Ask almost anyone and they probably know someone running a home-based business (HBB), whether as an alternative source of income after being retrenched or an entrepreneurial dream.
Such enterprises are certainly more visible now due to the increasing use of social media, especially during the Covid-19 pandemic.
Ms Megan Ong, director of Nanyang Polytechnic's Singapore Institute of Retail Studies (Sirs), said that there seems to have been a spike in the number of HBBs commencing operations during the circuit breaker period. Besides selling food products, there have also been more small businesses selling fashion and lifestyle products bought cheaply from overseas, she said.
She added that a good proxy to estimate the scale of HBBs is social media, which many rely on to promote their products or services. For example, the Instagram hashtag #homebasedsg alone has more than 17,000 posts.
There is no official tally of HBBs, as they do not need a licence, but they must follow guidelines from the Housing Board (HDB) and Urban Redevelopment Authority (URA).
For HDB flats, these include not using the flats as a business address, not employing anyone from outside the household, not displaying any physical advertising or engaging in paid advertising, and not causing a nuisance to neighbours. Private residence addresses can be used for business registration as long as the premises remain residential.
HBB activities can include baking, sewing, manicure services, freelance writing and private tuition for up to three students at one time.
If employees from outside the household are needed, firms can register with HDB or URA under home office schemes to save on renting an office space. Only certain types of businesses are permitted, such as consultancy, design and financial planning services.
More home offices were registered last year. HDB said it received 3,053 new registrations, up from 2,607 in 2019 and 2,640 in 2018. URA said it received more than 1,020 new registrations last year, up from over 680 in 2019 and 580 in 2018.
The benefits of HBBs include opening up more choices and convenience to consumers and creating more opportunities for the development of new ideas and exploration of new ways of running a business, said Ms Ong.
"Starting an HBB can benefit female entrepreneurs in particular, especially if they are juggling work and caregiving duties, as they have a test bed for their ideas and strategies without too many overheads," she added.
With marketplace platforms such as Facebook Marketplace, Shopee, Carousell, Lazada and Qoo10, it is easy for HBBs to distribute their products. They can also make use of social media and word of mouth to market their businesses for free.
Ms Sneha Menon, business adviser at the SME Centre @ Singapore Malay Chamber of Commerce and Industry, recommended maintaining a simple customer database and using a broadcast list to stay in touch with them. Making notes using free calendar software on special occasions when customers engaged your services and small gestures to remember them go a long way in developing and sustaining a long-term relationship, she said.
Before you invest your time and money in starting an HBB, consider the goal.
If it is going to become the main source of income, then you will have to start worrying about demand fluctuations and other things that bigger companies worry about, said National University of Singapore Business School assistant professor of strategy and policy Ng Weiyi. "The limitation of the home caps growth," he added. "If you're baking cookies, you can only accommodate so many cookies in one oven, you have only so many hours a day, and you have only one pair of hands."
It can be hard for someone trying to break into the market to estimate demand for their goods or service, which also makes it hard to estimate how much money to invest in the business or how much help is needed, said Prof Ng.
Another challenge might be sourcing reliable suppliers. Mr Anthony Chai and Ms Jade Ng of interior design and styling firm Houseofchais, which started as just a personal Instagram record of their home renovation, said that they met with terrible suppliers in the early days of the business.
They were stuck with them for an entire three-month project and Mr Chai had to personally help clean up, install items, and drive a lorry to deliver items, to salvage the client's experience. The firm now makes sure to be highly selective of suppliers.
When the business expanded and they hired staff, they faced a new set of challenges such as setting company culture and training staff. But no problem has been insurmountable so far, said Mr Chai and Ms Ng. "We approached each problem with a can-do attitude, asked around for advice, and read up to find the best solution for the problem."
Free advisory services are also available at the 11 SME Centres set up by Enterprise Singapore and various trade associations and chambers. Sirs also offers courses such as "digital and leadership skills to excel in the future of retail and business" and a digital mentorship programme.
Tips from experts
Ms Sneha Menon
Business adviser at the SME Centre @ Singapore Malay Chamber of Commerce and Industry:
• Be aware of the regulatory framework and ensure that the business activity does not disturb your neighbours. Other regulatory frameworks could include fire safety and food hygiene.
• Discuss the operational factors associated with the business with members of the same household, since the home is a communal space. This could create an environment that is understating and supportive.
• Save and invest. Keep personal and business finances separate. Save some revenue and invest this in growing the business in both resources and skills.
Ms Megan Ong
Director of Nanyang Polytechnic's Singapore Institute of Retail Studies:
• Draw up an honest and well-considered business plan. Identify all your costs (product cost, packaging cost, logistic cost, commissions payable, and so on). New business owners may not take into consideration the full cost of operations, such as underestimating shipping cost, taxes or even foreign exchange rates. As a result, the selling price might be pegged wrongly, leading to lower profit margins.
• Customer service is key. Pay special attention to your customer engagement, be it on marketplace chats or on your social media interaction. Prompt, sincere and honest service goes a long way in building a solid foundation for your business.
• Be open to trying new ideas, whether it is a new sales platform or a new method to engage on social media (such as live streaming).
Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.
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