A Dedicated Space is Best.

I really believe that you won't get far unless you set aside a space and use it for work only. Why? Well, if you use your work space for things other than work, then you'll get distracted by anything you leave there. Other people in the family might become frustrated by not being able to use the space, or you might find that you simply don't have anywhere to put all the important pieces of paper you acquire, meaning that they get lost.

The Art of the Home Office.

A home office is really what you want -- this really needs to be a dedicated room of a reasonable size. You shouldn't have too much trouble if you convert a small bedroom, as most bedrooms are actually surprisingly large once you take away the bed.

Your essentials for a home office are a desk, chair, computer, filing cabinet and phone/fax. If you don't have spare ones of these lying around then you should buy them used, or from some kind of discount store -- don't spend a cent more than you need to on your office furniture and equipment, at least to begin with. Still, though, do try to find things that don't look too bad, and that match.

Do make sure that you have everything in the room that you'll need for your business, and that your equipment is good enough that you'll be able to use it for long periods of time without it becoming painful. If you plan to do a lot of phoning, for example, buy a headset so that you can do it hands-free. It's also worth spending just a little extra on that chair, if you're going to be sitting on it a lot.

You should also make sure that the room is well-lit and decorated in a style you like: one that says 'serious', but not 'dull, terrible work'. Keep it at a comfortable temperature, with good ventilation. Many people like to make their home office visibly different to the rest of their house, by having a differently-coloured carpet or wooden floor, or painting the walls an entirely different colour. Whatever you do, though, I have no doubt that it'll be better than 99% of the corporate offices out there. The most important thing is that you don't spend too much, but that you make sure to solve any problems you have with your space as soon as they come up.

A Whole Other Building.

One thing that some people like to do when they set up home offices is to make it completely separate from their house: a business annex. This could be expensive -- for goodness' sake don't build a whole other building if you don't have something like a shed or garage to convert -- but it is also one of the most effective ways to work from home. It's not so much a 'home office' as an office that you've built right next to your home -- and it gives you a much clearer sense of when you're working and when you're not.

This option is especially worth considering if you do a manual trade, especially if you already have some kind of workshop space. I knew a carpenter who saved himself all sorts of headaches when he moved his home office away from his bedroom and into his existing workshop in his garage.

A Question of Tax.

When you're organising your home office, don't forget about tax. The area of your house that you do business in should be tax-deductible, and so should any equipment you buy or other work you have done. Don't use it as an excuse to get carried away, but do remember that you're not spending quite as much as you think. As long as you don't go overboard, your home office will be one of the most important investments you will make -- as anyone who's ever tried to work from home without one can tell you.