If you've ever contemplated launching your own business, you've likely considered work-from-home opportunities. After all, starting a business at your own place requires little to no overhead costs, making it less of a financial risk than renting an office or storefront. Plus, by working from home, you can benefit from added perks like losing a regular commute and having additional flexibility to strike an optimal work-life balance. Still, for all the advantages a home-based business can afford, it's easier said than done.
If you want to become your own boss and find the right work-from-home entrepreneurial venture, here's how to start a business from home:
- Choose a compelling small business idea.
- Hire professional help.
- Create a budget.
- Keep your day job or work part time.
- Account for taxable income.
- Invest in your office space.
Read on to learn more about how to make your home business idea a reality.
Choose a Compelling Small Business Idea
It doesn't have to be all that unique, but your business should solve a problem, says Asa Leveaux, an entrepreneur coach based in Oklahoma City. "Restaurants solve the problem of hunger. Private tutoring solves the problem of students not having great grades. And you solve a problem as well," Leveaux says. "The greater you are at explaining what problem you solve, the better your bank account will be in the end."
It's also a good idea to craft a business plan. Coming up with an idea can be challenging, but developing a plan to execute your idea can take weeks and months. In your business plan, you'll want to consider how to market your business, finance it and identify competitors. After all, if you don't budget for marketing, or have a plan to get the public to be aware of your business, you'll have few customers. And keep in mind, it takes money to make money, so you may need business loans or perhaps a willing friend or family member to invest in your business if you don't have the money.
You'll also want to carefully evaluate your skills, talent and passions before starting your business. You might want to see if a local college or community center has any courses you can take before starting a business.
Hire Professional Help
Creating a new business requires filling out plenty of paperwork to ensure you don't run afoul of any tax laws. You may want to simply file with the Internal Revenue Service as a sole proprietorship, or you may want to file as an LLC, which means you'll need to apply for a federal employee identification number. Alternatively, you might want to file as a C corporation or an S corporation, both of which also require a federal employee identification number, and there may be other requirements you'll need to fulfill, such as getting a business license.
"To be set up for success, you still need to do the administration stuff by the book," says Jackie Minchillo, co-founder and president of Pineapple Development, a St. Petersburg, Florida-based web development agency that she runs with her husband, Donny.
Julie Whitney, the owner of a home-based public relations firm, Phillippi-Whitney Communications, LLC, in Cincinnati, Ohio, advises hiring someone to walk you through the numerous steps you need to take to set up a business. "Find a good small business accountant who can steer you in the right direction in terms of where to incorporate or become an LLC. He can always guide you on filing quarterly taxes," she says.
And if you can't afford professional help, you may want to seek out help from the nonprofit business mentoring group SCORE or the Small Business Administration, which features information and free resources for small business owners getting started.
Create a Budget
When it comes to mapping out a business budget, the key is factoring in your fixed expenses, like your mortgage or rent and phone bill, and variable expenses, such as groceries and gas. Are there any purchases that you make every month that you can jettison from your routine? Budgets are always important, but they can be vital if you're depending on the revenue you're making from a home-based business.
If you launch a home-based business and you aren't working somewhere else, remember you won't be paid regularly, points out Melissa Smith, who owns and runs The PVA, a virtual assistant matchmaking and consulting firm based in Athens, Georgia. If your business is taking off, you may have pinpointed a money-making side gig, but "having money coming in at all times can be harder to manage for some."
Or you may go stretches at a time without any revenue coming in. Smith says you should be thinking about that as well – and how to set your prices. "So many people, including myself, fall into the trap (of thinking) if I do what I love then of course I will make money. I've been doing this for years. It's not always that cut and dry, and often people don't set their prices to factor in insurance, sales tax, federal and state taxes or monthly business expenses, since their biggest expense of leasing or renting outside the home is not a factor."
You also might want to ask yourself what you will do to keep afloat if it takes awhile to make an income. Will you keep yourself afloat with credit cards? Do you have emergency savings?
Keep Your Day Job or Work Part Time
You may think your new business is a sure-fire success, but Leveaux warns that you really shouldn't do that until the numbers suggest that you can afford to quit. "It's important to keep the lights on because your bills aren't paid by motivation," he says.
Account for Taxable Income
Once the money does come in, you're going to need to make estimated payments to the Internal Revenue Service. Because of that, Whitney says she always puts 30% to 35% of each check into a separate account, which she uses to pay her quarterly taxes from. If you don't take this important tax-filing step you could face a hefty tax bill.
Invest in Your Office Space
While one of the perks of working from home can be working in your pajamas, a lot of home-based business owners suggest some formality in the home. "Create a formal work space that inspires productivity. Don't work from the couch with your laptop in your lap," advises Minchillo.
Minchillo says that she and her husband worked from their home for 10 months before renting an office space, though they still each maintain a home office. She advises getting dressed as if you're going into an office. "It helps shift the mind into work mode," she says.
She also suggests creating a schedule and sticking to it. "Do what you need to do to make sure work time is just that. No multitasking and mixing home duties with work functions," she says.