Some of the biggest names in business were born in basements. Amazon, Microsoft, and Google famously launched from home garages. Yankee Candle got its start in Michael Kittredge’s childhood kitchen. Even Intuit originated at Scott Cook’s kitchen table.

Starting a business at home certainly isn’t a new concept, but it is skyrocketing in popularity. This is thanks in part to the economic effects of the COVID-19 pandemic. Shelter-in-place protocols meant spending more time at home than ever before, and mass business closures left a lot of employees looking for extra income.

The result was a surge of home-based, online businesses. You know what they say, “When the going gets tough, the tough get going.” According to a 2020 QuickBooks survey, 28% of those who already planned to start a business say COVID-19 accelerated their plans. Another 42% of those who started a new business or planned to start a business said they were finally taking their side gig full-time.

But here’s the best part: these new business owners feel overwhelmingly optimistic about their future prospects. 72% of new business owners are optimistic about their success in 2021 and beyond.

Starting a new business can be daunting, but it becomes less so when you can do it from the comfort of your own home (or garage). However, there are some pros and cons to consider before you dive in.

Pros and Cons of Starting a Business from Home

Starting your own business from home comes with lots of perks:

• Low overhead costs mean you can get your business off the ground for less. You can avoid overhead costs like rent for commercial office space, phone systems, and other vital services by making use of the space and services you already have.
• Being your own boss means you make your own hours. You can put in the work when you feel most motivated and inspired.
• Eliminating a commute allows you to trade the time you would normally be stuck in traffic for more productive minutes.
• Taking advantage of home office tax deductions can save you money and maximize your tax returns. These deductions are only available to businesses that operate from home.

There are some disadvantages to working from home you may also want to consider:

• The line between “work” and “life” can become blurry over time. When you live and work in the same space, it can be difficult to differentiate between the two.
• If you live in a residential area, your neighbours might not appreciate your entrepreneurial spirit. If clients will be coming to your house or you’re going to operate loud machinery, it may cause a rift in the neighbourhood.
• Your home might not be the ideal space to operate your business. You’re limited to the space you have, and working from the garage can get old quickly.

Home Business Ideas with Low Startup Costs

Weighing up the advantages and disadvantages of operating a home business is one thing, actually deciding on what that business will be is a whole other undertaking. To get you started on your brainstorming of the best home-based business ideas, we’ve created a list of some of the most inexpensive operations you might consider tackling. These include such activities as:

• Selling home-made products such as jewelry, bath bombs, soap, home decor, and other crafty or luxury items
• Starting a dropshipping business
• Buying and selling vintage clothing and antiques
• Buying and operating a fully-fledged e-commerce site
• Teaching or tutoring online
• Conducting webinars and online tutorials
• Selling digital assets like NFTs
• Offering service-based freelance work such as content writing, photography, video editing, web designing, massage therapy, tailoring and alterations, carpentry and woodworking, personal cooking, and shoe repairs
• Consulting as an accountant, foreign translation, travel agent, marketer, life coach, social media manager, financial broker, or event planner
• Operating a daycare and child care facility or pet boarding business

Before You Get Started On Your At Home Business

If the pros outweigh the cons and you’re ready to take the home-based business leap, there are a few things to think about before you get started. Therefore, keep these necessary steps in mind when you’re considering how to start a small business from home.

1. Assess your talents and skills

Before you dive headfirst into starting a business from home, you’ll want to take some time to brainstorm the best fit of business for your specific skills and experience. Weigh up your strengths and weaknesses, your current level of expertise in various disciplines, and the space and equipment you already have handy at home.

For example, if you have excellent digital skills and already have a computer, you are well on your way to starting a freelance design business or social media marketing company.

2. Nail down your business plan

When it comes to starting a great business, you need more than just a business idea.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. More importantly, it answers the question, “Can this business realistically be conducted from home?” 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 roadmap for growth. If you’re not sure where to start, a business plan template can take you through it, step by step.

3. Do your research

No matter what you’re selling, you’re going to have some competition. Identifying and analyzing your competitors gives you valuable industry insight and helps you build better business strategies. You should know what they’re selling, how they’re selling it, and who they’re selling it to.

The “who” part is important: they’re your target market. Understanding your target market helps you build effective marketing strategies and attract more customers. Social media is a good place to start your analysis. Check out what your competitors are posting and how their customer base reacts to it. Conducting this research early on will help you build your business plan.

4. Think about funding

It’s possible to start a business with no money , but almost every new business comes with some amount of startup costs. Registering your new business, applying for business permits, and purchasing equipment or software all come at a cost. It’s a good idea to calculate your startup costs before you start and consider how you might fund them. If your costs are low, you might be able to pay out of pocket.

If you need additional funding to get your business up and running, there are a few options to think about. Crowdfunding, appealing to angel investors, or applying for small business loans are common ways to secure funding. If you’re not ready to take the financial leap, working part-time or focusing on your new business during evenings and weekends can bring in some income while you get on your feet.

Set Up for Success For Running a Business from Home

You’ve written your business plan, conducted a competitive analysis, identified your target market, and calculated your startup costs. Now it’s time for you and your at-home business to hit the ground running. If your life was a sitcom, this is the part where you might say something like, “It’s really happening!” Here are a few steps you can take to build a successful home-based business.

