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Home Business and Publishing are Practically Synonyms

It’s hard to think of a better home based business than publishing. Whether you are publishing paper books, magazines and newsletters, or have made the transition to electronic publishing, there’s practically no difference in the office setup. You’ll need a computer (I use a laptop) and a printer, though you can do without a printer for long stretches of time. Then you’ll need an Internet connection and, and, that’s it. You don’t even need a phone if you don’t like talking to people, e-mail is much more efficient. If you publish paper books and you print offset rather than on-demand, you’ll need storage space, but that’s low cost warehouse space, not a prime office address.

So why would anybody with a successful home publishing business rent office space? There’s really no reason at all, which is why I’m embarrassed to admit that I did rent some shared office space this past summer just to see if it would make me more productive. I carefully selected an office with air conditioning (which I don’t have at home) that was a half hour walk from the house so I wouldn’t be tempted to run back and forth for no reason. I actually did make it to the office twice before giving notice, both times to talk about Internet publishing with my erstwhile office mates. And that was all the use I got out of my three month rental.

I recently spent some time crunching sole proprietor tax statistics to see what failing small business have in common. The results aren’t specific to the publishing business, but they agree 100% with my experience. The main reason home businesses fail is because they don’t sell enough. In the case of new self publishers, many never sell anything. They just get a bunch of books printed and stare at them in hopes that they will sell themselves. Not surprisingly, the failing businesses hold twice as much inventory as the successes. But the most glaring difference between businesses that make it and businesses that lose money is the amount of debt they carry. All of the self publishers I know who are making a good living from books launched their businesses on a shoe string, working out of the home.

The advantages of a home business are manifold, starting with no commute and no overhead expenses. The money you invest in your business will really be invested in growing the business, not in having a place to go every day to drink too much coffee. The IRS rules for business use of your home allow you to dedicate part of your home to your business, and then deduct the expenses for that part of your home (which you're paying for anyway) from your business income. It is one of the few areas in the tax code where renters usually make out better than home owners, since the renters get to deduct a percentage of their rent while the owners can only deduct mortgage interest and utilities, plus depreciate the land the house stands on.

But the real advantage of keeping your publishing business at home is it will keep you from thinking you’re some big shot and spending all the business income playing at business. I’ve gotten to the point where I enjoy telling people who are calling from corporate offices that I work at home. I don’t answer the phone “Foner Books” or “Morris Rosenthal”- I answer the phone “Hello?” I’m not trying to kid anybody and you shouldn’t either.

You never want to lose sight of the fact the business is about selling your books, eBooks, etc. It’s not about trying to convince people that you are a legitimate publisher by looking and sounding the part. I know plenty of people who wear expensive suits and have self published books, but none of them sell enough books to call it a legitimate business. So stay at home, work naked if you want to, and don’t spend money trying to keep up with the NY trades. They all face publishing extinction anyway.

8 comments:

Anonymous said...

Ok, I love this blog post but it has me more and more concerned about a situation I'm currently facing. Here goes.

Right now I'm basically a living breathing example of your blog post. Low expenses, enjoying the "good life" of at-home publishing.

Here's the problem. I own a 1100 square foot home, and have a wife, 2 year old, and hopefully soon another kid on the way. The problem is that space is just .... flat out not enough space!!!

The great thing is, I don't owe a ton on my house, my payments here are low, we like our house to some degree. I think I could even have my house payed off in about 8-12 years.

I live in a place where the house I just described, even after the real estate melt down, still costs a pretty penny - about $325,000.

So as my business and family grow, my options are: Stay here and deal with the space crunch, rent office space (which I just can't see myself doing - I'm too entrenched in my current work-at-home lifestyle), or.........

BUY OUR DREAM HOME which we just found for sale for $400,000 down the street. This home has a lot more room and is a lot nicer. It won't stretch us that far - basically it will soak up about $25,000 in savings and increase my monthly mortgage payment from $1200 to $1700.

But it will also almost double my total debt (we don't have car debt or credit card debt, just our current mortgage).

On the one hand, I feel like I should jump on this house as the opportunity of a life time (taking into account the fact that interest rates are at an ALL TIME low right now AND property values in my area have cut in half making this great house affordable) but on the other hand I feel like saying, "why take a risk and get more debt?"

I could always convert my two-car garage in my current home to my office which would free up space, but we live in a place that gets 5 feet of snow in 24 hours sometimes ( not that's not a typo ) and living without a garage for cars is a quality of life sacrifice I'm not willing to make.

Right now I'm very torn on which way to go. Renting a bigger house isn't really an option, my business is getting big enough now that I'm not prepared to move everything and set up shop somewhere else at the whim of an eviction from a land lord.

