Starting a small business at home can be an achievable goal, and these steps will help you quickly start earning money with very little time and qualifications. I managed to set up a successful home business in one afternoon, and you can too. There's no need to spend months filling out complicated paperwork or navigating legal red tape. You don't need to take classes, become an accountant, or hire a manager. Fear of the unknown often gets in the way of success, and it can be very overwhelming without clear directions. Here are the steps I followed to start my business, giving you the confidence to take action and achieve your business goals.
Step 1. Come Up With a Business Idea
Coming up with a successful business idea is the first step in starting your own small business. Do you have a passion or skill others might pay for? That could be the beginning of a successful small business. Simply having a business idea isn't enough – it's essential to see if there's a market for that type of business and whether or not you can stand out among competitors. To test the viability of your business idea, start with market research and competitor analysis. Look into your target market, what they're buying, and what similar businesses offer. This can help shape your unique selling points and create a business plan. I like to ask friends, family, and industry professionals for input. Their feedback can give valuable insights into refining and improving a business idea before taking the plunge into entrepreneurship.
Step 2. Decide What Product or Service To Offer
Before starting a small home business, take some time to figure out what you plan to sell. Will you offer physical products, a service, or a mix of both? Once you understand your offerings, begin understanding your target customer. What problems are your products or services addressing, and who will likely be interested? These questions can shape your marketing efforts and increase your chances of success. Be ready to get creative and stay flexible – key traits for becoming a successful business owner.
Step 3. Postpone Branding
Branding your business before you begin puts your priorities out of order and gives you limits you don't need as a beginner. Branding only works when it mirrors the company's actions and ideas. As you get your company off the ground, your brand will emerge. It's perfectly fine for your small business to operate under something other than your company name. Besides, a business name is something you can easily change in the future.
Step 4. Get Your Employer Identification Number
An employer identification number (EIN) is a tax number used to identify your business. It's legally required if you intend to hire employees or form a corporation, LLC, or partnership. Even if you expect to be a one-person show, getting an EIN is good for business and security reasons. Skipping this step requires using your social security number to identify your business, making you vulnerable to identity theft. I got my EIN for free by applying online here.
Step 5. Register Your Trade Name
If you don't want to use your personal name for your home business, you might need to register a trade name. Check state laws on the requirements in your specific location since regulations can vary from state to state. Registering a business trade name is a pretty simple process. It usually requires filling out a form with contact information and a few specifics about your business. If you're working with partners, be prepared to also include their names on the form.
Step 6. Get Your Business License
Your city or county will require you to purchase a license to start a small business at home. The Small Business Administration provides a comprehensive guide to understand the licenses and permits for legal business operations. A business license holds you accountable for your services and the necessary taxes.
While it might seem unnecessary if you only use your home business for extra income, you could face potential legal issues without a license. Fortunately, the licensing process is often available online. Otherwise, you'll need to visit your city or county office in person. Ensure your privacy and security by using your Employer Identification Number on this form instead of your social security number. You might be required to pay a small fee to get your business license. Once you've completed this step, you have officially started a business from home.
Step 7. Prepare a Business Plan
“A goal without a plan is just a wish.” This phrase was first uttered by French aviator and writer Antoine de Saint-Exupery (author of “The Little Prince” written in 1943) over half a century ago.
Think of your business plan as a roadmap that outlines the necessary steps to achieve your goals and help you stay on track. If you need a business loan, you'll need to have a business plan. But, even if you already have the money required to get started, this plan will help determine the capital required and provide a direction for your small business.
Your business plan doesn't need to be formal. It can simply be a list of milestones and financial goals. If you're not presenting to investors, think of it as a comprehensive overview of your business structure, the issues your business will address, and your target market. Creating this plan will help uncover any areas you may not have considered. Many online business resources are available for those needing detailed information on creating a business plan.
