Your Guide to starting a Home Based Business
By Eric T.
In America, home based businesses generate over $102 billion annually.
Whether it’s a side hustle or a full-time job, a home-based business is an attractive option to make extra income, change your career, achieve a better work-life balance, or simply turn your hobby into a business.
Rising living expenses, inflation, less job security, and most recently, Covid-19, has pushed a greater number of people to leave the comfort of their jobs and venture into building a home based business.
According to the Small Business Administration, over 69 percent of American entrepreneurs started their businesses from home. However, starting a home based business needs personal commitment and planning. Plan out a working strategy, put down all details, even the miniature ones, and make it all happen.
So, wondering how to get started with a home-based business? Here is our home-based business starter guide.
1 – Decide on a Home Based Business Idea
Many of us have various home business ideas, some more feasible than others. How then do you decide on a the best home business venture that’s also profitable?
Your talents, skills & experience
Think about your hobbies and talents. What is it that you enjoy doing and can perform better than other people? This could be anything from making jewelry, cooking, stitching, gardening, decorating, car detailing, writing, graphic design, among others.
Additionally, you can develop your business based on your education and professional skills.
Some of the best business ideas come from what you know, your strengths and what you can tolerate doing for a long time.
Just like a traditional business, you will need start-up capital. However, with it’s low start up costs, a home based business may be a more affordable option.
Whether you get capital from your savings or business loans, consider your financial options carefully. Think about the cost of production, equipment, initial starting cost, and inventory, and any other expenses.
For example, for freelance writing, the start-up cost is quite low, but on the other hand, starting your own clothing line can be more costly since you need equipment, inventory, shipping, packing, and marketing.
Consider other businesses within your locality that offer the same products or services. Figure out the target market, size, demand, and value proposition before embarking on the business.
If the market is saturated, you need to differentiate your services from your competitors, check and analyze your competitor pricing. In some cases, if you can offer the same product at a slightly cheaper price backed by excellent customer service, you can attract a huge customer base.
Understand the Market Need
Consider the needs of your potential clients by listening to what they say. Social media is a great way to figure out your potential customers’ pain points and tweak your products and services accordingly.
Test Your Idea
After considering the above, it’s time to test if your idea is viable and a worthwhile investment.
For example, it’s advisable to offer free services to analyze the market for a service-based business. Conversely, if planning on selling products, test the water by advertising them on select platforms so that you can gather customer reactions before starting the full swing.
2 – Plan Your Business
After deciding on a profitable venture, it’s time to plan it by writing a business plan.
A business plan is quite complicated and time-consuming, but it’s essential for your operations’ progression and potential growth.
Business Plan Essentials
Your business plan needs to contain relevant information needed to run your home venture. It should contain:
- Your business overview
- Sales and marketing plans
- Market analysis
- Financial projections and plans
- Executive summary
- Description of your services or products
Following the above points will make it easy to break down the different aspects of your business and give you bite-sized actionable points.
3 – Choose a Business Entity and Name
After crafting a winning business plan, it’s time to give your business an official name. Choose something easy and memorable, that captures the concept of your business.
After deciding on the name, ensure it is available for use by checking it through the business bureau website, Trademark Office, U.S. Patent, or just a simple Google search.
Remember that extending your business name search beyond your jurisdiction is vital, especially when venturing into online sales.
Additionally, choose your business entity type to help define the business venture and its uniqueness. You can choose either from;
- General partnership
- Limited liability corporation
4 – Register Your Home Based Business
After deciding on the form of your home based business, it’s time to register it and make it legal.
The registration process for each jurisdiction is unique; thus, it’s advisable to consult your local business bureau for complete guidelines.
It is not compulsory to register your home venture with the state, but it’s vital to have it registered with the federal government.
Additionally, apply for your employer identification number (EIN). You can easily apply with the IRS online. The EIN will be useful for opening your business bank account, hiring employees, and filing taxes.
5 – Apply For a Home Based Business License
After completing federal/state government registration, it’s time to acquire a business license. Home-based business license requirements may differ from traditional ones and may also vary based on your location.
Home occupation permit
This permit allows you to operate your venture from home. Essentially, it shows that your business is not adding any significant noise, traffic, or harmful environmental conditions.
Zoning and property use permits
Check out your local zoning ordinances as some residential areas restrict home-based businesses. Your city or local government can guide you on what regulations apply.
General business permits and licenses
Consider applying for general permits needed to ensure your business operates legally. These may include sales tax permits, trade, professional, and environmental licenses.
Overall, ensure your business operates legally, even if it’s online consulting.
6 – Separate Personal and Business Finances
At this point, your home-based venture is legal and official. Now it’s time to separate your finances to ensure accountability and management of business liabilities and debts.
Additionally, having separate entities ensures you protect your personal assets. It is also crucial while filing taxes, bookkeeping, and general organization.
How to separate personal and business finances
Open a business bank account
A business account enables you to manage your money easily. For a home-based business bank account, find one with mobile/online banking, free ACH payment, and mobile check deposits.
Obtain corresponding credit cards
Put all of your purchases on the same business credit card. There are many options out there for cards that give you the maximum benefits, including travel points and cash back. Depending on your business and needs, choose the card that gives you the most bang for your buck.
Choose accounting software
To manage your home-based venture perfectly, we recommend using accounting software. Using automated software makes your taxing and bookkeeping easier, reduces your workload and offers a streamlined method of operations.
7 – Setup Your Home Office
Finally, you can now move from starting your home business to actually running it. To set up a home office;
- Choose a designated space that has low traffic, enough light and air.
- Invest in proper technology, furniture, and tools,
- Decorate the office in a personalized manner that reflects your style and inspires you to create.
8 – Tell Everyone What You’re Up To!
Now that you’re up and running, be sure to be open about your business and what you’re working towards. Word of mouth advertising is free! Of course, depending on the type of business you have, you may have to be careful what you choose to divulge, but especially if you’re selling products or offering up services, let people know!
You never know who may need your product or service!
Technically you have completed the basic steps of starting a home business, but remember, it’s a learning process. Don’t forget to market and promote the business, learn and make small adjustments as the business grows. Understand that success and positive cashflows will not happen overnight. It takes time, consistency, persistence, and perseverance. The advantage though is that you are your own boss. Pursue your passion and have fun along the way!
About the author: Eric T. is a content specialist at Thor Capital Group, a direct lending firm that offers uncommonly flexible options for working capital to small and mid-sized businesses in need of financing to improve or grow their well earned place on the street. When not hunched over his computer thinking loudly, you can find him playing pop music with his band, reading horror novels, or traveling.