How to Start a Small Business at Home

How to Start a Small Business at Home

3. Nail down your business plan

If you’re reading this article, you probably already have a home-based business idea. You took a look at your passions, your hobbies, and your unique skill set, and you said, “I can sell this.” You’re off to a great start. But when it comes to starting a successful business, you need more than just an idea. Here are some things to consider:

  • Nearly 70% of seasoned business owners recommend writing a business plan before you start a business—and home-based businesses are no exception. 
  • A business plan clearly communicates what you’re going to do and how you’re going to do it. 
  • It answers the question, “Can this business realistically be conducted from home?” 

For example, selling digital art online can easily be done from a home office, but a catering business can quickly outgrow your home kitchen. A business plan serves as your road map for growth. If you’re not sure where to start, a business plan template can take you through it, step by step.

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What are the best part time home businesses?

  • 1. Virtual Assistant
  • 2. Senior Companion
  • 3. Craft Business
  • 4. Start a Blog
  • 5. Tutor
  • 6. Dropshipping
  • 7. Car Detailing
  • 8. House Cleaning

I’ve started many of my home businesses part time and been very successful at them. But the key thing to remember is that you need to plan and start a part time business just as carefully as a full time business. That means first learning about how to start a business and also writing up a good business plan. To learn more see my courses on BusinessTown including Start-a-Business 101 and How to Create a Business Plan. You can try BusinessTown for free.

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What are the easiest home businesses to start?

  • 1.  Dog Walking
  • 2.  Selling on eBay
  • 3.  House Cleaning
  • 4.  Freelance Writing
  • 5.  Home Tutoring
  • 6.  Social Media Service
  • 7.  House Painting
  • 8.  Yoga Classes

To find out more about launching a business, start streaming the courses on BusinessTown including Start-a-Business 101. You can try BusinessTown for free.

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9. Put financial systems in place

More than 60% of experienced business owners say the first thing you should get help with when starting a new business is setting up your financial systems correctly. 

According to the QuickBooks survey, these business owners wish they’d invested in things like expense tracking and invoicing sooner. Learn from their mistakes. Now is the time to invest in financial bookkeeping or accounting software for your business or recruit the help of an expert (like a bookkeeper or accountant).

FAQs About Home Business Ideas

  • How do I start a small home business?

Wondering how to start a small home business? Here are 8 steps to starting an online business:

  • Choose an online business model that suits your business
  • Identify your target market
  • Identify the problem that your business is solving
  • Know your competitors and how you are different from them
  • Choose a sourcing strategy that your customers will love
  • Set up your payment system so you can get paid 
  • Test your business idea in the simplest way possible
  • Create your marketing strategy to start promoting your business
  • How do I make money from home business ideas?

There are many ways that online home business ideas make money. You could charge per product, create subscriptions, build affiliate links, and so much more. Once you have decided your business model you can start brainstorming the exact home business idea for you and get started.

What Is Special About What You Offer?

  • Is the need for your product or service not currently being met or are there other businesses offering it? If there are others, how many others?
  • What is about your product or service that is different from the competition? Are you faster, cheaper, more service oriented, etc.?
  • How does your product or service meet the need of your target market? What benefits do they get by using it. 
  • What is your value proposition? What is your competitive advantage?

Use all this information to craft a marketing plan, outlining how you’re going to let your target market know about your business.

4. Create Your Business Plan

A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions, and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. A well-rounded business plan should contain the following sections:

  • Executive summary. The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
  • Company description. The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
  • Market analysis. This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
  • Organization and structure. Write about the type of business organization you expect, what risk management strategies you propose, and who will staff the management team. What are their qualifications? Will your business be a single-member LLC, or a corporation?
  • Mission and goals. This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
  • Products or services. This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your product costs, who will be responsible for creating the product, how you’ll source materials and how much they cost to make.
  • Background summary. This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
  • Marketing plan. The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
  • Financial plan. The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.

Medical Billing Business

Medical billing is the process by which doctors and hospitals receive payment from health insurance companies. It also involves resolving any disputes and following up on claims that have been delayed or rejected. Medical billing services provide coding, invoicing and collection services to different types of health-care facilities. Individuals can get certified by enrolling in schools that have medicalbilling programs, or via online courses.

