Moving business from commercial location to home, what should I look out for?
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  1. #1
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    Default Moving business from commercial location to home, what should I look out for?

    Wheelieking, I'm looking at you.

    Backstory, I run a small fabrication shop, currently in a leased commercial location. Been here since I opened in late '12. Pretty much a 1 man band, save for some part time (cash) help once in awhile, and probably plan to continue as a 1 man show. Every time I start thinking about employees, something happens that makes me quite glad to be solo. Current space has 1800 sq. feet of shop, and 600 sq. feet of office. Certainly don't need that level of office space, might could make do with a little less warehouse.

    Wife and I have been wanting to relocate closer to saltwater for some time now, and had somewhat planned to start going down that road in 2 years or so. Tentative plan was to take the equity from selling our house up here, and use that as the down payment on a small commercial building, and then buy a smaller house in the new area. I've also toyed with the idea of having a shop on a home property, but that's down the road, so I haven't ever really looked heavily into it.

    Unfortunately, it looks like I'm losing the lease on the shop I'm in, and there is absolutely nothing suitable listed for lease in our area, so our two year plan may have been pushed into a 2 month plan.

    Given that it's pretty likely that I'm not wanting to grow this thing into something requiring employees, I'm wondering if I wouldn't be prudent to more heavily investigate the home shop plan.

    A couple relevant details:

    -If I went down that road, we'd be talking a county property for sure, outside of city limits.

    -3 phase is not a concern. My current commercial property only has single phase, and I'm running everything via RPC as it is. I work with thin aluminum, so my stuff is smaller anyway - 66 ton press brake is my biggest machine.

    -Over the past few years, I've gradually been transitioning to mail order projects, with the desire to ultimately be at 100% mail order. I have very little work left that requires customers to visit my location. Hence, the location change won't appreciably affect my customer base, and I won't have much need for customers to be at my shop.

    -I'm looking at the idea of a metal building on the property, not sharing walls with the house.


    Some of the questions I have:

    -How are deliveries handled? UPS is obviously not a concern. Do metal suppliers have issues delivering to a home business? For outgoing motorfreight, do you eat the residential surcharge, or are customers okay with paying that? I'm split between sales that go to the end user (just standard UPS ground, no issue there), as well as providing components to a handful of OEMs (small to medium companies, not auto).

    -Is there an image issue? Do I risk missing out on a new OEMs due to a non commercial address? I imagine most of my end user stuff won't matter much. For my OEM sales, I'm pretty much making semi custom stuff - my product, my design, but they specify their dimensions, their options, and their powder coat variations - not truly off the shelf stuff.

    -What sort of risk do I face of a county property being annexed by a growing city? I've found a place that would be almost perfect (even has a pole barn with 3 phase on the property), but it's not far outside the city limits. Would I be grandfathered in, or SOL?

    -How is insurance handled in this situation? Will commercial insurers look at me?



    What questions should I be asking, that I'm not?

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    Fish On,
    I'm 8 miles of town in a rural county. Started a Machine Shop in basement in 1976. Blessed to be full time since 1983. I checked local zoning, no issue. Sole Proprietor was/is easy to start and run. Might be a great time now as most States are promoting small business. Especially as you are established and will bring revenue into their county and State. I run single phase with RPC no issues, also do not deal with general public much other than barter repairs, usually for home made venison sausage. I do have product liability insurance and joined to local Chamber of Commerce. Maybe want to talk to those folks first as they will know the quirks of that area and are always looking for new members.
    To get fish on you gotta throw out the line.
    spaeth

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    I don't have any issues with my metal supplier delivering to my home shop, but that's going to depend on what suppliers you have local and their policies. I do light fabrication/prototyping as a side business, so I'm not dealing with large quantities of anything. I do try to make it worth their while to deliver. It doesn't hurt that my main supplier is only about 5 miles from the house.

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    I never had any problems with running out of a residential location. I also had great[read tolerant] neighbors

    It was a long time ago. but in one of the most regulated states in the union

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    Just a counter-perspective; we are in the process of getting OUT of a residential location. I've been in the back of a detached shop on a farm for nearly 5 years. Dealing with power, delivery, and image have all been a nightmare. Especially delivery has been rough. Some of the truck drivers are cool, but some of them hate backing down the long gravel drive. I can't use certain metal suppliers, because they won't deliver any more.

