How to start a business at home: A step-by-step guide with examples

Starting a business at home certainly isn’t a new concept, but it is skyrocketing in popularity, thanks in part to the economic effects of the COVID-19 pandemic.

The result was a surge of home-based, online businesses. Here we will discuss how important it is to explore your options on starting a home-based business and how it can help you reach your professional and financial goals. 

Before you get started

1. Weigh pros and cons
2. Research different home business examples
3. Nail down your business plan
4. Do your research
5. Think about funding
6. Secure a marketing plan

Setting up for success

1. Dedicate space for work
2. Get a business bank account
3. Put financial systems in place
4. Set up social media channels

Make your business official

1. Check zoning laws
2. Check local business permits
3. Register your business
4. Register for business licenses
5. Invest in business insurance

Keep your books up to date from the start

Before you get started

When you’re ready to take the home-based business leap, there are a few things to think about before you get started:

1. Weigh the pros and cons
2. Research different home business examples
3. Nailing down your business plan
4. Doing your research
5. Thinking about funding
6. Securing a marketing plan

1. Weigh the pros and cons

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. Over 70% of new business owners are optimistic about their success in 2021 and beyond.

Pros 

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

• Low overhead costs: This means 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 services by making use of the space and services you already have.
• Being your own boss: This means you make your own hours. You can put in the work when you feel most motivated and inspired.
• Eliminating a commute: Working from home allows you to trade the time you would normally be stuck in traffic for more productive minutes.
• Home office tax deductions: Taking advantage of this perk saves you money and maximizes your tax returns. These deductions are only available to businesses that operate from home.

Cons 

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 draw boundaries between the two.
• Neighbors 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 neighborhood.
• 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.

2. Research different home business examples

Home-based businesses have become prominent and even successful options for business owners who are just getting the ball rolling. Here are some great examples of home-based businesses you can start now:

Virtual assistant

A virtual assistant, commonly known as a VA, helps with management and organization tasks of all kinds. For example, some VAs assist with travel arrangements, calendar organization, admin tasks, and customer service. 

 Freelance writer

Freelance writers create blogs, articles, short stories, and even novels either for themselves or for clients for an agreed-upon price. Jobs like this take some hunting on LinkedIn and job boards, or might even require cold pitching online. However, if you’re good at pitching yourself and have a portfolio of work to back up your knowledge, there will always be a need in this area.

Digital marketer

Another great home-based job in high demand is digital marketing. Digital marketers are responsible for encouraging buyers to purchase goods and services via marketing tactics. With much of our buying being done online now, digital marketing experts are in high demand. 

Creative designer

Creative design is easy to start from home due to efficient products like print on demand and drop-shipping, where you don’t have to actually have products on hand to start. Creative design can include:

• Crochet
• Sewing 
• Painting
• Crafts

There’s a never-ending supply to what can fulfill customer needs through creative design. 

Teacher or tutor

There are few jobs that can impact others so drastically, arguably none more than a teacher. Teaching from home through virtual learning centers has now become a popular option for classroom-style teaching. Signing up for these programs is fast, simple, and free, which makes them great work-from-home options for those with a passion for teaching. 

Additional home business ideas

Of course, there are many other home businesses out there, including:

• Data entry
• College consulting
• Transcribing
• Travel planning
• Medical coding
• Customer service

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.

4. Do your research

No matter what you’re selling, you’re likely 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.

5. Think about funding

It’s possible to start a business with no money, but almost every new business begins with some amount of startup costs for things like:

• Registering your new business
• Applying for business permits
• Purchasing equipment
• Purchasing software 

These 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
• Applying for small business loans 

These are all common ways to secure business 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.

Setting up for success

You’ve written your business plan, conducted a competitive analysis, identified your target market, and calculated your startup costs. Now it’s time to hit the ground running. Here are a few additional steps you can take to build a successful home-based business:

1. Secure a marketing plan
2. Dedicate space for work
3. Get a business bank account
4. Put financial systems in place
5. Set up social media channels

 6. Secure a marketing plan

Marketing is the pathway of getting paying customers to your product or service. It’s not only a good idea but required for any business to be successful. It also comes in many shapes and sizes with different companies using various tactics to market to their target audience, including:

• Social media marketing: Utilizing social media platforms to drive customers to your product
• Print marketing: Utilizing print advertising in magazines or newspapers to drive business
• Online ad placement: Utilizing online outlets such as email or website ads to drive traffic back to your product or service offering.

7. Dedicate space for work 

Your kitchen table works as a desk for a short time, but 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 multibillion-dollar businesses in garages.

8. Get a business bank account

Good financial recordkeeping 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. 

It can also help you take full advantage of tax deductions and credits available to small business owners. Keep in mind that if you decide to register your business as an LLC or corporation, you’re required to have a separate bank account for your business.

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).

10. Set up social media channels

One of the best ways to create a splash in today’s world is through social media. So get to tweeting, chatting, and posting. This is a great way to create a buzz in the online realm. Be active and consistent when posting and follow others in your space to keep abreast of what’s trending. Utilize channels like:

• Instagram
• Pinterest
• Facebook
• Twitter
• Snapchat
• LinkedIn

Make your business 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.

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. Business consulting from the Small Business Administration (SBA) and SCORE network is always free.

11. 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 neighbors. It’s a good idea to check your local ordinances before you launch, just in case. 

If you live in a neighborhood with a homeowners 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.)

12. Check local business permits 

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.

13. 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 Form 1040.

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 with most things, there are pros and cons for every business registration. Choosing how to register your business can be tricky, but your local SBA can help you choose the right business structure and register correctly.

14. Register for business licenses

Outside of registering your business, you might also need to apply for a business license. A business license 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 license, 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 your secretary of state’s office, your local Department of Revenue, or your county clerk.

Finally, you’ll want to apply for an Employer Identification Number (EIN). This number is assigned by the IRS to identify your business. Applying for an EIN is fast and free, and it protects your personal Social Security number. If you choose not to register your business, applying for an EIN is still a worthwhile step.

15. 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.

Keep your books up to date from the start

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. 

To avoid problems later along your business journey, it’s important to keep your books up to date from the very beginning. Utilizing software like QuickBooks Online can make a big difference. 

Stay open to growth opportunities

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 separate website. And innovative apps like Asana and services like QuickBooks Online 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. But for now, starting a business at home is a smart way to test the waters, maximize your productivity, and chase your passion.