Many people try to gain independence and earn more by starting their own businesses. According to US Small Business Administration statistics, 50% of small businesses are home-based, including 60.1% of businesses without paid employees. It's no wonder people want to be free from bosses and manage their time as they wish. As a self-employed, you're free to manage your company from your own perspective and earn what you're really worth. All you need is to take courage and plan wisely to become a great entrepreneur. Keep reading for tips on how to start a home-based business and realize your full potential.
Roots of a home-based business needs
Before jumping into home-based business affairs, it's best to lay the groundwork for a successful start. Home-based businesses have particular demands. Let's see what they are.
Dedicated space and time
To work effectively from home, you will need personal space. In search of such a space, the following questions may arise before you:
- Where your workplace will be
- Whether you'll have enough time to work without distractions
- Whether your family will be okay with your working at home
- How flexible you're with juggling business demands
Before starting your company, make arrangements. Organize your workspace, preferably where nobody can disturb you. This may be the least popular part of your house where your family usually doesn't spend much time. As long as there is a stable internet connection and a spot for your workstation, it'll fit the purpose of your home-based office. Agree with your family on your schedule and set aside time for household chores.
Skills, experience, and knowledge
To run your business, you need several things — proficiency in the sphere you're about to start your business, outstanding management skills, marketing knowledge, etc. If you're not familiar with terms such as competitive advantage, return on investment, and fixed and variable costs, we recommend you study up. You can begin reading related books, watching videos, and crashing at least one online course. For starters, acquire self-management skills with Stephen Covey's book The 7 Habits of Highly Effective People.
A good idea is to talk to other home-based proprietors to learn all the nuances. Think of volunteer work to gain experience. Once you collect enough knowledge, move on to building your business strategy.
When you've got an idea of making money from home, that's fine. You're enthusiastic and eager to take action. But acting without a plan isn't smart. Jumping into startup mode may mislead you and ruin your business. Before establishing a company, define:
- Company's mission and vision
- Company's objectives
- Your value proposition
- Market needs
- Management structure
- Financial plan
These planning basics will tie you to your goals and prevent you from spreading yourself too thin to change or improve something. You can use our checklist to introduce your business plan.
4 steps for starting a home-based business
At this point, you've laid the foundation to set your company. You've set aside time and a workspace, created a business concept and integrated it into a business plan. Let's take a look at what steps you should take next to initiate your home company.
#1. Meet legal requirements
Many business people are so tempted to launch a business that they forget to equip themselves with permits and licenses. First and foremost, you should know your rights as a business owner. The steps for becoming legally compliant are:
Learn about licenses and permits
Depending on your region and the sector you want to operate in, you may need to receive licenses and certificates. Zoning regulations may forbid you from advertising in front of your house to keep neighborhoods' residential character. If you want to have employees, get an Employer Identification Number (EIN). Financial and legal advisors need to obtain a federal or state professional certification. If you're setting up a US-based home business, look for legal requirements on the US Small Business Administration (SBA) website.
Select the structure of your business
A business structure determines rules, taxes, and legal documents for your business. For a home-based company setting, there are two convenient options:
|Sole proprietorship||Sole proprietors run their business affairs under their legal names. They have all their accounts and taxes tied to their social security number. No state registration.|
|Limited liability company (LLC)||Your company is a flow-through organization, so you're not taxed twice on company income. Requires registration by state.|
Choose your legal name
We recommend creating your own company name regardless of what law framework you choose. When you're ready to scale, it can come in handy. Here's some advice on creating your name:
- Check if it's available with the US Patent and Trademark Office and on Google.
- Look for available domain names.
- To work across states, file a trademark.
#2. Register your organization
This step is an easy one. As you know, sole proprietors are not necessarily required to register their companies. But for businessmen who want to establish their branding, filing a Doing Business As (DBA) is essential.
LLC framework requires filing your business. The registration process varies in different states. Turn to your local business bureau or Secretary of State for instructions. You may be asked to provide specific details as:
- Your name
- Business's name and structure
- Home office address
- Type of business
Once you've solved all the legal issues, you can define your business operations.
#3. Define your operations
Well-established business operations allow you to spend less time running your affairs and more time delivering services and supporting your clients. You'll need operation manuals for finance, marketing, sales, service provision, customer management, etc. To prepare these manuals, decide the workflow of your business. Underline your challenges and choose technology to handle them. Decide what tools you'll use for each task. Write down all the nuances of your business processes to easily track growth zones and continuously master your management skills.
Prepare a list of questions to describe your daily tasks in detail.
How will I send invoices?
How will I receive payments?
How will I manage refunds?
|Tools for managing payments and refunds|
Setting up operational processes reduces the risk of unexpected problems. Problems equal losses. If you want to retain your customers and save your money, you should make thorough preparations before delivering your services.
#4. Choose the proper technology stack
Business management may be time-consuming. You have to meet deadlines, manage clients' issues, and deliver services simultaneously. This is especially hard when you are self-employed. That's why we suggest using technology to be more productive.
Let's consider John, a sole proprietor who has been consulting clients from home for three months.
Now, meet Samantha. Samantha's also a home-based consultant. She started two months ago and has already fulfilled her short-term goals. How did she manage to achieve such results?
Home-based business tips for success
Repetitive tasks can be automated with the proper tools. The right software can help you achieve your objectives faster and more efficiently.
As a home-based proprietor, you have a thrilling and sometimes difficult journey ahead of you. Let's go through the steps of launching a business from home once again:
- Ensure legal compliance
- Register your business
- Align your workflow
- Choose tools to operate
Creating a profitable home-based business requires great effort, but we believe you'll achieve good results. The main thing is to be persistent and make thoughtful decisions. Here are some additional tips on how to protect your finances.
Tip 1. Separate your finances
Since you will manage your operations by yourself, try to keep your personal and business funds separate. When you split your finances, you'll ease your bookkeeping and tax payment. How to split your funds:
- Open another bank account
- Get a separate credit card
- Find appropriate finance management tools
Using this approach, you can easily monitor all your company transactions.
Tip 2. Learn about tax deductions
Another useful tip for your home-based business concerns taxes. Consider tax deduction to cut the company's expenses. Once in a year, you can get reimbursement for your business spendings. For example, a corporate vehicle and home office are tax-deductible. Learn more about what expenditures you should report as deductions on the IRS Self-Employed Individuals Tax Center.
Tip 3. Get business insurance
Unforeseen circumstances can arise for a home business owner. Risks include receiving claims from third parties, business property damage, and accidents. Insurance will reduce your losses. There are few insurance options for home proprietors:
- A homeowner's policy endorsement extends coverage on a specific property or parts of a property that are not covered by the regular homeowner's insurance.
- An in-home business policy gives broader coverage for businesses than a homeowner's policy endorsement and can vary depending on the insurer.
- A business owner's policy protects business property and profits.
Keep these tips in mind, and you'll achieve great results in your home-based business!
Self-employment brings opportunities for your income to expand. While it is a huge responsibility to run a company from home, with the right approach, you'll find your way to success. Remember that you can achieve good results quicker and more productively with advanced technology.
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According to SBA statistics, 50% of small businesses are home-based, including 60.1% of businesses without paid employees.
Yes. If you’re a single-owner LLC, you’ll be treated as a sole proprietor but still have the possibility to add more owners to grow your company.
Steps to start a home-based business:
- Meet legal requirements
- Register your home-based business
- Set up operational procedures
- Choose the proper technology to manage your business
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