    Another consideration is that if you dump a ton of money into a residential shop, it won't have the type of ROI that a commercial building will. You are probably never going to sell space on your residential lot to a "legitimate" business.

    My final thought is that counties (at least around here) are going to start cracking-down. If I cruise around the block out here, probably 1/3 of the "farms" are clearly running a business out of their shop buildings. The county knows what's up, and I think it's just a matter of time before they start shutting it down. I hate operating with the fear that a nosy neighbor or bored inspector could open up an inquiry that forces us to close the doors.

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    In California we had to get a zoning change to RM (rural manufacturing), it cost about 3000 bucks and took 6 months. Here in Idaho we had to get a special use permit, it cost 500 bucks plus 10 cents a copy for any papers they had to copy, I think it came to 6 bucks. As mentioned some truckers are a problem and others are not. Here in Idaho the property can be altered slightly, trim some trees and move some landscape rocks and then medium size trucks will be able to get in, for large trucks I plan to find someone in town to accept my deliveries and I will pick them up from them, in the past I have been able to do this for a 30 pack of beer or swap for some machining now and again. For 30+ years we have been walking to work and living in the country with our machine shop.

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    Quote Originally Posted by boosted View Post

    My final thought is that counties (at least around here) are going to start cracking-down. If I cruise around the block out here, probably 1/3 of the "farms" are clearly running a business out of their shop buildings. The county knows what's up, and I think it's just a matter of time before they start shutting it down. I hate operating with the fear that a nosy neighbor or bored inspector could open up an inquiry that forces us to close the doors.
    Are we talking about operations flying under the radar, or ones that were approved at the time of inception? That's one of my main concerns.

    I definitely see the point about not getting an ROI on the building, but at the same time, the cost of entry is quite a bit less, so it frees up quite a bit of money that could be put to other uses in search of ROI. Comparatively, I've been leasing for the last 8 years, with nothing to show for it.

    I'm not anticipating as much of a problem with physical truck access - we're looking at Florida panhandle, or coastal Alabama, so there's not a whole lot of geography to contend with, beyond the occasional wayward palm tree. And, I'm working with the idea of 5+ acres on a county road, not a residential area.

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    Since you have to move anyway, pull the trigger and go where you want to live. Problems that arise will all have solutions. Try your best to make Mama happy.

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    Truck access would be my concern (for deliveries). Is the new place at the end of along windy forest road, or easy access from a well traveled main road. The other thing you seem to have going for you is no general public sales, so you wont have people in and out all the time increasing traffic in neighborhood and bothering the neighbors.

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    It really depends on your neck of the woods. My business is totally legit and I am incorporated, sole proprietors are only if you don't make money because of the labor taxes. I did build my shop on the sly but that was 16 years ago and all is well, although I did sweat it the first time the assessor dropped by but all they did was add the square footage to our property taxes so I am legit now. I only have one customer that drops by to say hi while out on a motorcycle ride and meet the metal supplier at the Wallmart parking lot, or pick it up from a customer since they supply their own materials. I own everything personally and do a turn-key lease which is a good way to get money out of the business. You really need to ask around where you want to move to find out how working from home is viewed.