Tip: Working in a doctor's office can be helpful in understanding how patients are billed.

Read This: Start Your Own Medical Claims Billing Service by Entrepreneur Press and Charlene Davis | Amazon | eBooks.com | Barnes & Noble 

Personal Chef

There's nothing like satisfying a hungry stomach with a hearty meal and getting paid for it. Personal chefs can market their business to just about anybody who likes to eat well and is willing to pay for it.

In addition to cooking skills, personal chefs also need a working knowledge of nutrition and excellent organizational skills. A sound understanding of safe food handling practices, health regulations and product liability laws are also essential.

Tip: Be ready to adapt to working in different kitchens. Some clients will have good, workable pots and pans and utensils; others won't. Investing in a travel set of cooking utensils and pots and pans may be a wise idea.

Read This: The Professional Personal Chef: The Business of Doing Business as a Personal Chef by Candy Wallace and Greg Forte | Amazon | Indigo.ca | Barnes & Noble 

Come up with a marketing plan

Marketing is crucial for building a successful business, but too many business owners go into it without a plan. This lack of planning often leads them to spend a bunch of money without seeing any real results. Or worse — something does work, but they have no way to recreate it.

That’s why it’s essential to start with a marketing plan. A marketing plan will outline how you plan to get the word out about your new business. It will typically include:

  • An overview of your marketing goals.

  • A description of your target market and customer.

  • A timeline of tasks to be completed.

  • Important metrics to track along the way.

From there, you can outline your plans for your website, social media channels and company branding.

[Read more: The Best Online Marketing Strategies]

9. Financing for Your Home Business

While most entrepreneurs rely on their personal savings to start a business, others seek funding from banks or family and friends. In fact, 75% of small businesses used their personal finances to fund their business, while 16% went to banks, and 6% solicited the help of family and friends. Let’s look at several funding options and see which one’s the best for your home business.

Rollover Your Retirement Funds Into Your Business

A Rollover for Business Startups (ROBS) lets you invest retirement funds in a new business without paying taxes or early withdrawal penalties. A ROBS is not a loan or withdrawal; instead, it allows you to tap into your retirement funds early. A ROBS is a great way to use your 401(k) to start a new business, particularly if you have more than $50,000 in qualifying retirement savings. There are no monthly payments and repayment is not required.

Tap Funds From Friends & Family

You can talk to your friends and family and introduce your business idea. If they like it, offer the opportunity to invest in your home business. You can take the money as a loan, or you can offer them a slice of your business. If you take this route, be sure to have an attorney draw up the paperwork to avoid problems in the future.

Borrow From a Peer-to-Peer Site

If getting money from friends or family is not an option, consider applying for a loan from peer-to-peer (P2P) websites. P2P platforms like the LendingClub match borrowers with investors. They offer small business loans from $5,000 to $300,000 and allow you to pay them back over one to five years with a typical APR of 9.77% to 35.71%. This gives you quick access to funds, while investors enjoy solid returns over time.

Use Credit Cards

Another option to fund your home business is to use personal and business credit cards. Many offer 0% APR for new clients while providing rewards or cash-back programs. On average, credit cards charge a 16% annual interest rate plus fees of about $50 to $100 annually. With credit cards, you don’t have to draw from your personal savings to fund your business.

Apply for an SBA Loan

The Small Business Administration (SBA) offers loan guarantee programs. A loan guarantee means that the SBA does not provide loans, your local bank does. It’s difficult for an at-home startup business to receive funding from a bank for an SBA loan.

A bank is typically looking for at least three years of consistent income before lending to a business. If you’re a startup, the bank wants to have access to the loan amount in a liquid account, such as a certificate of deposit (C.D).

To qualify for an SBA loan, your credit score must be above 680, and you need to be able to put up collateral for the loan, like real estate property. If you qualify, you can borrow up to $250,000, but expect to pay an annual interest rate of 6% to 9%.