1. Dedicate space for work

Your kitchen table works as a desk for a short time. If you’re serious about your business and want to maximize productivity (and save your lower back), you’ll need a more permanent space to work. Plus, separating your workspace from your living space can keep the line between work and life clearer. For some, that might mean your home office ends up in the garage or the basement. If that’s the case, you’re in good company. Remember, Jeff Bezos and Bill Gates both started their multi-billion-dollar businesses in garages.

2. Get a business bank account

Good financial record-keeping is key to starting a successful business. Opening a business bank account is an easy way to track and record business expenses. Keeping expenses separate from personal finances protects your personal assets.

This separation can also help you take full advantage of tax deductions and credits available to small business owners. But it’s not just a good idea. That being said, if you decide to register your business as a corporation, you’re legally required to have a separate bank account for your business.

3. 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.

4. Track home office expenses for tax deductions

Once you have implemented an accounting or bookkeeping system for your business, you will want to track your home office expenses. Working from home means you are entitled to certain tax deductions of your home business expenses from the CRA.

Depending on the size of your home office, or the space you use for work, you can partially deduct your rent, mortgage, and other utility bills on your business tax return. Suppose your home office takes up 20% of your home or apartment. In this case, you are entitled to write off up to 20% of your rent and utility costs.

The equipment and office supplies you use for work, such as a computer, sewing machine, notebooks, appliances, or any other necessary tools are also tax-deductible. You can even write off a fraction of your artwork in your home office, as long as it’s hanging in a space where your clients and customers will see it.

Learn more about  deducting your home office expenses .

Make Your Small Business from Home Official

Now that you’ve made space for your business in your home and opened your bank account, it’s time to officially bring your business to life. This is the not-so-fun and kind-of-daunting part. There are a few things you need to do to comply with legal requirements and tax laws.

It’s a good idea to enlist the help of an expert as you prepare to tackle these steps.The Canadian government website has a checklist to help you get started .

1. Check local zoning laws

In some residential areas, local zoning laws prohibit all types of businesses. Residential zoning laws often allow small, home-based businesses to operate as long as the home is primarily a residence and business activities won’t negatively impact neighbours. It’s a good idea to check your local ordinances before you launch, just in case. If you live in a neighbourhood with a homeowner’s association, you’ll want to make sure they don’t impose restrictions on home businesses. And if you’re renting, you’ll want to read your lease agreement. Your landlord might not support your pet sitting business.

Additionally, your business may need permits to operate. Some cities and counties require a home occupation permit to operate a business from your home. Others require a sign permit if you choose to display a sign in your yard or in your house. If you plan on renovating your home to accommodate your business, you might need a building permit.

Depending on the type of business you open, you may need additional permits. For example, if you’re planning to open an in-home daycare, you might need a health permit or a permit from the local fire department.

2. Register your business

If you’re planning to operate as “self-employed,” you’re not required to register your business . But you run the risk of missing out on tax benefits and personal liability protection if you don’t. If you decide to register as self-employed (or as a “sole proprietorship”), you’ll report your business income on your personal T1.

Remember that if you expect to earn over $30,000 it is required by the CRA to register for a GST/HST number. Learn more about sales tax here.

Sole proprietors enjoy some of the lowest tax rates but, because you and your business are the same entity, you can be held personally liable for business debts. As always, there are pros and cons for every business registration. Choosing how to register your business can be tricky, but you can find regional business support on the Business and Industry website of the Government of Canada.

Outside of registering your business, you might also need to apply for a business licences. A business licences gives you permission to conduct business in your city or state. If you’re operating as a sole proprietor, you might not need a business licences, but it’s always a good idea to double-check. If you’re going to collect sales tax, you may need a sales-tax permit. Get more information from the Business Development Bank (BDC).

Finally, you’ll want to apply for a Business Number (BN). This number is assigned by the CRA to identify your business. Applying for a BN is fast and free, and it protects your personal Social Insurance Number. If you choose not to register your business, applying for a BN is still a worthwhile step.

3. Invest in business insurance

It’s a good idea for any small business to think about general liability insurance. This type of business insurance policy protects you if someone makes a claim against your business for injury or property damage. It also protects you if you accidentally damage someone else’s property. For example, if you start a housecleaning business and accidentally break something, you’re covered.

You might need to reassess your homeowner’s insurance as well. Your policy might not cover the costs related to operating a home-based business. If something happens to your home, you’ll want to make sure you can recover the losses from your business as well.

Learn more about business insurance here.

Go Big and Go Home

Remote work was on the up-and-up long before the pandemic hit, but 2020 saw a rapid shift. Businesses we thought could only operate in person found new ways to thrive in a virtual landscape. 28% of small businesses say they started selling more products and services online in 2020. Nearly all of them said the COVID-19 pandemic influenced that change. Looking forward, 87% of new small businesses say they will operate online to some degree. And nearly a quarter of these businesses say they will operate 100% remotely (in most cases, from home).

Today, starting a business at home goes far beyond dog walking. E-commerce sites like Etsy, eBay, and Amazon make it easy for any business to sell products online without building a website. Innovative apps and tools make it possible to manage growing teams from afar.

There may come a time when it makes sense for you and your business to expand into a physical location or commercial workspace. For now, starting a business at home is a smart way to test the waters, maximize your productivity, and chase your passion.

Overall, if you’ve done the work and are ready to start your at-home business, then consider using QuickBooks Online to help you get your finances in order. Start streamlining your accounting process while running a business from home when you start your free trial today.