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    Man, this is one of those situations that will be different for almost everybody.
    With different variables and priorities for almost everybody.
    Speaking for myself:
    Getting enough power was a PITA and very expensive.
    Still is in some ways. I have a $400 box of capacitors for the phase-perfect that just showed up today. You said you run a rotary, so you wont have this BS issue.
    I stayed with the same insurance company I was using when I was in the commercial space. But, that wasn't easy either.
    They did not want to continue to cover me at first when I told them I was moving the business home. There was a whole lot of this from them.
    There were many lengthy phone calls. And, several emails with lots and lots of pictures.
    It wasn't until I could finally get them to survey everything in person (twice, two different people),
    That I could convince them that it was still in an industrial style building. With zoning that allowed me to operate, and the proper permits with Gilbert.
    If it had been a wooden structure? They would have dropped me. I was told that point blank. No sprinkler system almost did nix the deal
    So, make sure ins. is not going to be an issue. Don't assume your homeowners ins. is enough.
    I seem to remember the building had to be detached, and a certain distance from any other structure as well. But, that is foggy.
    Running from home has caused me to not get work. There have been potential customers that tucked tail and ran when they found out I was home based.
    This hurt pretty bad in 2019 when I was very slow and struggling real bad.
    At the same time, 85% of my work gets shipped. I have never met my best customer. He is 1500 miles away. Even though we are pretty good friends now, LOL.
    So, during busy times, like now, it doesn't affect me at all. Except:
    Employees! I have no bathroom in the shop. And, I am not about to let employees use the house. Then simply, do you want your employees at your house?
    You seem to plan to stay solo. So, that shouldn't be an issue. But, you never know what is coming! (trust me on that! LOL)
    And then the big one: you ARE always at work! People warned me how bad this would be. I knew it was an issue to consider.
    But, I have to admit, it is far worse than I thought it would be. It is far too easy to work your evenings away.
    And, the guilt of not working "because, I am here anyways, I could be doing this and working" will slowly and quietly wear on you.
    But, after admitting that aspect is worse than I though it would be? I have zero desire to go back! Even knowing exactly what it is like now?
    I would still make the exact same decision! I absolutely love working from home. I am also getting better at shutting work off. And, doing not work related stuff.
    Instead of trying to work on my car and keep machines running? I just run them balls out for a little bit. Then shut them OFF, and work on my car.
    I get more done on both fronts, and enjoy the latter a whole lot more! You just have to figure out how to make it work for you.
    One of the biggest things for me is not throwing money away on a lease or rent! Fuck-that-noise!!!!!!!!!!!!!!!

    I will try and paint a picture of how/why moving the shop home was the smartest financial decision i have ever made:
    We bought this place dirt-cheap, because basically that is what it was. A dirt lot. In a pretty darn nice neighborhood. And, the house was neglected.
    We literally paid for the dirt if you look at the going rate for 1.25acre in Gilbert, AZ. The house and building were basically free. Seriously.
    Over the past three years, we have dumped a bunch of cash in to improving it. Landscaping, remodeling, huge car-port, lots of concrete, a pool.
    Hell, we have spent over $10k on trees! LOL.
    Anyways, we have spent very close to what a 3 year lease would have cost me to stay in a 2500ft space for the next three years. In cash. We havent financed anything.
    Which is about 1/3 of the purchase price for our place. We just had it appraised because we refinanced. We have more than doubled the value of this place!
    That is a 4 fold return on what a lease would have cost me, AND! I own it! So, keep the financial side of this decision in the front of your mind.
    Paying to lease/rent space is a huge waste of money, unless the nature of your business requires you to do it. It doesn't sound like yours does.

    So yea man, you just have to take a good hard look at your personal priorities and variables. And, make a decision. I knew from day one what i wanted.

    The shitty part for me? I am at a stage in the game where I need more room, more machines, more employees, and a bathroom! LOL

    Edit: I guess if you figure what it cost me to get power, out of what a lease for three years would have cost me? (I didn't while painting that picture, LOL)
    My return wasn't quite as rosy. But, it was still real damn peachy! At least two fold. And, again, I own it. ALL of it.

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    I rented 1200 sq ft in a residential neighborhood to start. That was rough. Neighbors would call the county if I had a vehicle that wasn't mine out front (ran a transmission business for 2 years there, had hundreds of vehicles in and out). I never got any repercussions, but always felt it was right around the corner.

    Got into product manufacturing and moved into 2700 sq ft shop and small house in rural area. The driveway sucked. The worst you could imagine. No chance of getting a semi near the place. The neighbors were cool, but always treated me like a renter. I didn't trust the neighbors to completely divulge what I was doing there. Had major problems with landlords as soon as they figured out I was hunting to buy a place.

    Bought a fixer big old house and a few acres in a nice rural area a mile outside a town big enough to have everything we could need. There were two old barns on the property about 80 feet apart. I built a big steel building with a crane between the two barns and turned it into 7k sq ft of shop. Put in a driveway that I can turn a semi and 53' trailer around in. I've got the best neighbors I could have ever asked for. Everyone around is either in manufacturing or construction. Everyone helps everyone.

    I used to have problems with Coast aluminum not wanting to deliver. Now they show up here and don't question a thing with a big building and easy access.

