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How to Start a Home-Based Business

Starting a new business can be a major undertaking, so for entrepreneurs wanting to start off small, a home-based business is a great idea. You’ll learn a great deal about running a business successfully, while avoiding many of the costs associated with larger businesses, like office rental, utilities or hiring employees.

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    What Type of Home-Based Business Should You Start?

    If you want to start a successful home-based business, it’s important to know what your options are. Here are some of the more popular home business ideas:

    1

    Freelancing From Home

    If you have a creative streak, becoming a freelancer could be a great idea. Whether you’re a writer, artist, designer, programmer or have another in-demand skill, this can be a lucrative field. You will need to start small and build up a portfolio and reputation to command higher rates.

    2

    Selling Products From Home

    Online retail and ecommerce is becoming increasingly popular. You can set up a store on a platform like Shopify, or sell through a third-party marketplace like Amazon or Ebay. Note that if you’re selling products, you will need to store inventory and take your products to the post office for shipping.

    3

    Dropshipping Products

    If you want to sell products but don’t have a place to store them, dropshipping could be a good idea. This relies on you selling the product through a website and then getting a supplier to ship the goods directly to your customer. Please note that this is a very competitive space.

    4

    Creating and Selling Products

    If you have artistic talent, you can even sell the products that you make. You can do this through a marketplace like Etsy, or create your own store to sell art, prints and other creations. Websites like CafePress and Zazzle will even put your designs onto items and take care of everything else for you.

    5

    Providing Services From Home

    Home-based businesses aren’t just about selling products and skills — you can also provide other services too. For example, you might offer tutoring or childcare, or make private appointments with clients if you have skills as an instructor, coach, consultant, complementary therapist or counselor.

    6

    Providing Professional Services From Home

    If you have professional qualifications, they can be a great basis for a home-based business as well. Perhaps you're a certified business coach, bookkeeper or accountant — these are all services that are in-demand from trustworthy and experienced professionals.

    Validating Your Home-Based Business Idea


    The above home business ideas are all great starting points, but you’ll need to build on them to make the business your own. You have unique skills and insight you can use to create a home-based business that will really stand out.


    Start by determining whether you have the right skillset. For example, if you’re selling products from home, have you identified the right niche and marketplace? If you’re providing home-based services, is there a demand for those services in your area?


    Don’t assume that just because it’s home-based, it’s easy. Every home-based business will have dozens or hundreds of competitors, and you need to stand out, deliver superior products and services and excel in your chosen area.


    Getting started in a home-based business is easy, but becoming a success is harder. Before committing too much time, energy and money into your new home-based business, it’s important to test the marketplace and validate your ideas.

    Identify your home-based business’s unique selling points (USPs)

    Whether you’re competing on features, price, quality, speed or something else, your USPs set you apart from competitors and encourage customers to come to you.

    Look at who your competitors are in the space

    Having competitors is a good thing as it shows there’s a market — but if there are too many, you’re likely to struggle without a really good unique selling point.

    Understand your market

    Clearly identify exactly who your customers are likely to be, where they hang out and how you’re going to reach them. This will be essential to your marketing, communications, sales and customer support.

    Talk to clients

    Speak with potential customers to understand what they want from your products and services, and validate this by asking if they would commit to spending real money on them.

    Get involved with business communities and discussion groups

    One of the great things about home-based business is that there are plenty of great communities and discussion groups. Get involved in them and learn the ins and outs of your chosen market before committing.

    The thing to learn here is that it’s okay to say “no” to your first, second or third home-based business ideas. Very few entrepreneurs get it right first time. In fact, getting it wrong is often a badge of honor!


    Still, you don’t want to waste too much time, energy or money on the wrong initiatives, so ask and answer these questions honestly to find the right way forward.

    Your Home-Based Business Needs a Plan


    It's easy to overlook a business plan when starting your home-based business, but that’s a mistake. Every business needs a business plan to become successful and grow.


