The average American house has just five rooms. So where does a home-based entrepreneur squeeze in a company's worth of invoice, receipts, office supplies and furniture?

In general, those who operate home-based enterprises – and slightly more than half of U.S. entrepreneurs do, according to the Small Business Administration – make extra space by converting basements, guest bedrooms or attics into offices and garages into warehouses.

Many say they stick with items that are critical or highly useful, rather than stylish or decorative. And in some cases, they invest in compact technology—laptops, printer-scanner hybrids and other devices that take up minimal space.

"You have to be thoughtful," says Mary Mihaly, author of "The 250 Questions Every Self-Employed Person Should Ask." "Keeping it clutter-free and really lean is key."

To be sure, setting up a productive home office demands more than just smart organizing. It also requires diverting potential distractions, from chatty neighbors and curious pets to noisy landscapers and giddy schoolchildren. Plus, it means training oneself to ignore temptations like an alluring daytime TV drama or a backyard with a basketball net.

Christine Perkett runs PerkettPR, a public relations firm, out of her home in Marshfield, Mass. She says a headset with a mute button is an essential tool for keeping disruptive noises at bay. "In the summertime, you open your window and the neighbor starts mowing their lawn and you're on an important call," she says. "The kids across the street have a pool. A bus or garbage truck drives by. I can hear everything."

Even her own two kids can be a distraction, adds Ms. Perkett, which is why she employs a nanny to take care of the kids while she's on the clock. She also insists that her 20 employees, who also work from their homes, make comparable arrangements. "You cannot take care of a child and work productivity at the same time," says Ms. Perkett.

This article was written by Sarah E. Needleman and published in The Wall Street Journal magazine.