This article describes how to convert your business from the normal "brick-and-mortar" office into one in which you and all of all of your employees work from home.
Stories of small business failures are common in today's economic climate. Quite often, it comes down to "permanent," "unchangeable" overhead costs: To wit: "We need a certain number of offices and cubicles (at $x per square foot), we need a secretary to answer the phone (and look good for visitors), we need a phone system and multiple incoming landlines to handle sales and support calls.
" ...and... "Our payroll is $y, we can't cut that.
" ... and the, sad but inevitable math as stated by the owner... "So our company's monthly 'nut' is $z and my savings account can no longer sustain any more months of covering the shortfall. So, sorry one and all, but we'll be ceasing operations as of...
This is a scary situation. But here's a scarier one: The owner tells you "There are assets here: intellectual property, a customer base, a modest Internet presence, a bit of recurring income, and potential for new income. How would you like to take that and run with it? On your own?
A big opportunity... to rebuild the business and get rich! Or a chance to fail miserably after mortgaging your home and running your credit cards to the limit. What the heck, let's give it a go!
Get a mailing address
Form the company -- incorporate
Open a checking account
Get a phone system
Get an accountant to handle taxes
Miscellany: Business cards, little details
What about the offices and cubicles and the receptionist? We're going to cut all of that overhead right out of the equation. Do some math... How many employees do you really
need in order to handle the support and sales calls? If you slash the overhead to the bone, can the expected income cover the (much smaller) 'nut'? If the numbers are right -- and if your business can actually run without a physical office (and many types of information/technology businesses can) -- then you might be able to make a Virtual Office
work for you and your company.
This article cannot be a comprehensive guide to starting or running a small business. I'm going to hit on a few of the key issues. This is more to reassure you that it can be done
than to tell you exactly how to do it.
1. Get a Mailing Address
You can't entirely hide the fact that you are running a virtual office, but you don't need to advertise it. You will probably decide that you don't want a residential address (your house or apartment) as your main corporate office. For one thing, a customer might use Google maps and see a house. It's simple and cheap to get a mailing address. Find one that is near your house, because you will be driving down there nearly every day. I've had good luck with
The UPS Store
Your address will be a "suite number" (so it looks more like you are in a large building) in a business district. Get a small box (if a big package comes in, they'll accept it anyway). They will sign for incoming mail when necessary, and even e-mail you when you get an important package. You'll get to know the people there... John is kind of gruff, but Christie is sweet and has a cute smile.
This sounds frightening if you have never done it, but it turns out to be not so bad. There are do-it-yourself books in the library that include all of the forms and so forth, but my recommendation is to just use...
Browse their site; there is a great section on getting educated about starting your business. You might choose to go the S-corp route or LLC. Do a little research to see what's best in your situation. The key is that LegalZoom maps out everything and includes step-by-step guidance. The "scary" things like getting an EIN (Federal Tax ID) just become another item in a checklist that they handle for you. I suggest the "middle" package that costs less than $250 and includes the cool faux-leather binder and the corporate seal embossing tool. When that arrives, you really feel like you have a company.
You need to decide on corporate officers. Somebody gets to be called "President" ... no big deal. Whenever you need to sign your name and print your title, just print "Officer."
3. Open a Business Checking Account
There are a number of banks that provide "free business checking" and some versions of free
are less costly than others. Shop around. You can get a business debit card that looks and works just like a credit card. You can use it to pay most bills. It is especially useful for recurring expenses.
Again, find a bank that is local to your house. You don't want to drive a lot to make a deposit. I actually suggest that you request a "bank by mail kit" -- a set of pre-addressed envelopes and deposit slips -- so you can avoid driving, but I know that many people will want to do all of their banking in person.
When you open the account, the bank will access your (and the other corporate officers') credit information. We tried to use the maildrop address, but they needed a "real" address of one of the officers for one of the line items in one of the forms. Don't feel like you are hiding anything: That is your official corporate address; you are doing nothing that is not totally legitimate.
BTW: You will need your EIN (Federal Tax ID) here (part of the incorporation step). It's possible to get an EIN over the phone while you are at the bank, but if you do that, you will end up with two of them. So avoid that.
4. Get a Phone System
This is actually the key to running a virtual office. It's the one thing that really frightened me because in the old office, we spent $600 per month and had dedicated PBX hardware, ... and the whole rigmarole. And it's the one thing that turned out to be simplicity itself. I understand that there are a number of reliable companies that provide this service, but I can personally vouch 100% for:
For an unbelievably small fee ($50 per month), you get a toll-free phone number (actually a set
of toll-free numbers) and a system that handles everything -- entirely offsite. To your customers, your system is just like that of the big guys. They will hear an automated attendant and they can use a voice menu or send a fax. The call is routed to you or any employee. If you are not home, it goes to voice mail and you then get an e-mail with an attached WAV file of the message (even voice-to-text if you want it). The system is flexible... For instance, the "attendant" will try your land-line, your cell phone, and then your partner's cell before it sends the caller to voice mail.
