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How to Start a Small Business From Home [2021 Guide]

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About 20% of small businesses fail within the first year. By the end of the fifth year, about 50% fail.

Do you want to start a small business from home? You’ll need a plan, first. Otherwise, you could become one of the 20% of businesses that don’t last the year.

How to Start a Small Business From Home [2021 Guide]

Starting a small business from home with no money is possible. With these tips, you can stay organized and start generating sales.

Set your small business up for success with these tips today!

1. Assess Your Talents and Skills

First, you’ll need an idea. What are your unique talents and skills? How can you turn those skills into a money-making business?

Are you a fast learner, detail-oriented, or creative? If you’re creative, do you have artistic, design, or writing skills? You could use those tools to start a marketing agency.

If you’re detail-oriented and good at math, you can become an accountant.

Combine your skills and talents to determine what type of business you want to create.

2. Determine Your Target Market

Once you have a business idea, make sure there’s a target audience for it. Will people want your product or service?

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Start researching your target market. Make sure there are enough potential customers that your business idea is worthwhile.

3. Make Sure It’s the Right Call

Once you have an idea and potential audience for your business, make sure it’s the right call. If you start a small business from home, how will it affect your life? Do you have time in your day to start a business?

Make sure it’s appropriate for you to work from home, too. Otherwise, you might want to consider finding separate office space instead.

If you’re starting a small business from home, find space that’s only for your business. You’ll need:

  • Power
  • Lighting
  • Internet
  • Ventilation
  • Pleasing visuals
  • Circulation

Keep your work and home life separate. Otherwise, you might get easily distracted.

4. Research Your Competitors

Who are your main competitors? If you want to create a unique business, you’ll need to know what you’re up against.

Start on Google. Look for other businesses that offer the same product or service. How can you differentiate yourself?

Check social media, too. How do they reach customers?

Create a competition comparison table. This table will help you find opportunities and threats in the industry.

5. Define Your Unique Value

If you want people to choose your business above the rest, you’ll need a unique value proposition. What can you offer that no one else can? Look at your competition table to find opportunities.

If you don’t have a unique value, you’ll struggle to stand out.

Evaluate the current market and find opportunities. Then, look for ways to provide customers with better solutions than what’s available. Consider offering a better price point as well.

Your unique value will help you penetrate the existing market.

6. Understand Relevant Laws

In order to start a small business from home, you’ll need to consider the relevant licenses, laws, and permit requirements. Some laws are specific to at-home businesses. These include:

  • General Business License
  • Professional and Trade License
  • Home Occupation Permit
  • Sales Tax Permit
  • Health and Safety Permit
  • Sign Permit
  • Homeowners Association restrictions
  • Construction Permit

You can check the US Small Business Administration for more information about the application process.

What about the tax laws for home-based businesses? You’ll need to consider:

  • Direct business expenses
  • Operating costs
  • Vehicle expenses

Research as much as you can about these tax laws ahead of time. Otherwise, you might find yourself lost during tax season.

7. Remain Diligent About Your Schedule

If you want to start a small business from home, you’ll need discipline. Remember, you need to separate your home and work.

Set a schedule and stick to it. Maintaining a work schedule will help you establish and grow your business.

8. Test Run

You don’t have to put all your eggs into one basket from the get-go. Instead, give yourself a test run.

Try introducing your product or service as a beta. You can find customers at farmers’ markets, trade shows, and other local events. Get feedback from your customers and start making improvements.

Try working part-time during this time. That way, you can still make money.

You can also create a crowdfunding campaign to raise money and interest.

9. Determine a Budget

If you want to start a small business from home, you’ll need to set your budget. The average cost for home-based franchises is between $2,000 and $5,000. However, your industry and other factors can cause the costs to vary.

First, take the time to consider the type of expenses you’ll have when starting a small business from home.

Your one-time costs could include equipment. There are a lot of one-time expenses you might need to start your business. You’ll need to consider ongoing costs, too.