– Emily Purdom, Founder, DotComTherapy“It is critical that a business remains lean. We took out sequential small SBA loans as needed. Define the minimal viable product or service you need to begin bringing in revenue and fund that. Through that initial influx of cash, you will learn what is most important to seek funding for and what can be pushed down the line while organic cash flow develops.”

– Emily Purdom, Founder, DotComTherapy

Step 10: Gauge Your Familys Support for Your Home Business

    Get your family on board with your home busine
Get your family on board with your home business goal. KidStock | Getty Images

Your family's support will be more important than you think, so don't leave this step undone. 

Running a home business isn't done in a vacuum. Members of your family may need to make sacrifices or lifestyle changes in order to accommodate your business. As a result, they need to know what you're up to and how it might affect them. If you have a spouse or significant other or children living with you, your home business will be a big part of their lives too.

Communication is key to helping them understand what you’re doing. Explain to them your intention and goals. Allow them to be a part of the process, if they’re interested. Ask for their support as opposed to expecting or demanding it. If they have concerns, try to understand where they’re coming from. Respond to their questions, issues, or objections, discussing them openly and calmly. There is a lot you can do to get your family members on board with your home business goal if they’re resistant.

Couples who plan to operate a business together need to have a good idea in advance if they can work together. It's a good idea to discuss who will be responsible for specific tasks. If you can't agree on this now, there's a very strong likelihood you won't agree on it later. 

Don’t let your business damage your family relationships. A strained family situation is bound to show in your business activities, so strive to work with your family to develop a routine and systems to make your home business and home life a success.

10. Grow your business

Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. It’s going to take time and effort, but you’ll get out of your business what you put into it. 

Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer some of your time or products to get your name out there. 

While these tips will help launch your business and get you set to grow, there’s never a perfect plan. You want to make sure you prepare thoroughly for starting a business, but things will almost certainly go awry. To run a successful business, you must adapt to changing situations. 

Free download: Free download: We’ve created a sales plan template you can use to scale customer acquisition.

“Be prepared to adjust,” said Stephanie Murray, founder of Fiddlestix Party + Supply. “There’s a saying in the military that ‘no plan survives the first contact,’ meaning that you can have the best plan in the world, but as soon as it’s in action, things change, and you have to be ready and willing to adapt and problem-solve quickly. As an entrepreneur, your value lies in solving problems, whether that is your product or service solving problems for other people or you solving problems within your organization.” 

Work with an accountant

Taxes are confusing to most people, and they get even more complex when you’re running a small business. Plus, you need advice on how to structure your business, how to set up payroll and how to track your expenses. That’s why it’s a good idea to hire an accountant.

An accountant can help you with all of this and ensure that your business is up to date with the most recent tax laws. And in the unlikely event that your business is audited, an accountant can walk you through this process.

[Read more: When and Why You Should Change Business Entities]

4. Define Your Unique Value Proposition

After completing your comparison table, you will know how many competitors are in your market and their important features. It will be extremely difficult for you to win over their customers if you offer the same products or services. You have to stand out and offer more value or address a specific need if you want to be successful.

Reflect on your business’ strengths to ident

Reflect on your business’ strengths to identify your main unique value proposition.

Using the data you gather from your research, you can come up with a unique value proposition. Think of this as what separates you from your competition, while at the same time something that your customers want. To come up with a unique value proposition, examine what everyone else is doing and the current market. Then, determine how you can provide a better solution, offer a better price point, or both.

For example, someone looking to start a PC repair home business discovers that all firms providing the same service in the area are retail shops. It is common practice for retail stores to strongly recommend item replacements in order to increase sales. In this scenario, there are several steps an individual can take to help build a unique value proposition using the data they’ve gathered:

  • Evaluate the current market: Customers drive to the store to get electronics fixed, only to get recommendations to purchase new items or wait several days for basic troubleshooting, paying high costs for their time or replacement electronics.
  • Determine a better solution: Offer home-based appointments to provide personalized laptop or PC repair and upgrade services. Basic troubleshooting is completed within a few hours, not days.
  • Offer a better price point: Customers mostly pay for labor, saving them the unnecessary expense of replacing functional components.