You can use your toll-free minutes for outgoing long-distance calls. You can set up conference calls. I continue to be amazed at how much you get for that one low fee.
5. Accounting Software
I just noticed that Legal Zoom's recent packages include a free copy of Peachtree accounting software. That might be a good choice... I don't know. But I can recommend:
Intuit's QuickBooks Pro
You might never need to use the fancy features. Record income and outgo by simply filling in the checkbook ledger. It's easy to record recurring (debit-card) expenses manually from the checking account statement or even automatically (if your bank provides that service at its website). Remember, your overhead is minimal, so you won't be writing that many checks. You'll need the end-of-year summary data for the accountant. It's a bit scary if you've never done it, but I'm here to tell you: It's not
6. Get an Accountant/Bookkeeper
For many, this would be the first (and absolutely-required) step. But I've done my personal taxes ever since I was 14 years old, so I thought I could handle a set of corporate taxes easily enough.
After some study, I decided that the anxiety was not worth it. I found a local guy who specializes in small businesses and handles QuickBooks data format. It's worth his fees just to be able to call him up when I have a question. I once overpaid some taxes (I'd gotten an alarming bill from the state) and he saw the entry in the books and when I had explained, he sent out the right paperwork and I ended up getting the entire $1,200 back from the state ("Always, always
run these by me, Dan!").
The point is, you need a real person -- one who specializes in these things -- to take a load off of your mind so that you can spend time doing your business.
7. Very Little Else
You will want to print up business cards with your new address and phone number. Printing used to be a big expense, but Internet printing shops make this sort of thing dirt cheap these days. You probably don't need pre-printed letterhead -- just put some sort of logo in the top-right corner of your invoices and correspondence. Print the envelopes (include a logo if you want). Why bother with laser-printed checks? Just write them by hand (unless you think you need your vendors to continue to think you are a large company -- in my experience, you earn vendor respect by paying on time, not by the look and feel of your checks.)
Employees and payroll: The logic is simple: You no longer commute, so you have two extra hours every day... you need fewer employees. What's more, they are now working from home, and they
save on commuting expenses, too...you can pay them less. You can find part-time workers cheaply.
Payroll taxes seemed like it would be difficult, but my accountant worked out a way to do it quarterly. We converted some employees to independent contractors (consult your accountant about this, though, it can be tricky to keep within the letter of the law).
Expect to lose out on some of the sales or consulting deals that you might have made if you were in a fixed location. Accept that, and move one. Make more effort to get the other deals. There are
places that will provide you with a rented conference room, and I suppose that you could keep up the facade of being a larger business if you try that. But I don't recommend it. Another trick is to meet at a restaurant at the airport or a midway point between your two "locations". If it gets down to "I need to visit your office
," then you are best off to have never spoken an outright lie.
When the time comes, just state that you have a virtual office. Own it.
Be proud of it.
I guess I have taken this for granted, but I realize it needs to be mentioned -- at the very least. As a virtual office, you need to share documents. A team of programmers will need to use a source-control system. You certainly should do centralized off-site (off all
sites) backups in case of fire
or natural disaster. Somebody needs to maintain the web sites and be able to set up a VPN or at least an FTP login when needed. I have frankly assumed that if you are reading this, these sorts of issues are not your key problems; that is, I assume that one or more of your group can handle these things.
However, a lot of this may not be all that critical. A surprising amount of inter- and intra-company business can be handled entirely via e-mail. Members of your virtual team need core competencies in that and in computers in general. There is no place on the team for somebody who can't set up and maintain his own computer, keep his anti-virus software up-to-date, and handle day-to-day computer emergencies. That is, be his own "help desk."
What about human contact?
What is missing
in a virtual office? Employee camaraderie; the synergy of rubbing shoulders with peers. We all need human contact. Are you capable of spending the whole day alone at your desk, never seeing a co-worker's face? If not, forget about this route. But you might try taking up yoga or joining a book-discussion club, or maybe even a church group or other volunteer organization. We so often make the workplace the center of our lives, but life offers many options. Just look around you.
Set up company conference calls on a schedule. You need to keep in contact. You won't "bump into" anyone at the water cooler, so make notes and make phone calls. CC or BCC e-mails that affect co-workers, and have them do the same, so that everybody is always "in the loop."
Have some scheduled company events -- Christmas party, whatever -- at a centrally-located restaurant or rotating through the company officers' homes. Invite the families. Make it fun (do business on the phone, not
at the party).
Not all businesses can "go virtual" but some can. It is a logical extension of what many larger companies already do: Farm out some operations; send overhead-costly operations offsite. Just take it one step further -- make everything
offsite! Instead of "death by 1000 papercuts" take one big slash with a Katana
. If the business can possibly
survive that way, then I assure you that you can make
it survive. And even thrive.
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