    I would be very picky when house shopping. Look for a large driveway, heavy power available. Biggest thing is neighbors. Look for forklifts and dumptrucks and excavators and the size of the outbuildings. Everyone that does shit has atleast one of those things and they don't have grass growing around them because they get used.

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    Once you figure out where you want to be, go talk to the county and feel them out. There is surly a clerk that will tell you directly what you want to know or who to talk to that does. If there is an economic development person they will know some or all of that as well. Our county has a full time person that does it and she is pretty good.

    My guess is that if you buy in the county and are legal in every way that you have a fab business on the property that if ever annexed you would be grandfathered in, but again, try to find that out beforehand.

    Once you get a place, figure out what you have to do to make access for trucks. The easier it is for them, the easier it is on you. You want to spend an afternoon meeting them somewhere and hand loading your stuff? That is like waiting on the cable guy to show up.

    You might even put in a separate drive or entrance to the shop if possible.

    My shop is not at home, but I own it. Mine is in a little town where the building was cheap and there aren't any requirements for permits etc. I can anything I want in or to the building. That has saved me a ton of money.

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    1. This hugely depends on the state, the county, the official and the practical law. There may be local tax issues that will cause them to basically throw a fit if you aren't in a commercial building, it's about revenue.

    2. To me the biggest issue is that a day will come when I don't need/want a shop any more, but I will likely still like my house on the lovely lake. Being able to sell the shop and keep the same house is a big deal. Now if your house is effectively on a "farm", and your shop can be in what amounts to an out building - meaning when the business is gone you'll be fine with it, that kind of deals with that.

    Also, covid, and the follow-on which is likely to last for some time, may mean that "small one person business that pays taxes and causes no trouble and provides needed stuff" will be looked on very favorably, at least outside of cities.

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    Quote Originally Posted by Garwood View Post
    Bought a fixer big old house and a few acres in a nice rural area a mile outside a town big enough to have everything we could need.
    Just curious, are you near the Portland metro area? We are about 30 miles out of town, and almost everything out here is zoned for "exclusive farm use". It can be extremely difficult to even get permitted for a house if one is not pre-existing. I've had a lot of folks tell me their business is "grandfathered-in", or otherwise somehow legal, but I'd bet my bottom dollar that a machine shop out here would get shut down if it fell under too much scrutiny.

    Our building is supposedly zoned for some type of mixed use, but again - I seriously doubt it is 100% legal. Now that we are getting bigger, I am scrambling to eliminate that potential liability.

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    Definitely a lot of good points to ponder.

    I'm reasonably sure power isn't going to be much of an issue. My biggest motor load is 7.5hp at the moment, don't see getting anything in excess of 10hp for the stuff that I do, unless I go nuts and end up with a laser or something. I'm in fabrication, so there's not much ability to run multiple machines at once. I could run my current shop on a 125 amp single phase service with absolutely no hiccups. I make smallish components out of thin metal. We don't (and won't) have kids, so our household power consumption is relatively low, so I don't see much problem of a house and a shop sharing a service if they had to.

    I'm definitely still concerned about the image issue. I was 19 and green when I started this shop up, and I think the commercial warehouse definitely helped me out in that regard. I'm pretty sure my reputation has passed the point of needing that level of street cred, however in the past 2 years I started picking up a fair bit of work for smaller OEMs, so that's definitely something I need to ponder more. I think the fact that I make my own products puts me a little better off than a strict job shop, but I'm not sure a $35 million a year manufacturer wants to buy components from some guy in his backyard, despite having no problem buying from the same idiot in a rented metal building.

    If I had to pick between just chasing the commercial work, or just chasing the end consumer web sales, I'd probably pick the latter, so there's that.

    No sprinkler system almost did nix the deal
    Did you have sprinklers in your leased shop? They're not concerned that I don't have them now, so I can't see why they'd require them, but you never know.

    Paying to lease/rent space is a huge waste of money, unless the nature of your business requires you to do it. It doesn't sound like yours does.
    That's the big thing for me. I've known for awhile that my next step was something I owned. By being in the right place at the right time, I've been paying quite a bit less than market rent on my current shop for some time, so that's made it an easier (actually quite easy) pill to swallow. That gravy train is coming to an end.