    You need to define how you’re going to run your home-based business, market yourself, get sales, make a profit and grow. This can only come about through creating a watertight business plan. It will help you get your thinking in order and show your commitment to your home-based business.


    Business plans do vary slightly, but they should all cover the following areas:

    01

    An executive summary with the most important points from your business plan

    02

    Your goals and what you hope to achieve with your home-based business

    03

    A description of your business, background information, and context

    04

    A market analysis and likely demand

    05

    An overview of how your business is structured

    06

    Your business model

    07

    How you will market and sell your offerings

    08

    Financial projections, revenue, and profitability

    09

    Appendices

    We’ve got the perfect guide to writing your business plan.

    Right

    Business

    Structure

    Setting up Business Operations in Your Home

    Once you've legally created your home-based business, you’ll need to get some other things in place.

    Location

    Of course, the whole point of a home-based business is that you run it from home. But it might not be quite that simple! You will probably want to put aside a room in your home as your office, where you can work undistracted. If you’re selling goods, you will need space to store inventory, and if you provide services you may want a room where you can see clients who come for appointments.

    Equipment

    The equipment you need when you start a business from home will depend on the type of business you run. While a freelancer, consultant or accountant might only need a laptop and smartphone, an Etsy seller may need specialized equipment for crafting. Whatever you need, make sure you have the space and expertise to store and use your equipment safely.

    Employees

    It’s very unlikely that you will need any employees to begin with. You can always hire other freelancers for specific tasks who can work remotely. You can try platforms like Upwork, People Per Hour or Fiverr Pro.

    Software and Process

    The right software and processes will make running your home-based business much easier. See our list of the best apps and software at the end of this guide.

    Marketing

    Marketing will be a huge part of your online business. You will probably need a great website, but you'll also need to get branding, newsletters, digital ads, social media accounts and other channels in place.

    Finances and Taxes

    You will need a separate business bank account for your home-based business. You might also want to consider a business credit card. Additionally, you will need to keep careful bookkeeping records and file business and personal taxes. Here at Bizee we can even help you file your taxes.

    The Complete "Start Your Business" Checklist

    A Clear and Comprehensive Guide to Starting Your Business the Right Way

    Rules, Regulations and Taxes for Your Home-Based Business


    Depending on the type of home-based business you run, you will need licenses, permits and regulations. You will need to explore local, state and federal licenses and permits, and we can also help out with researching your business licensing needs


    Taxes

    Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. Depending on where and how you’re selling products and services, you may also be liable for sales and use tax.


    As a rule of thumb, we recommend holding back around a third of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

    Maintaining Your Home-Based Business

    There are certain forms and legalities you need to follow to keep your home-based business in good standing.

    File an Annual Report

    Depending on the state you’re located in, you will probably have to file a report every year. This report tells the state about any major changes to your business, and we can file your Annual Report on your behalf.

    Pay estimated taxes

    You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).

    Renew Business Permits and Licenses

    Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.

    Prepare your taxes

    You will need to work with your accountant to prepare all the taxes you need to pay.

    File your taxes

    You will need to file your taxes once a year.

    Pay payroll and sales taxes

    If applicable, you will need to make payroll and sales tax payments on a regular basis.

    Groups and Forums for Your Home-Based Business


    Here are some useful places where you can connect with other home-based entrepreneurs.

    Useful Online Tools for Running a Business from Home

    Here are some really great online tools for managing your home-based business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.

    Project Management

    Productivity

    Marketing Automation

    Customer Relationship Management (CRM)

    Customer Support

    Human Resources

    Website Development

    Please note: This post contains affiliate links and we may receive a commission if you make a purchase using these links.

    Conclusion

    The world of home-based businesses is extremely diverse. With the right intent and purpose, you can start a home-based business and turn it into something that could earn you more than $100,000 a year. Use this guide to start your search, form your business and the sky's the limit!