How to Start a Business From Home
Working from home affords you the ability to control how you spend your time and make your money. It’s understandable why 50% of all small businesses in the United States are home-based. Are you ready to join the club?
Depending on your expertise and budget, it is possible to start any business from home. Whether you want to start a business from home to increase your earned income, or you want to replace your job entirely, the key to success is to choose something that inspires and interests you.
You don’t necessarily need a ton of capital to get started, but you do need plenty of energy, ingenuity, and self-discipline. Are you ready to turn your experience and interest into a home business?
Turn your interests into income
Chances are you already have a concept about what kind of business you want to start from home, but it’s important to make sure your idea has legs. Set yourself up for success by adequately evaluating its merit. You should be able to answer yes to one of the following questions:
- Does it solve a problem?
- Does it fulfill a need?
- Does it fill a hole in the market?
Identify your target market
Develop a clear understanding of who will purchase your product or service. Form a profile of your ideal customer based on your observations, expertise, and feedback you’ve received from colleagues or potential clients.
The more accurately you can identify your customer base, the more potential your business can predict their needs.
Research the competition
During your research, you will likely find many businesses offering the same services or products you do, but zero in on the specific things you can provide that they don’t. Look for what’s missing or what you can do better. The following are tips for researching your competition:
- Analyze competitor’s strengths and weaknesses: Document the services and products your competitors offer, their branding technique, and client reviews.
- Identify your advantage: Document your distinct business strength that best appeals to your target clients, and it will help you create branding that will set you apart from everyone else.
Set up your home business
After validating your business idea, it is time to assess your financial need, set up bookkeeping, and determine which legal structure works best for you.
Create a budget and a financial projection
The first thing is to set up a budget for your home business. Your business choice will determine what start-up expenses you need to budget for, but some universal expenses for starting a business at home include:
- All-in-one printer, fax, copier, scanner
- Desk and chair
- Internet service
A financial projection is a forecast of future revenues and expenses. It’s smart to consider costs over three years so you can prepare financially. Financial projections and a business plan are required if you plan to raise capital from an investor or take out a business loan.
Set up an accounting method
Save yourself the hassle by setting up an accounting program before taking your first payment or paying your first bill. Implementing an accounting system doesn’t have to be a complicated process.
Companies like Quickbooks offer low-cost desktop and online programs that make it easy to keep track of all your business transactions and help you file and pay taxes.
Choose a legal structure and apply for business licenses
Depending on the type of business you choose, it might be a good idea to register as a legal business entity as it protects personal assets from lawsuits, but it is not required. Listed below are the most popular business entities:
- Sole Proprietorship doesn’t separate personal and business assets and liabilities but does allow you to work under a trade name.
- Partnership is the simplest structure for two or more business owners. It is an appropriate choice for businesses with multiple owners and professional groups.
- Limited Liability Company (LLC) lets you take advantage of the benefits of both the corporation and partnership business structures and protects personal assets.
- C-Corp or S-Corp offer the best protection from personal liability, but the cost to form one is higher than other structures. It’s the right choice for businesses that need to raise capital or take on investors.
Depending on the city and state you live in and your type of in-home business, you may be required to file for a business license.
Open a business bank account
Once you decide on a business structure and complete appropriate registrations and licensing, it is time to open a business account. Having a business account separates your personal and business expenses and will help with accounting.
Raise money to start your home business
According to the Small Business Association, most entrepreneurs use their savings to start a business; however, other options are available if your savings account leaves you short.
Take out a business loan or open a line of credit
There are several loan options available to help fund your home business. Typically, the better your credit, the better loan terms you will receive.
- SBA loans are backed by the U.S. Small Business Administration. A few different SBA loans exist, but they all offer low-interest rates, low down payments, and long terms.
- Lines of credit give you quick access to funds, making them great for cash flow issues. As a revolving line of credit, you get continual access to funds and only pay interest on the money used.
- Term loans give you an up-front lump sum, and then you repay the loan plus interest over time. Term loans often have lower interest rates, and you can get large sums of money; however, they may be difficult to obtain for a new business with no previous credit history.
Use personal assets
Self-funding your business using cash on hand has a significant advantage as it keeps you from taking on debt. For those who are lacking funds, here are some other options:
- Home equity loan: Use the equity in your home to finance your small business. You can deduct any interest and fees as a business expense.
- Retirement fund: A Rollover for Business Startup (ROBS) allows you to invest retirement funds from a 401(k) or IRA into your business without paying early withdrawal penalties or taxes.
- Peer-to-peer lending uses online platforms to connect investors and borrowers. Interest rates depend on your credit rating, but you don’t need a lengthy credit history to get funding.
- Personal credit cards are great to pay for expenses but can be a costly option if you need cash, as most credit card companies charge large fees and APRs for cash advances.
- Family and friends: People you know might be willing to help support your entrepreneurial desires.
Use crowdfunding to raise capital
Crowdfunding is the practice of funding a project or venture online by raising small amounts of money from a large number of people. You make a pitch, offer an incentive, set a goal, then post it on a crowdfunding site, like Kickstarter or Indiegogo. However, don’t rely solely on your platform of choice to bring in donors, as people with the most robust social media outreach have the greatest success in crowdfunding arenas.
Market your home business
After getting your business plan and financing in order, it is time to focus on developing a customer base. Marketing is a vital aspect of home business success. If people don’t know about your service, they can’t obtain it. We will touch on the two main areas to focus on to get you started.
Create a website
Every home business needs a website. Listed below are some components your site should include:
- Display branding elements of your business
- Include contact information
- Include client testimonials
- High-quality video and images
Whether you want conventional or tailor-made design, several options exist depending on your budget. Build-it-yourself options like Weebly and Squarespace make building your site simple, offering templates, and guidelines. If DIY isn’t your thing, there are plenty of companies out there to choose from that will take care of everything from design to web-hosting.
Set up social media accounts
Social media platforms are great for creating attention around your home business. Home businesses can take advantage of social media content marketing, influencer networking, and paid advertisements on social media. Top social media accounts to set up are:
Take the next step to start a business from home
Join an online community of self-starters to help you survive the trials and share in the triumphs of starting your own business from home. Build a network of cohorts or ask the experts. Doing so will give you the support and resources you will need moving forward.