    I'm not averse to having a commercial shop that I own, but I'm not sure I can swing that at the moment. I'm not super familiar with commercial loans, but I'm vaguely aware of high down payment requirements, as well as a lot more up front transactional costs than a piece of residential real estate.

    Also, I never really set out to build a business, moreso to create my own job, if that makes sense. I've apparently got a couple decent ideas, so it's morphed into something halfway decent, but I still don't really have the desire to build a bigger business with employees, so I feel the home shop does fit that mindset.


    At this point, there are a ton of moving parts that have to work together. My current building is up for sale, with the neighboring tenant holding right of first refusal, so I've been told to expect a 60 day notice sometime between now and a year from now. We have a first choice city, as well as a couple backup options, so step 1 is for my wife to find a job somewhere to at least establish the locale, and then start searching for a place for the shop while selling our house up here. Worst comes to worst, I could fall back on leasing a shop in the new area, but I'm holding that as the backup.

    The caveat is, there is one place that has been on and off the market a couple times for the past few months near enough the first choice city that already has a shop on the property (although I think it's a pole barn, not a steel building), and is around the same value as our current house. It's basically a situation of buy the house, and the shop comes free, and it's already standing, so that would almost be worth the risk to take without her holding employment, if the legality details worked out. I'm thinking about reaching out to them to see if they're still ready to sell.

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    To solve the "image" issue set up a simple website or even an online video that only shows the shop font the outside and moves inside to show a clean well tooled professional shop, maybe a few processes in action.... Do not show ANYTHING that even hints at non commercial. Get a P.O. box for all business mail.
    Send the video to anyone interested in your work.

    Another thing to seriously think about is to get a large enough property that the shop can be out of sight of the house. This does a little for the work image but way more for the home image. Someday you will hear something like "why do you want to live in a junkyard", "why is that pile of metal in my way"....
    And it keeps a better separation of home and work. If you are just a 30 second walk away she will come and get you for menial things more often than a 10 minute walk.

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    Quote Originally Posted by Rob F. View Post
    If you are just a 30 second walk away she will come and get you for menial things more often than a 10 minute walk.
    No she wont. She'll just call or text: "can you come here for a second?" Because your only a 30 second walk away.

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    Quote Originally Posted by boosted View Post
    Just curious, are you near the Portland metro area? We are about 30 miles out of town, and almost everything out here is zoned for "exclusive farm use". It can be extremely difficult to even get permitted for a house if one is not pre-existing. I've had a lot of folks tell me their business is "grandfathered-in", or otherwise somehow legal, but I'd bet my bottom dollar that a machine shop out here would get shut down if it fell under too much scrutiny.

    Our building is supposedly zoned for some type of mixed use, but again - I seriously doubt it is 100% legal. Now that we are getting bigger, I am scrambling to eliminate that potential liability.
    My property is zoned agricultural. I even sell duck eggs. About 35 miles from Portland here.

    I don't plan nor do I want to get much bigger. I may hire a couple employees down the road. I keep going back and forth and find that farming out and automating what I don't want to do is a great alternative to hiring.

    The strategy that I employed for "Image" was to make my shop look like an ag building from the road, but the front of the building is actually around the back. The building from the rear looks heavy industrial. I have temporarily hung a sign and taken a picture to send in as part of setting up accounts with wholesale vendors that require brick and mortar shops. The building is 26' tall, but the barn side of it near the road only has 8' eve height.

    It works for me. I have very nearly went commercial building twice and at this point I'm glad I didn't. I used to think being able to sell the business and just toss the keys to the next guy would be cool, but I've grown to feel different about it. I have products and brands and I feel I can grow those and continue developing more to the point where they are independent valuable entities. I like working from home. My kids have never been in daycare or even had a sitter that wasn't immediate family.

    My tentative plan if anything really takes off is to lease a commercial space nearby just for sales and warehousing/shipping. I will stay in my shop at home and manage the offsite employees remotely.

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    Quote Originally Posted by wheelieking71 View Post
    No she wont. She'll just call or text: "can you come here for a second?" Because your only a 30 second walk away.
    Fortunately, she works a full time job outside of the house. We don't and won't have kids, so I don't envision that changing.

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