The potential for more autonomy, flexibility, and income is drawing more people to start their own businesses. According to US Small Business Administration statistics, 50% of small businesses are home-based, along with 60.1% of businesses without paid staff.
The Ultimate Guide to Starting a Profitable Home-Based Business
To make a profitable home-based business, however, you must create a clear strategy and plan wisely.
In this article, you’ll learn practical tips on how to launch your home-based business and reach your full potential as an entrepreneur.
What is the foundation of a home-based business?
Before delving into home-based business matters, let’s discuss the basics. Home-based businesses have specific demands, including:
A dedicated workspace
You need a home office space to successfully run your online business. When looking for a private space, answer the following questions:
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- Where would your ideal workspace be located?
- Can you avoid distractions to stay focused?
- Does your family support your home-based business?
Before starting your home-based business:
- Find a workspace where there are few distractions
- Make sure this place is quiet and not a space your family uses frequently.
- Ensure you have a stable internet connection and the proper workstation setup.
- Tell your family about your work schedule to ensure you have some dedicated time when you are not disturbed
To operate your home-based business, you need to be proficient in what you want your home-based business to provide, have excellent management and organizational skills, and know how to market your product or service.
We recommend learning key terms such as competitive advantage, business ROI (return on investment), financial accounting, fixed costs, variable costs, etc. You can do your own research, read business-related books, watch videos, and take online business development courses.
If you’re a beginner, you can dig deep into business and marketing basics with Stephen Covey’s book The 7 Habits of Highly Effective People or Allan Dib’s The 1-Page Marketing Plan: Get New Customers, Make More Money, And Stand Out From The Crowd.
Try to talk to real people who succeeded in entrepreneurship to learn about potential pitfalls, listen to their experiences, and ask for home-based business tips.
You can use this information to continue to develop your home-office business strategy.
Your business plan
There is no point in starting a home-based business without careful planning and a step-by-step strategy. In March 2021, only 80% of startups survived after one year of operation. To put your best foot forward, identify these key points for your business:
- mission and vision
- company goals
- value proposition
- marketing needs
- organizational structure
- financial strategy
Planning will help you stick to your goals and make more efficient progress.
4 steps to starting a home-based business
Once you find a suitable workspace, set up your work environment, and develop a business plan, you can start your home-based business.
#1 Fulfill legal requirements
No matter what type of business you’re starting, you need to obtain the required licenses and learn about your rights as a business owner. Follow these steps to ensure you comply with legal requirements:
Learn about business licenses and permits
Depending on your living area and type of practice, you might need to obtain a license or certificate. According to federal or state regulations, financial and legal consultants, for example, must get a professional certification. To hire employees, you’ll have to get an Employer Identification Number (EIN) assigned to your business entity, which can be provided by the Internal Revenue Service (IRS).
If you’re a US citizen and want to start a home-based business, check the legal requirements on the US Small Business Administration (SBA) website.
Determine your business structure
The home-based company structure you choose will come with mandatory regulations, taxes, and legal documents. Your home-based business can be registered as one of the following two options:
- sole proprietorship. Sole proprietors operate their companies under a single legal name with all their bills and taxes connected to their social security number.
- limited liability company (LLC). Limited liability companies are hybrid entities that merge the elements of an organization with sole proprietorship or partnership.
Select your business’s name
The legal name of your business can make your business memorable and helps convey your company’s identity and values. You can search online for registered business names with the US Patent and Trademark Office and check domain availability. If you will be providing services across states, also check the availability of your trademark.
#2 Register your company
You don’t need to register your business entity as a solo owner. However, if you do register as a limited liability company (LLC) or corporation, you have to operate under a Doing Business As (DBA) name.
According to the law in most US states, a person can only do business under their own name if the DBA name is not registered. You may also approach your local Secretary of State for further guidance.
#3 Clarify your business operations
When you streamline your business operations, you will save time handling your administrative and logistic tasks and can devote more time to serving clients. You can write business operation manuals for finances, sales, marketing, client management, service provision agreements, etc.
You should also consider what technology can help you:
● handle each task of your business processes
● tackle problems if they occur
● improve your time management
Describe your daily routine to create an outline of your business processes. This is what your outline could look like if you were a consultant:
With thorough preparation, you reduce the likelihood of unexpected issues and monetary losses.
#4 Choose a technology stack
If you’re self-employed, you must do multiple tasks simultaneously, such as managing clients, handling payments, providing services, and arranging your schedule. That’s why it’s best to use technology to help you complete tedious tasks, reduce stress, and work more efficiently. For example, if you want to automate bookings, appointment scheduling software can help you with this.
There are many software choices for any task. However, to eliminate app juggling and keep all of your information in one safe place, it’s worth considering an all-in-one solution for your business. You can easily automate administrative tasks with the right technology, such as ExpertBox, which lets you do everything in one place — control and manage your schedule, provide your services, automate bookings, manage clients and documents, and accept payments.
Home-based business tips
If you choose the right service provider, you can reach your business goals faster and provide your clients with the convenience and flexibility they look for.
Let’s look at some other tips on how to improve the financial side of your home-based business:
- Split your budget
Manage your personal and business finances separately. This way, you
simplify your accounting and tax payments. You could also open a new bank account and get a new credit card specifically for your business.
- Learn the most common tax deductions
Tax deductions can help you cut down your business expenses. Once a year, you can be reimbursed for your business expenditures. You can learn what fees to document as deductions on the IRS Self-Employed Individuals Tax Center website.
- Buy business insurance
Home-based business owners could face risks, such as third-party claims, property damage, and other unexpected events. Business insurance can prevent your home-based business from significant losses.
There are three insurance coverage options for home-based business owners:
- a homeowner’s insurance policy endorsement that expands coverage on a specific property or its parts that regular insurance doesn’t cover
- a business owner’s insurance policy that covers business property and earnings
- a home-based business policy that offers more comprehensive coverage for businesses than a homeowner’s policy endorsement and depends on the insurance company
Running a home-based business requires your full attention and a lot of responsibility. However, if everything is set up correctly, you can increase your income and lead your home-based company to success. Remember that you can reach your full potential and streamline your business operations more easily with cutting-edge technology.