowered significantly which translates to more take home pay.
6. Commuting: If you work outside of the home and take public transportation to work every day, take into account how much money you currently spend on your monthly commute.
7. Daily Expenses: Many minor expenses like a work wardrobe, dry cleaning and dining out will be significantly reduced when you work from home which will save several hundred (if not thousand) dollars each month.
Launching a business takes discipline, sacrifice and creativity and the first place to put these skills to work is by revamping your finances to find the funds you need for your business start-up. Take a hard look at your family budget and it may open your eyes to how small the gap is between your current income and what you will need to earn working for yourself!
Starting a home based business can be scary. And, it’s not uncommon to come up with excuses that keep you from pursuing your dream of working from home. (I know because I had a long list of them when I started my home based business!)
- I don’t have the money. Is there ever a time when you have enough money? Most home based businesses start on a shoestring budget and grow from there. Consider the money it costs to launch a home business as an investment in yourself and your future. (And by the way, did you know that business expenses are tax deductible?)
- I don’t have the time. As the saying goes…Want something done? Give it to a busy person. Most people launch Homeowner Referral Network (HRN) businesses while still working a full time job. (I launched my HRN with a newborn at home!). If you really examine your day, you can carve out a few hours to get something started, especially if you love it!
- There’s too much competition already. Do McDonald’s and Burger King operate in the same market? The answer is yes! And, as far as the HRN business goes, online lead generation companies and national referral services pose no competition at all. If you have a proven business model and offer local, personalized and a professional service, you’ll succeed. That’s why the HRN business has lasted for the past 19 years!
- I can’t take the risk. I know one thing for sure….if you don’t try, you’ll regret it. When you look back at your life one year from now, ask yourself “Do I want to be in the same position as I am today?” You can either let your fear of risk hold you back or use it as fuel to do whatever it takes to succeed.
- I’ll be embarrassed if I fail. Join the club. Failing in public can be embarrassing. (Personally, I didn’t want to tell anyone about my business when I first started because I was so afraid of failure!) But, what I’ve learned is that you’ll be surprised at the number of people who will respect you for taking a shot.
And more importantly, you’ll respect yourself.
Financing tends to be one of the biggest challenges for people who want to launch a home based business. Even if you expect your start-up and monthly operating expenses to be minimal, finding the money you need may still be a challenge.
If a traditional business loan isn’t an option, you might want to consider some simpler financing options:
Take a look at your assets. If you own things, you can sell them. Jewelry, rugs, antiques, time-shares or second properties are just a few examples.
What about your car? If you drive a nice, late-model car, you can sell it and lease a less expensive one without a down payment. This might net you $15,000 to $20,000 and leave you with a small monthly lease payment.
Borrow against your home. If you have established equity in your home, it should be very easy borrow against it. Keep in mind though that once the loan kicks in, you’ll have monthly payments. Or, you may want to consider refinancing your mortgage with a new one.
Friends and family. Friends and family may be willing to support your business start-up. If you do chose this option for financing, be sure to put your agreement in writing so that it’s official and there isn’t any miscommunication about the terms of your relationship.
Borrow Against Your Investments. If you plan to continue working full-time while you start your business, consider borrowing against your 401(k) retirement plan.
Consider a low or no interest credit card. Credit cards are a quick and easy method of funding your start-up and can help build business credit at the same time. You can start with deferred payments or a minimum monthly payment until your business starts to generate income.
Regardless of the financing option you chose, be responsible and keep your financial security at the forefront of your mind. If you’re determined to succeed at your new home business venture, investing in yourself is the way to go!