When many Americans lost their jobs during the pandemic, they responded with a renewed sense of entrepreneurial purpose. U.S. workers had a lockdown wake-up call for eliminating their daily commutes, gaining flexible work schedules and being their own boss.
According to SBA.gov data, there are more than 32.5 million small businesses in the U.S. Half of those, or approximately 15 million, are home-based businesses. The percentage goes up to more than 60% if you include small companies without paid employees.
When starting a business from home, people from all backgrounds find new opportunities amid job burnout, unemployment and underemployment. While many start working from home as a side hustle alongside their regular job, home-based businesses can become successful primary endeavors.
If you want to start your own home-based business, it’s crucial to get organized with the right mindset, financing and marketing. If you’re not sure where to start, use our in-depth checklist to stay on the right track.
Before you start
Accomplish the following action items before you officially start your new home-based business.
- Conduct a personal evaluation. Ensure you’re ready to start your new business. One handy tool is the U.S. Small Business Administration’s (SBA) Entrepreneurship Readiness Assessment, which can help you better understand your skills, characteristics and experience, and how they relate to your readiness to start a business.
- Sign up for small business training classes. Free courses are available through the SBA’s learning platform, and SCORE.org has additional resources and mentors. Learn how to write a business plan, and gain familiarity with small business accounting, small business tax considerations and effective marketing best practices.
- Research the market. It’s crucial to know your industry. Who are your target customers? Who else is in your space, and how can you beat the competition? Is the sector or industry poised for growth? Track your industry’s trends to understand precisely what’s happening.
- Write your business plan. After learning about business plans through expert resources like the SBA and SCORE.org, it’s time to formally write a business plan. You can reach out to mentors at SCORE.org for feedback and advice on your business plan.
The SBA says that about 1 in 5 businesses fail within the first year. After five years, only half are still operating. It’s crucial to prepare as much as possible to increase your chance of success.
Getting set up
It’s time for some practical considerations and tasks related to starting your home business.
- Name your business. Determine the perfect name and register your business name with your state. Keep your potential business domain name in mind when choosing your name.
- Secure a P.O. box. Many small business owners prefer receiving their mail via a P.O. box to keep their personal mail separate. Using a P.O. box at a business services location is also handy for mailing packages, getting documents notarized and more.
- Set up a separate phone line. You likely won’t want to conduct business via a home phone or personal cell phone. Look into business phone systems that cater to small businesses, or use a dedicated smartphone.
- Figure out where to set up shop. You’ll need to equip your workspace with a desk or table, comfortable chair, and proper lighting; you’ll also need easy access to electrical outlets. Save money by looking into used office furniture that suits your needs.
- Track utility costs. Determine your household’s regular costs for electricity, real estate taxes, mortgage interest, insurance, repairs, etc. Depending on how much space you use as your home office, you may be eligible for tax deductions and benefits for business expenses.
- Buy a laptop for work-only purposes. Your personal search history, family pictures and social media accounts should be separate from your work activities. Use a laptop or computer dedicated to your business to streamline operations and work more professionally.
- Choose business software and applications. Depending on your business and its needs, pinpoint the software best suited to your work. You’ll likely need an office suite, such as Microsoft Office or Zoho Office Suite, accounting software like QuickBooks or Zoho Books (read our Zoho Books review to learn more), and file storage tools like Dropbox and Carbonite.
- Invest in an all-in-one printer. An all-in-one printer can help you scan, print, fax and copy. Investing in one will save you from countless trips to the post office or Staples.
Pay close attention to your new business’s legal considerations, as it’s crucial to stay organized and compliant.
- Decide your business entity form. Speak with a lawyer or conduct research to determine if forming an LLC is right for you. Forming an LLC can protect your personal assets. You may also consider entity forms like a sole proprietorship, partnership, corporation and S corporation.
- Apply for an EIN. You will need an employer identification number (EIN) to act as your federal tax ID. You will need it to pay taxes, take out loans, open a bank account, apply for licenses and permits, and more.
- Properly register your business name. You’ll need to register your business name with the U.S. Patent and Trademark Office. Registering will prevent you from violating any trademark or copyright laws.
- Find small business insurance. Look into small business insurance, including general liability insurance and errors and omissions insurance. Also, double-check your homeowners’ insurance policy to understand whether or not it covers home-based business losses.