Ongoing costs are paid on an ongoing basis. Since you’re working from home, you won’t have to pay for rent. However, you might have to pay for monthly website hosting.

Which of your costs are essential versus optional? Your essential costs will benefit your company’s growth and development.

Try to avoid any optional costs during the first year.

Next, you’ll need to consider your fixed and variable costs. While rent is consistent, you might notice your product costs vary each month. You might have a more difficult time anticipating your variable costs.

Potential Costs and Cash Flow

Your startup expenses might include:

  • Web hosting, design, and development
  • Office furniture
  • Labor (if you’re hiring employees)
  • Basic supplies and technology
  • Your license, insurance, and/or permit fees
  • Marketing and advertising

You can check out these offers when gathering your equipment.

Next, you’ll need to consider your cash flow. Do you plan on starting a small business from home with no money? Will you need to borrow money from a bank or friend?

If you’re borrowing money, don’t forget to consider how interest will affect your business over time. You might need to put personal assets on the line.

Try to avoid borrowing if you can. Borrowing money can add unnecessary stress.

Consider using software, like Quickbooks, that connects with your bank account. You can use accounting software to track your monthly expenses.

10. Choose a Legal Structure

You’ll need to register your at-home business as a legal business entity. Your options include:

  • Sole proprietorship
  • Limited Liability Company (LLC)
  • C Corporation
  • S Corporation

Each option has different requirements. You might need an at-home business license as well.

11. Open a Business Bank Account

Once you’ve registered your business, you’ll need a business bank account. Separating your business and personal expenses is essential. This will help you avoid cash flow problems down the road.

It also makes federal tax audits easier.

There are different account types available, including business checking and business savings accounts.

12. Develop a Marketing Plan

How do you plan on marketing your business? Will you create a company website? What strategies will you use to reach customers?

Without a marketing plan, you’ll struggle to develop visibility. Even with a strong value proposition, your business could fall into the background. You need a marketing plan to:

  • Boost brand awareness and visibility
  • Generate brand recognition
  • Stand out from competitors
  • Generate leads, conversions, and sales
  • Become a thought leader in your industry
  • Generate credibility
  • Improve your ROI

Otherwise, you could waste valuable time and money trying to attract customers. You’re not limited to cold calling anymore. Instead, you can use an inbound marketing strategy to expand your reach.

Marketing Strategies

First, consider your branding. A unique, distinct brand will set you apart from competitors. When developing your brand, consider your:

  • Unique value proposition
  • Vision statement
  • Mission statement
  • Logo
  • Mascot
  • Color scheme
  • Font styles
  • Imagery/photography styles
  • Tone
  • Voice
  • Personality

Think of your brand as a real person. How would they talk and act? Humanizing your brand will make it easier for you to forget connections with customers.

Once your brand is set, you’ll need a website. Without a website, customers will struggle to learn more about your business.

How will you attract people to your website?

Leads from search engine optimization (SEO) are eight times more likely to become customers than those through traditional campaigns. In fact, over 90% of activities online start with a search engine like Google. If you want to reach customers, you’ll need SEO.

Consider pay-per-click advertising, email marketing, and social media marketing as well.

These strategies will expand your reach and help you generate leads.

13. Start Selling

Ready to start a small business from home? With these tips, you’re almost ready. Now it’s time to start selling!

Develop a strong sales strategy for yourself. Consider using a customer relationship management (CRM) tool to keep track of customers. A CRM can help you nurture leads.

You can then turn those leads into long-time, loyal customers. Brand loyalty and high customer retention can boost your ROI!

Start a Small Business from Home: 13 Tips for Success

Set yourself up for long-term success. With these 13 tips, you can start a small business from home with ease. Make your business dreams come true with these 13 easy tips today.

Searching for more useful tips and tricks? We’re here to help.

Check out our latest guides today for more helpful advice.

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Some other articles you might find of interest:

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Startup’s Guide to Write a Business Plan

Would you like to know how investors value a startup?

How Do Investors Value a Startup?

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