Defining a unique value proposition can help you penetrate the market and put your home business in a better position to succeed. Use the unique value proposition to make a clear and concise statement of why you’re better than the competition.

Tips for Running a Business Out of Your Home

Running a home-based business is a lot different than heading into an office for a 9 to 5 job. You’ll have to deal with considerably more distractions for starters, but you’ll also need to have a certain level of discipline to make it work. After all, you won’t have a boss looking over your shoulder anymore.

In addition to making sure you’re dedicated to your home-based business idea and ready to put in the hard work, here are some additional tips that can help:

  • Have a dedicated space to work. If your home-based business idea is one that actually runs out of your home, make sure you have some separate space to work. This could be an area of your dining room where you’re able to set up a desk, or perhaps you have a basement where you could set up a dedicated office space. Whatever you have to work with, make sure you have a work area where you can go to focus on the work ahead.
  • Set a schedule. When you don’t have a regular job, it’s easy to keep putting off your work to the point it never gets done. With that in mind, it’s smart to set strict working hours like you would have if you worked for someone else. You don’t have to work 9 to 5, but you should have set working hours that never change. 
  • Protect your work time from family and friends. Don’t let family and friends sabotage your home-based business since they know you’re home. Make sure you tell everyone that you are actually working from home, so you cannot chat on the phone, run errands for them, or keep an eye on their kids. 
  • Keep your business financials separate. Once your business is up and running, we recommend taking steps to separate your business finances. This typically involves setting up a business checking account, signing up for a business credit card, and creating folders for receipts and other paperwork you’ll need to keep track of for business and tax purposes. 
  • Learn how to outsource effectively. This tip is for intermediate home-based businesses, but it is still important. As you grow your operation, you’ll want to figure out what you should outsource so you can spend more time on your business. This may mean paying a bookkeeper to keep track of your expenses, or perhaps even outsourcing cleaning and errands at your home so you have more time to work. 

Apply for a small business loan when you need extra cash

If you’re looking for more capital and have been operating on a shoestring budget, consider applying for a small business loan. Banks and online lenders offer differing kinds of small business loans to customers looking for extra cash flow or investment funds. You can usually get more favorable terms with a traditional bank. Online lenders, however, are typically more lenient in their requirements. Just watch out for those high interest rates.

If you’re not looking for a lump sum loan amount, consider a business line of credit. In short, they’re like credit cards for your business. They’re good options for purchasing items on an as-needed basis. (You can read about them and other small business loan options, here.)

6. Purchase an insurance policy

It might slip your mind as something you’ll “get around to” eventually, but purchasing the right insurance for your business is an important step to take before you officially launch. Dealing with incidents such as property damage, theft or even a customer lawsuit can be costly, and you need to be sure that you’re properly protected. 

Although you should consider several types of business insurance, there are a few basic insurance plans that most small businesses can benefit from. For example, if your business will have employees, you will at least need to purchase workers’ compensation and unemployment insurance.

You may also need other types of coverage, depending on your location and industry, but most small businesses are advised to purchase general liability (GL) insurance, or a business owner’s policy. GL covers property damage, bodily injury, and personal injury to yourself or a third party.

If your business provides a service, you may also want to consider professional liability insurance. It covers you if you do something wrong or neglect to do something you should have done while operating your business.

2. Refine Your Business Idea

Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Or, maybe you love making soap and want to open a soap shop in your small town that already has three close by—but it won’t be easy to corner the market when you’re creating the same product as other nearby stores.

If you don’t have a firm idea of what your business will entail, ask yourself the following questions:

  • What do you love to do?
  • What do you hate to do?
  • Can you think of something that would make those things easier?

These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.

Your business idea doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it.

Build up six months’ worth of savings for expenses

Admittedly, tapping into your savings account isn’t the ideal situation. Yet, it’s a pretty common practice among entrepreneurs. When designing your business plan, be frank with yourself about how much you’re spending and how much revenue you’ll likely bring in. Then, be realistic about how long it will take before you see a profit. Usually, it takes about at least six months before you start seeing any cash flowing in. Make it a goal to save at least six months’ worth of living expenses so you can devote yourself to your new business.

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