So, you’ve decided to jump in with both feet, take control of your destiny, and run your own business. Even better, you’ve decided to get out of the commuter grind and run that business from your home.
Congratulations! This can be a very rewarding lifestyle, assuming you have everything you need in place to make it flow smoothly.
After reading that last sentence, you might be wondering: What do you need to start a home-based business in the first place? Well, let’s take a look.
A Workable Idea
You must have something to sell if you’re going to make money. That something can be your time, your expertise, your talent, or products and services. Whatever you decide, it’s a good idea to conduct some market research to be certain there’s a demand for what you have to offer.
You’ll also want to take note of competitors and determine what you can do to stand out. Once you have all of that information, writing a business plan is a great idea. This will serve as your roadmap and give you the documentation you’ll need should you decide to seek outside financing.
Another fact to consider is whether the idea has staying power. Ideally, you’ll do something with the constant demand for which there is a definite need from a significant portion of the population. Further, you’ll want to sell something that people will buy, even when the economy slows down. You also want to find something in which you have a passionate interest.
The Ability to Do What Needs to Be Done
There’s more to running a business than clocking direct deposits. You’ll have to earn them. Do you have the expertise you’ll need to do so? Can you bring on people who do?
If you’re going it alone, you’ll answer phone calls and emails, process orders, write contracts, submit invoices, and pay bills — as well as handle taxes and accounting. You’ll also need to create budgets and spending plans to ensure the ongoing profitability of your business. Finally, you’ll need to market your business so people know you exist!
Space to Operate
Many a company has been started around a kitchen table, in a closet, or in a garage. Ideally, you’ll find a space in which you can work free of the distractions home environments often present. If you have a family, you’ll need a separate room with a door – and maybe some soundproofing.
The area you choose should have enough electrical outlets to safely power whatever equipment you’ll need, as well as space for your supplies and for you to conduct your work. You’ll also need speedy, secure internet connectivity.
Proper Zoning or a Variance
Make sure it’s legal to do what you want to do out of your house. If your business involves the use of chemicals, heavy machinery, or any other element capable of negatively impacting the immediate atmosphere, you might be better off renting space in an industrial park.
Ditto if you’re going to be doing a lot of shipping and/or receiving goods with delivery trucks. Your neighbors might get cranky about that after a while. By the way, you’ll need to garner the blessing of your homeowner’s association too, if your neighborhood has one. Look into getting a variance if it turns out your neighborhood isn’t zoned for your activities.
Licenses and Permits
Odds are, your state and local governments are going to want to know what you’re up to. Make sure you have all the right licenses and permits in place, so your activity can be taxed appropriately. If you’re selling products, you’re going to need a sales tax permit as well.
Setting up a separate bank account for your business is also a good idea. This makes it easy to handle your taxes and the IRS will look more favorably upon you. Get a Tax ID number to protect your Social Security number. If you’re creating something original, seek to patent it; trademark your business name, and copyright it, too.
Homeowners’ insurance policies do not always cover the property for businesses. Check to see what provisions your policy makes. For example, your car won’t be covered in business situations by regular car insurance; you’ll need a commercial auto policy. You’ll also need General Liability business insurance from a provider like Verifly if you have customers coming and going or you enter clients’ homes and/or places of business. This type of policy covers accidental bodily injury or property damage to
others, among other things.
Working at home will entail less expensive than renting, leasing, or buying a facility, but you’ll still encounter costs. Consider all of the line items for which you’ll need cash.
These can include:
- Professional support such as a lawyer or an accountant
- Office furniture/computers
- Supplies and materials
- Business licenses and fees
- Fees for your domain name, hosting, and website design
- Business cards and marketing materials
You’ll need to find funding sources if all of this is going to run you more than you have in hand. While you’re running the numbers, figure out what your ongoing costs will be to help you price your products and services profitably.
Your kids and significant other might be excited to learn you’re going to be home all the time — at first. Their attitudes could change when the needs of the business start cutting into their lifestyles (and they will).
Inform them of the endgame. Let them be part of what you’re doing. Encourage them to communicate freely and openly. Make adjustments when they voice concerns.
Understanding what you need to operate a home-based business — before you start it — is crucial to the ongoing success of your endeavor.