Step 8. Decide on a Business Model
When starting a new business, jumping right in without thinking about the legal structure can be tempting. The way you set up your business can have consequences in the future. A sole proprietorship may be chosen for ease and simplicity. As the name suggests, this structure designates you as the sole owner, and no complicated paperwork or taxes are required. It also allows flexibility in terms of decision-making and profits. Although, there is one major downside. As the sole proprietor, you are personally responsible for any debts or liabilities while running your business. So, weigh the pros and cons and explore all options before committing to a legal structure for your small business.
Step 9. Open a Business Bank Account
As your business grows, keeping your company separate from your personal life becomes more critical, even if you are the only person involved. Opening a business bank account can protect you from unexpected problems and provide convenience for smooth transactions.
I have my business account at a local credit union. There are so many options available when it comes to banking, so be sure to take your time and compare fees and benefits before making a decision.
Reasons to Have a Business Bank Account
- Legal protection – If, for any reason, your customers aren't satisfied with your exemplary service and decide to sue the business, your personal finances cannot be dragged into the lawsuit.
- Convenience – Distinguishing personal and business expenses is difficult without a business credit card. Additionally, a business credit card may have more to offer than a personal account.
- Tax Purposes – No matter what kind of business you own, business taxes don't mingle with personal taxes. You must file your business expenses and income separately from your personal taxes to get the proper allowances and deductions.
- Accounting clarity – You might not need to take a professional accounting course to run your business. Still, you must keep up with the cash flow entering and leaving your business. A separate account will allow you to make business-size deposits and deductions hassle-free
Step 10. Protect Yourself With Business Insurance
Running a business comes with numerous risks, including lawsuits, data breaches, and unexpected interruptions that can shut down operations. Protect yourself by obtaining the right insurance coverage. Sitting down with an insurance agent can help you identify specific coverage options that will cover your bases and give you peace of mind. I always feel better knowing I'm fully prepared, even if nothing goes wrong.
Step 11. Set up a Home Office
A specific space for your work materials and tasks can improve your productivity and mental health. Plus, when it's time to clock out for the day, you can leave all your work in one place instead of finding scattered papers and forgotten to-do lists all over the house. Designating an entire room as an office is ideal, but even carving out a corner of your bedroom can make a difference. So treat yourself to some cute desk decor and organizational supplies. And enjoy all the perks that come with a designated workspace for your new business.
Step 12. Find a Good Accountant
Hiring an accountant can bring relief and peace of mind regarding filing, structuring your business, and tracking expenses. Many small business owners try to save money by handling their taxes, which can often cost them more in the long run.
An accountant can not only ensure everything is done correctly, but they can also offer valuable insight and advice on optimizing your business financially. So leave the business tax headaches to the professionals so you can focus on running your business! Be sure to shop for a reputable accountant with experience working with small businesses in your industry.
Step 13. Check for Any Additional Legal Requirements
Before starting your own business, consider what legal boxes must be checked. Take the time to research any state or local requirements that may apply to your business. It may feel tedious initially, but it will save you headaches and money in the future. These requirements can range from obtaining a license or permit to studying local zoning laws restricting where you can start a small business. The last thing you want is to be hit with a fine for something that could have been easily avoided with proper investigation beforehand.
Step 14. Put Your Business Idea to the Test
It's time to get the business off the ground and start making money. But where do you start?
First, determine your target market and the most effective ways to reach them. Creating a solid marketing strategy can involve some trial and error to find the right channels to promote your product or service. Craft a sales pitch highlighting what sets your business apart from competitors. And remember, pricing is key. Don't undervalue yourself or your product, but also ensure your prices are competitive.
Don't be afraid to reach out to satisfied customers to ask for referrals or offer promotions and deals to attract new buyers.
Starting a small business at home is exciting, but there are many things to consider. From legal requirements and marketing plans to opening baking accounts and setting up a home office, important steps must be taken. If you're passionate about your product or service and have a clear vision for your company, these steps for starting a business can help bring your dream to life.