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How to Start an Online Business From Home

Ryan Ayers
Ryan Ayers

Follow these five steps to lay a durable foundation for small business success in the digital marketplace.

What's more ideal than owning your own business? The answer is owning a company that you run from the comfort of your home.

You can improve your odds of entrepreneurial success by taking the time to consider a few key points about your proposed enterprise.  A growing number of entrepreneurs are starting home-based online businesses. However, it's essential to take the right steps to lay the foundation for success.

How to start a business from home

Although every business is unique, there are several steps entrepreneurs should consider when starting a business from home.

1. The fun part: Choose a name.

Your business name is one of the most important parts of your brand. Your name should project the right image. Of course, your tastes will influence the business name that you choose, but you should also think about how you want customers to view your enterprise.

You want a name that's creative and unique but that also makes sense for your service or goods. Research the name(s) you are considering. You do not want to choose a name only to find that customers confuse it with another business. Nor do you want one that may compel an existing proprietor to sue you.

However, don't overthink your choice. In the beginning stages of starting a business, you don't need to pick the perfect business name. You can change it at any time between now and when you formally launch your business. You do, however, need to reach a final decision when you register your business with the appropriate municipal and government agencies.

It's also recommended that you register a website for your business, even if you don't have content or products listed on it. Registering your website name can protect your business name from domain squatters, who look for companies without websites hoping that, one day, the owner will pay a handsome fee for the right to use the domain name.

Choose a domain name that evokes a positive image. In addition, you want to select a name that is professional so that customers take your enterprise seriously but which isn't too technical that your ideal customer won't understand.

Finally, keep it short and sweet. Google is the first place most consumers search to find information about businesses. You want your business name to be short and easy to remember so that customers can find you.

2. Write a business plan.

A business plan is not a guarantee of success, however, it is a practical exercise that will help you determine what you need to do to improve your chance of success.

Every business plan is different, but there are some common elements, for example, the:

Some business plans include an optional appendix for information that's too cumbersome for the central part of the document. When you present your plan to stakeholders – for instance, investors or lenders – limit it to two or three pages. There's no point in submitting a 20-page business plan that most people will likely never read.

The business environment is fiercely competitive. Consider anything that you can leverage to your advantage when creating your business plan. For example, veterans have unique opportunities like small business loans, grants and other funding explicitly intended for the nation's former soldiers.

The Small Business Administration sponsors the SBA Express Loan Program, which serves veteran-owned small businesses. Veterans can apply for small business loans of up to $350,000. Also, the SBA's Veterans Advantage Program offers business loans with better terms compared to current market rates. 

3. Learn the legal requirements.

Even though you're launching a home-based business, there are laws you must comply with. For instance, depending on your business structure or if you will have employees, you may need a federal employer identification number (FEIN). Depending on your business and/or industry, you may need an occupational license, or you may have to file your business with state or federal agencies.

Another important legal aspect is to determine the legal structure of your online business. The most common structure for small businesses is a limited liability corporation (LLC).

For some aspiring entrepreneurs, the cost of hiring a lawyer to prepare and file the paperwork for your business may be burdensome. If a lawyer isn't feasible for your budget, visit your local Small Business Administration. They have branches across the United States, and they'll also connect you with SCORE. The nonprofit is staffed by experienced executives who volunteer their time and share their expertise to help you launch your business. If you're a senior citizen, you may also want to visit AARP's small business center.

4. Insure your business.

It's also essential to protect your home-based business so a small mishap doesn't lead to the end of your venture. Accordingly, you want to purchase additional business insurance, whether you own or rent your property.

A typical homeowner's or renter's insurance policy does not cover business activities. Depending on your business, you may pay an extra $100 annually for about $2,500 of additional coverage. The actual cost will vary based on your business, the kind of work you will perform and the amount of inventory that you'll need to insure against damage or theft. 

5. Find the right technical support.

As a home-based entrepreneur, you most likely won't have the budget to hire a tech expert to fix things every time something goes wrong. You can get up to speed quickly by taking a computer class at your local community college. If you use Apple products, you can take lessons at your nearby Apple store.

If you need to conduct presentations, teleconferences or videoconferences, you'll need to familiarize yourself with videoconferencing tools such as:

Consider, too, the primary technology that you will need to run your business and successfully reach your target market. For instance, it may surprise you to know that, today, many small businesses with a limited budget can afford data analytics tools. Every business is different, but most enterprises can benefit from a few common tech resources, such as:

Last, consider whether you or your employees need hardware specifically for your enterprise – such as computers, laptops or mobile devices.

Should you start a home-based business?

Starting a business from home may seem like a great idea, but it's not for everyone. Below are some advantages and disadvantages you want to carefully weigh before moving ahead with your business plans.

Pros of starting a home-based business

Managing a business from home offers entrepreneurs a few luxuries that those working in brick-and-mortar stores or offices may not have. For example, working from home gives you more freedom over your schedule – you can multitask personal and professional responsibilities and work whenever you want, day or night. Startup costs are lower: You don't have to pay rent for a store or office, and you can save time and money on your daily commute.

Additionally, working from home may offer tax savings, as some laws and regulations may allow you to deduct part of your home's expenses (e.g., mortgage, maintenance, property taxes) on your business tax returns.

Cons of starting a home-based business

There are limitations that come with running a business from home, which entrepreneurs should carefully evaluate. For example, working from home can erase the current boundaries between your personal and professional life. This can lead to pitfalls like overworking and getting burnt out or, conversely, getting distracted and losing motivation.

Working out of your home can also restrict your ability to grow. You are limited to the size of your home, which may leave little room to expand and hire employees. Depending on your industry, a home-based business may impact your relationship with potential customers – a client may view your home office as unprofessional. Some zoning laws prohibit home-based businesses, so check the regulations in your city.

What businesses can you start from home?

If you've decided that an online home business is right for you, but you're not sure what kind of new business to run, the following companies can be operated 100% remotely:

  • Copywriting
  • Graphic design
  • Web developer or web design business
  • Digital marketing, social media marketing or affiliate marketing service
  • Transcription service
  • Translation service
  • Virtual assistant
  • T-shirt printing business (with an online store)
  • Dropshipping service

It takes a lot of work to start a business. However, nothing good comes easy. By taking the time to consider the possibilities for your business idea, you can increase the likelihood of success and long-term sustainability.

Additional reporting by Skye Schooley.

Image Credit: Jacob Lund / Getty Images
Ryan Ayers
Ryan Ayers,
business.com Writer
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Ryan Ayers has consulted a number of Fortune 500 companies within multiple industries including information technology and big data. After earning his MBA in 2010, Ayers also began working with start-up companies and aspiring entrepreneurs with a keen focus on sustainable scaling, professional development and business growth.