Oh, another thing - my wife's mom, being a loving mother in law, offered to give us some gift money as a down payment on the newer home, which is money I wouldn't otherwise get. This is already factored into the above numbers I noted earlier.

Which way to go? Conservative, low debt but pulling our hair out tripping over baby toys in the hallway...or just take the plunge on the big house and take advantage of a 4.75% 30 year fixed rate that's never going to be available again?

Due to severe building codes in my area I'm not able to build a workshop or extra space on my current property. On the new property even though it already has ample space, it ALSO has a building permit available for adding more space at some point which is also an attraction.

I could go on and on with the pro's and con's, but this is the basic picture.

Help...........

Signed,
-- A regular blog reader and commentor who doesn't want to identify himself due to the personal financial details disclosed above. --

Morris Rosenthal said...

Anonymous,

I would probably buy the bigger house. You know the neighborhood, you plan on growing your family, and I know you are making good money from publishing that you have to do invest. Ironically, real estate today is probably a good investment (even though I think prices will drop a little more next year) because there is literally nothing else to do with dollars that makes sense, other than to send them overseas.

So I would buy the house, start rebuilding your cash cushion, and make sure you take advantage of the tax incentives the IRS grants for business use of the home.

Good luck with #2.

Morris

SleepyJohn said...

Anonymous,

You say there are pros and cons to buying the bigger house. I can see the pros, but where are the cons? It seems on the face of it you will actually be risking more in your overall life by missing this wonderful opportunity. The very best of luck to you and your family. I say: go for it; be positive.

Barbara Frank said...

Hey, guys, do you really not see the cons? Housing depends on jobs, and things are not exactly looking up in that area. We boomers are down-sizing, dumping the two-story McMansions for something cheaper and easier to care for. Banks are sitting on foreclosed homes, releasing them into the market slowly and for many months to come. All of that will pull house prices downward for some time.

If I were Anon, I'd either put finished office space in half the garage and the most-used car in the other, or sell the house and rent something nicer if the numbers in his area work out.

I say this as half of a debt-free couple who sold our paid-off house a few years ago and now rent a lovely home for $500 more a month than we used to pay just in property taxes. Since the house sale, our former home has dropped about 25% in value. Glad we dodged that bullet.

Also, Morris, I completely agree about keeping the business simple, and debt-free whenever possible. Good luck with the new baby, Anon....we had four and highly recommend it :)

Morris Rosenthal said...

Barbara,

Normally I'm the last guy to tell anybody to spend anything. Did you see my intial post about self sufficiency for sole proprietors?

But in this case, I've known anon for years, know how much money his publishing business is making, and the direction he's heading. To me, it's less a question of if he buys a bigger house than when, and since I think prices are closer to fair now than they've been in years.

Renting is great for the business use of home, and I rent myself, but I am doing my best to find a house I love so I can buy it and get my savings out of dollar bills. What I need is four babies of my own, but I'm getting old and I guess I never found the right woman who was willing to take one for the team at tax time:-)

Morris

Barbara Frank said...

I did read that post, Morris, and agreed with it. You know Anon's income situation and must think he'll be fine. I guess my attitude reflects nearly 30 years of living on one income with several kids....being allergic to debt comes with the territory.

As for offspring of your own, you men have a much longer time frame than we women do. Here's hoping you find the right woman soon!

Anonymous said...

Thanks everyone for your input in the situation. My income now is adequate and as Morris says my publishing company is doing well. The question, I guess, is will it continue to do well? What are the shelf lives of my books? I too have the debt allergy and thus far have been over-the-top conservative on all my financial moves. So I'm bristling at the idea of taking on a lot more debt.

And what if prices fall a whole lot more? I live in a resort community and our prices are particularly volatile and erratic in any economy, so anything is possible.

Another option for us would be to get a bigger house that isn't our dream home. The house we are looking at right now is only 2200 square feet but it has an awesome location, views, etc. If I went with a 2200 sf house in less of a desirable location, I could possibly "have my cake and eat it too" by getting space at a lower cost. But my wife and I agree that we will only move if we "love" the house. Ah, the analysis continues. Well, I'll keep you guys posted... thanks again for the input and any ongoing ideas are welcome :-)

Anon

Anonymous said...

Also, Morris has a good point about putting money into a house. I don't see any good investments right now and cash will soon be worthless with the way the government is handling it. Having cash in the bank seems like a waste of resources. Buying the bigger house does make some sense to me because it is leveraging that useless cash into something we will use, enjoy, etc. Both my wife and I are home a lot, most of the time, so the house will be meaningful. Ok, off to bed before I waste the whole night again staying up and not sleeping while ping ponging back and forth from one conclusion to the other. Last night at 2am I was sure I wanted the house and at 4am I was sure I didn't. Ugh.

Anon