- Research workers’ compensation insurance in your state. If you don’t have any employees, most states don’t require you to purchase workers’ compensation insurance for yourself. However, if you don’t have it, you won’t receive any benefits if you’re injured on the job. Whether you’re starting out alone or you have several employees, it’s critical to understand workers’ compensation insurance laws in your state.
- Reach out to a local CPA. Whether or not you’re ready to hire a CPA, it’s valuable to consult with one. A CPA can answer any questions you may have and organize and submit your business taxes for the following year.
- Check if your industry needs licensing. Business license and permit requirements vary by industry and state. Research your situation to ensure you remain compliant.
- Interview potential business lawyers. Developing a relationship with a business lawyer you trust is crucial. Choose one with whom you feel comfortable. Issues can arise unexpectedly, and the last thing you want to worry about in a crisis is finding a good lawyer.
Finances are your business’s life force. Establish excellent financial management practices from the start.
- Get a bank account and credit card. Open a business bank account and apply for a business credit card. Establishing credit will help you apply for business loans and secure additional financing.
- Figure out your business’s budget. When determining your small business budget, consider how much money you’ll spend on supplies, advertising, operations, shipping and more. You must also decide on your salary.
- Secure startup funding. If you’re not self-funding your business, research your financial options. Financing options include crowdfunding, securing venture capital and getting a business loan. You may also consider reaching out to friends and family for seed money.
- Stay on top of deadlines and due dates. Pay your bills on time to increase your credit limit spending when you need to scale your business.
- Separate your business and personal accounts. With regard to credit cards, bills, banking and more, separating accounts will make it easier to keep track of debt and stay tax compliant.
- Proactively manage inventory. If your business has inventory, it’s crucial to avoid having too many or too few products.
Since organized finances are so critical, check out our reviews of the best accounting software to choose an application that puts your daily financial tasks on autopilot.
Building an online presence
Even if your business’s official address is your home, your online presence should be professional and impressive.
- Register your domain name URL. Use Instant Domain Search to ensure your name is available, and then register it properly.
- Create a website. Design a website that’s professional and easy to navigate. Choose one of the best website builders to fit your budget and needs, whether you require a complex online store or a straightforward business presence.
- Optimize your website for mobile devices. Work with your website designer to ensure an optimized mobile experience. You want users to be able to view your website easily on multiple platforms.
- Develop an SEO strategy. It’s crucial to prioritize your SEO strategy so your webpage ranks higher and enjoys more relevant traffic.
- Use social media, your website and email marketing. Staying active online and posting content frequently will keep your brand relevant and engage customers.
- Establish your business email account. Having a business email account sends a professional message to customers.
- Get listed on web directories. Establish your business’s presence on appropriate directories. For example, create a Google Business profile or a profile on Bing Places for Business, Yelp and Apple Maps.
- Partner with influencers. Build brand awareness and increase organic marketing by using influencers and brand ambassadors who are genuinely enthusiastic about your products or services.
- Get set up to accept credit card payments. You’ll want to be able to easily accept credit card payments, so set up a merchant account with one of the best merchant account services. If you’re selling online, ensure your website has online shopping cart functionality.
Marketing your business
You’ll need to get the word out about your business by marketing your products and services.
- Design basic marketing materials with your contact information. This may include images for social media accounts, brochures, e-books, business cards and direct mail pieces.
- Set up an email marketing account. Email marketing is an inexpensive, effective way to reach your customers and prospects. The best email marketing services can handle your email campaigns and provide valuable metrics.
- Secure your social media presence. You’ll want to secure your business’s name on various social networks where you plan to have a presence. Use KnowEm to reserve your name on hundreds of social media sites.
- Promote your products and services with social media. Some best practices for social media content include publishing meaningful blog posts, offering exclusive content, providing thoughtful insights and posting discounts across social channels.
- Focus on collecting five-star reviews. When possible, request reviews from satisfied customers. Good customer reviews that praise your company and products are useful for boosting sales.
- Use customer data to find your target audience. Narrowing your audience to your most likely prospects can save marketing dollars and customer acquisition costs.
- Network your business as often as possible. While digital marketing efforts are essential, don’t forget about your local community. Try to participate in local events and engage with other business owners.
Dave Thomas contributed to the writing and research in this article.