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Hidden Costs of Working From Home


Working from home, particularly in a recession where small businesses are trying the minimise costs has some very real attractions. The most prominent cost saving is that of rent and rates which are inherent in the usage of dedicated office premises.

Other benefits would include reduced travel time and perhaps a more relaxed atmosphere in a home environment affording the entrepreneur greater flexibility in terms of family life and other commitments.

Aside from the pounds and pence calculation, there are hidden costs in working from home which vary in the degree of influence on the eventual effectiveness of operations within the small business.

Small businesses typically rent office space in a serviced facility or in a self-sufficient complex of containing numerous working units. This creates a community effect whereby likeminded people can interact with one another and perhaps even source services or sell products within that environment.

A cost of working from home is that this kind of daily interaction is lost and the entrepreneur’s working day is essentially devoid of the same human contact generally experienced in an office complex working situation.

The specific type of business activities and the manner in which they are executed will determine exactly how much time the entrepreneur physically spends at home versus on the road meeting clients, suppliers and others.

Many entrepreneurs will verify that working from home physically for over six months does have an impact of the motivation and determination towards their business. The days where they do leave the house and their starvation of real human interaction dampens their enthusiasm towards their business operations. This eventually results in them seeking out not only a physical office outside the home, but also one where human contact is possible if not probable on a frequent basis.

Capital gains tax implications can be a cost of working from home in cases where the increased expenses incurred by the business are allocated against the income generated.

That proportion of expenses deemed to be incurred by the business would then be used to calculate any gain then made by the operations when the property is eventually disposed of. For example, if the business incurred say 10% of the household running costs, then that percentage gain achieved upon the sale of the property would be deemed to belong to the business and thus taxable.

Another hidden cost of working from home is the lack of expansion of staff and perhaps thereby operations which is possible when the entrepreneur works from their residence. Potential employees will be far more attracted to the possibility of working from a centralised location to one which is suburb based and in the employers home.

For many new entrepreneurs, working from home represents the only option of starting a new business under the financial constraints which they must adhere to. In embarking on this course of action is it certainly worth bearing in mind that there are hidden costs involved in working from home and these will need to be managed so that the continual forward motion of the entrepreneur’s aspirations are not adversely affected.

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