Many businesses have been forced to suspend in-person services and transition to working from home, but have you considered actually starting a business from home? As crazy as that may sound right now, our new realities may present new opportunities as well. Whether you’re out of work and looking for a fresh revenue stream, or you were planning to start a brick-and-mortar business but have had to hold off, or you’re using this time at home to finally take your hobby to the next level, this might be something to consider.
Starting a business from home takes a lot of traditional expense out of launching a new company. You don’t have to pay rent on a location, for example, which can be the biggest predictable expense for a small business outside of staffing. Depending on what type of business you want to start at home, you may need minimal capital to get going.
But it’s not all good news for a home-based business, and you can actually make some of the unavoidable challenges even harder for yourself if you don’t plan ahead. Starting with a solid plan and following the checklist below helps you avoid some common issues for home-based businesses
13 Things You Probably Need When Starting a Business From Home
1. A Valid Business Idea
It sounds obvious, but many people do skip this step. To succeed, you need a product or service that’s marketable, has a well-defined target audience and is somewhat unique to you. That doesn’t mean you can’t do something others are already offering, but you have to be able to differentiate yourself by doing it faster, cheaper or in a specific manner that would help certain customers.
2. A Business Plan
Many people skip the business planning stage because they think those documents are only necessary if you need investors. In reality, a business plan is a living, breathing document that helps you understand where you’re going with your endeavor and how to get there. While business plans differ by industry, common components include definitions of your products and target audiences, pricing strategies, marketing plans and growth plans.
3. A Business Structure
Choosing the right structure is critical because it determines your tax and regulatory obligations, what type of financing you might be eligible for in the future and how you must manage human resource issues — among many other things. Many people assume they can just wing it as a sole proprietorship while they get going with their business, but that can be a mistake that leads to hassle and expense later. The U.S. Small Business Administration offers a guide to business structures to help you choose the one that’s right for you, and most experts advise talking to a CPA or attorney for assistance.
4. A Business Bank Account
Separating your personal and business finances is important for a number of reasons. Unless you’re a sole proprietor, you’re actually legally obligated to do so. And for any business, keep finances separate helps you track business income and expenses to make better decisions and can provide added credibility, especially when you work with lenders or other financial institutions on behalf of your company.
5. Tax IDs
You need a tax ID unless you’re simply a self-employed contractor, in which case you can use your Social Security number as your tax ID. But many people take the step to get a federal tax ID anyway, because it keeps you from having to share your SSN so often. You can apply for a federal tax ID, or Employer Identification Number (EIN) from the IRS online.
6. Methods for Getting Paid
You need a way to accept credit cards and digital payments. Some popular options for home-based businesses include PayPal, Stripe and Square. But each method has its own pros and cons, so research them all to find one that best meets your business needs. Remember that most payment methods do involve fees, so you’ll need to factor that into your pricing plan.
7. A Web Presence
Whether or not you’re going to sell from your website, it’s important to set one up. The presence of a website creates confidence in your potential customers — it makes you look more like a legitimate business. It also provides a place consumers can go for the be-all, end-all word on your company’s services. Around 56% of consumers say they expect a business’s website to be the most accurate authority on the company.
8. A Business License
Whether or not you need a business license depends on your state, local government, and industry type. Nav.com provides a starting point for this research with helpful links for business license requirements by state. You should also reach out to your county, parish or city government to determine if you need a local license or whether local taxes might apply to your business.
9. Relevant Insurance
Consult with your insurance broker to find out whether or not your home-based business needs insurance. Your homeowners policy should still cover losses related to basic equipment (such as a computer or printer), but may not cover inventory or specialty business equipment you keep in your home. You might also be able to insure against business losses or liabilities, and depending on the type of product or service you offer, you might be required to.
10. An Accounting System
You don’t need to invest in a specialty software system that requires a degree in accounting to manage. But you do need a system to keep track of and categorize income and expenses as well as manage invoices so you don’t lose money by not collecting it. Come tax time, you’ll thank yourself for thinking ahead. QuickBooks offers a number of small business options, and you can also use apps such as Waze to handle accounting and invoicing.
11. Marketing Accounts and Profiles
After setting up your website, make sure you claim your other online profiles and accounts. You may be able to claim a Google My Business page, which is a free profile that lets you manage your presence in Google search results pages. You don’t need to have a presence on every social network available — no one has time for that. Instead, pick a few platforms that match up with your audience and make the most of those.
12. Computers and Other Technology
In many cases, technology is the biggest initial expense for home-based businesses. If you already have a computer, printer and other equipment, you can use those. But you may not want to share with the rest of the family, as that could derail your productivity when kids need the screen for homework or someone would like to use it for gaming. Every business is unique, but common requirements for a home-based startup can include at least one computer that can run all necessary software; an all-in-one printer that also lets you copy, fax and scan; communication equipment, including a cell phone or landline phone — or both — and webcam capability for video conference calls.
13. A Plan to Make Each Day Work
Finally, make sure you have a plan to make each day work as you embark on entrepreneurship from home. That means creating a schedule that ensures you have time to work and asking your family and friends to support you in this effort. While you can launch a business between cleaning your home and taking care of kids, success tends to be easier if you set aside some specific hours for chasing your dream.
Once you’ve completed the checklist above and officially launched your new labor of love into the world, it’s time to find some customers. Consider becoming a Groupon Merchant to gain access to proven marketing tools that expand your reach and help you find new clients.
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