Setting up shop in the spare room

In the second of a five-part series, Sharon Maxwell Magnus provides some tips on working from home

If you are thinking of becoming self-employed, working from home can give you a great advantage - largely because you won't need to pay rent on expensive premises.

Not all businesses can be run out of the spare bedroom. If you plan to open a shop or restaurant, or need vast amounts of stock, you may run into logistical problems, let alone the problem of planning permission.

Those working as consultants, however, or in client-based businesses, can maximise their chances of success. There are some important considerations to take into account.

If you own your home, check there are no restrictive covenants that may prevent you starting a business. This is only likely to be a problem if you change the character of your home substantially. Beavering away in the study is unlikely to cause a problem, turning downstairs into a theme-restaurant will.

The same is true of planning permission. This is needed if you change the character of your home, if there is a considerable rise in traffic, or if you become a nuisance to the neighbours. Unfortunately, what disturbs the neighbours or your council is highly subjective.Talking through what you plan to do could ease potential problems.

There is no point starting any business without doing market research. This doesn't mean expensive consultants. Market research can include many simple techniques, such as giving a questionnaire to people who might be interested in your service, asking whether they'd use it, how often, and how much they'd be prepared to pay.

Pricing correctly is important. There's no point making beautifully crafted products if your hourly rate is reduced to 50p. Reading up on trade journals, checking out local competition and researching the economic make-up of your local area can all be useful.

Get advice. Business-Link, Training and Enterprise Councils (TECs), small business advisers at banks, the Citizens' Advice Bureau and even solicitors (via the Lawyers for Business scheme) are all sources of free advice, although quality varies. They can be found in the phone book or through the local Job Centre. The Department of Trade and Industry also produces helpful booklets.

Once you've started up, you will need to devote time to finding, and retaining, customers. Many of those in client-based businesses, interviewed for my book, swore that the best marketing was through word-of-mouth recommendations. However, to get these, you need your first clients. Networking, holding open days when prospective clients can view work, leafleting, giving talks on your product or even offering samples are all low cost and can be as effective as expensive advertising.

Kiren Darashah, 28, is a children- and maternity-wear clothing designer who runs her own business, Ben Go Tig, from her home in Cambridgeshire. She has won two business awards.

Kiren started her business in 1993. "But I knew I had to do extensive market research before I put my money down."

She decided to work from home to keep costs down. "I wanted to avoid making costly mistakes. Working from home was part of that but so was doing the market research."

She started her research by distributing a questionnaire in local offices and at mother and toddler groups. She learnt that the essential idea was sound but that her prices were too high. "By adapting the material and designs, I was able to lower the price." Kiren still sends out a questionnaire each year to her customers and sells not only wholesale but also through party-plan which she believes helps her keep in touch with customers' opinions.

She has recently started researching the export market. "It's amazing how much information is available just on paper. It's a question of making the time to read it."

Useful contacts:

Your local Business-Link/TEC and Citizens' Advice Bureau can be found in the phone book. For planning difficulties, contact the Royal Town Planning Institute, 26 Portland Place, London, W1N 4BE (0171-636 9107).

Lawyers for Business scheme can be contacted on 0171-405 9075.

DTI Small Firms Brochures from Admail, 528, London, SW1 W8YT (0171-510 0169).

The Federation of Small Business is at: 32 Orchard Road, Lytham St Annes, Lancashire FY8 1NY (01253 720911).

The writer is author of 'Making Serious Money From Home', published on 22 March (Pan, pounds 6.99).