If you’re planning on starting a business at home, you’re in good company. About half of U.S. small businesses are home-based, meaning there are 15 million others just like you who have chosen this path and succeeded. From online boutiques to remote accounting firms, home-based owners are doing what they love — and making a living off of it.
How do you become one of these success stories? You must first understand what it takes to start a company in your home. Then, you can decide whether or not this path is for you.
Here are some essential things all home-based business owners should have to make operations run smoothly.
1. Products and a Market
One of the first things you’ll need before starting a home business is a product. This part may seem obvious. However, your goods and services can’t simply be adequate. They must outperform the competition, meet a specific consumer need and be of the highest quality. Plus, there must be something that sets your items apart from others that are similar. You can’t settle for mediocre here.
Your merchandise must also fit in a certain niche market. For instance, instead of selling soaps, essential oils and cupcakes, try choosing just one. Otherwise, you may have trouble identifying your target market and advertising to consumers.
2. Adequate Space
Next, you must make sure you have adequate space within your home to run a business. Certain aspects of your company — like bookkeeping, email correspondence, graphic design and marketing — may be easy to accomplish in your house. However, if you plan to start a retail company or teach yoga classes, renting additional space might be a better option.
Consider how much foot traffic you may get from kids, pets, clients and customers, too. You may find that you’re uncomfortable having clients in your home, especially if they must walk through the entire house to get to your office.
Regardless of what kind of company you plan to start, you’re going to need a few office essentials. Usually, these items include a computer, proper lighting, a surge protector, a high-speed internet connection, telephone service, and a printer or scanner. If you don’t have the money to purchase these items, you may have to put your business plans on hold for a short while.
You might also need a separate phone or phone number to make business calls, as well as a data backup plan to protect your digital records. Additionally, you may look into downloading business management software to organize your records, client information and marketing strategies.
4. A Business Structure
Your business structure will impact nearly every aspect of your startup, from taxes to liabilities. Therefore, it’s wise to consult a tax professional or attorney to choose between a sole proprietorship, a limited liability company, a partnership or a corporate structure.
Remember, the business structure you choose at the inception of your company may not serve you later on down the road. Many sole proprietorships evolve into a partnership as owners meet other small-business owners. Revisit your structure every few years to ensure it is the right one for your ever-changing company.
5. Legal Documents
After settling on a business structure, you must gather and sign all necessary legal documents. For instance, you will have to apply for a license or permit if a federal agency regulates your specific business activities. Check with the issuing agency to best determine which permits you need and how much a license will cost and what it might cost to start an LLC.
Additionally, unless you’re a sole proprietor, you will have to get a federal employer identification number. You’ll use this EIN for tax filing and reporting your income. Some states may also require you to get a state tax ID number.
6. Insurance Coverage
Obtaining proper insurance coverage is also an essential part of starting a company at home. Consider any and all risks that come with being an entrepreneur and think about how you’ll manage them. Odds are you’ll need small-business insurance — especially if you don’t want to foot the bill for accidents that occur on your property.
Find health insurance that covers self-employed persons and purchase additional home coverage if you determine you need it. Many times, your homeowner’s insurance won’t cover business-related costs. Liability and auto insurance might also come in handy if clients will visit your home or if you use a car for business purposes.
7. Business Bank Account
The Internal Revenue Service prefers you to separate your business and personal finances. Besides, it’s easier to keep track of your company’s income and expenses if funds are separate. Therefore, it’s best to open a business bank account, even if you’re a sole proprietor.
Compare banks and find out which ones offer free business accounts. Inquire about limitations and associated fees. Then, gather your EIN, business license, ownership agreement and any other necessary documents and open your account.
8. A Virtual Assistant
Many home-based business owners work alone. However, as your company grows, you might find you could use a helping hand. Instead of moving into a commercial office space, consider hiring a virtual assistant.
A remote assistant can help you grow your business without committing to paying a team of full and part-time employees. They can also take over menial tasks like answering the phone, filing, marketing, replying to emails and the like. Ultimately, they’ll save you time and money, even though you’ll likely be paying them a small salary.
Make a List
If you’re still having trouble figuring out what you need to do before launching your business, make a list. It’s always easier to accomplish tasks when you write everything down and check off boxes along the way. Plus, keeping track of what you’ve done and what you still need to do will help you budget wisely and estimate costs more accurately.
Once you have a list, it’s time to get to work. If everything goes according to plan, you should have your company up and running in no time.