Starting a home-based business can be a viable way to gain financial independence and pursue a passion. According to the U.S. Small Business Administration, 50 percent of all businesses start at home. The SBA also reports that 60 percent of all businesses without staff are home-based.
While the process of starting a home-based business may seem daunting, it can be broken down into manageable steps. Here’s how to navigate the journey successfully.
• Identify a business idea. Individuals can assess their skills and passions as a starting off point for developing a home-based business. Then these passions can be paired with market research to determine if there is sufficient demand for the product or service.
• Consider feasibility. It’s important to evaluate if a business idea can be realistically run from home. Certain business ideas, such as freelance writing, are much more conducive to being done from home than a wedding catering business.
• Compile a business plan. Every business should have a well written and concise business plan. A plan should includeasummaryofthemission and goals of the business, a detailed description of the business and its legal structure, target audience, a clear explanation of what is being offered to customers, and an estimate of costs, income and expenses.
• Set it up legally. Even though the business may be home-based, this doesn’t mean one should take shortcuts around the proper channels for establishing the business. Decide if the business will be a sole proprietorship, partnership, limited liability company, or a corporation. These designations come with different implications for taxes, liability and administrative complexity. Next, register the business name with the appropriate agencies. An Employer Identification Number likely will be needed for U.S.-based businesses. Licensesandpermits, including a sales tax permit if products will be sold, also may be required.
• Secure your finances. Decide what capital will be used to start the business, whether it is personal funds or from investors or a loan. Also, it is wise to open a dedicated business bank account and credit card to help separate personal and business finances. This will make accounting and filing taxes easier.
• Reassess insurance policies. One might consider business liability insurance to protect assets and the home from potential risks. A home insurance policy may not cover business-related incidents, even if they are at home.
• Develop a marketing strategy. As with any business, a home-based business requires a marketing plan. Developastrategytopromote the business and reach the target market.
• Retrofit the home. While manyhome-basedbusinesses can work seamlessly without home modifications, others may require some changes and a dedicated space. Assess needsandthenmakechanges accordingly.
Home-based businesses can be viable ways to make money and turn a passion into a profession.