For individuals who are currently unemployed, considering a leap into entrepreneurship by starting a home-based business is a great option. Low start-up costs, no commute, more control over your time, (and earning capacity) are a few of the many benefits of a home-based business. But, as an owner, the responsibility of finding clients, paying bills, and managing operations will all be on your shoulders. In this article, we explore six steps aspiring entrepreneurs should take to start a successful home-based business.
Create a Business Plan
A business plan is a detailed document covering all the important aspects of the business, such as:
- Goals: These are time-bound objectives that you seek to achieve in the short and long term.
- Financial Requirements: Specify the costs you’ll incur to launch the business and manage it monthly. Additionally, include a budget to cover these costs which can be done via bootstrapping or obtaining external funding, until the business becomes self-sufficient.
- Market Analysis: As reported by Pestle Analysis, this includes conducting research to understand current market trends and the performance of competitors. Additionally, collect information on your target market, their wants, problems, expectations, and purchase behavior.
Establish a Limited Liability Company (LLC)
A common mistake made by home-based entrepreneurs is to run their business as a sole proprietor. Under a sole proprietorship, you as the owner will undertake unlimited personal liability for the business. For instance, if you need to pay hefty damages to a client, your home, car, and finances can be claimed in the repayment process.
With an LLC, only business-related assets and funds can be scrutinized in the above-mentioned situation. Additionally, an LLC allows you to use business-related expenses such as utilities, purchase of stationery, gas (if your business requires frequent travel), and more as tax write-offs.
Open a Business Bank Account
After establishing an LLC, the next order of business is to open a separate bank account. Compared to a personal account, you can expect to receive great deals from banks, especially if you’re a first-time customer. This can include credit cards with high limits and low-interest rates (often for a limited time), higher withdrawal limits, and access to a personal banker who can assist you with business finance-related queries.
Additionally, having a business bank account simplifies the process of creating financial statements, reviewing performance, and calculating taxes come filing season.
Create a Workspace
Your first step will be to create a workspace free of distractions. Having a home office or an extra room is ideal. However, if space is limited, consider buying a room divider and choose a quiet corner of the house to set up shop. In addition to a desk, an ergonomic chair, and your laptop, make provisions for storage options that will be needed for the safe keeping of business documents and contracts.
Being your own boss requires a high level of self-discipline. This will include creating a fixed work schedule and minimizing distractions during those hours. Additionally, share the schedule with your family and request them not to disturb you during those hours.
Purchase Business Insurance
While homeowners insurance will safeguard against damage to your property, it may not cover damages related to the theft of business equipment or other work-related mishaps.
To avoid the confusion of purchasing numerous business insurance policies, opt for a Business Owner’s Policy (BOP), which safeguards you against:
- Theft of business equipment
- Damage to business property, which can include external locations, storage units, etc.
- Protection from loss of income arising from property damage, theft, or catastrophes
Implement Sound Accounting Practices
Use software to run accounting for your business. The best type of platform will allow for designing invoices, managing payroll, making payments, and creating 1099s for independent contractors. Additionally, important financial statements such as a balance sheet, profit/loss statement, etc. should be easy to access on demand to review business performance and stay on top of financial requirements. These statements can also be used to calculate tax deductions, helping you save hundreds if not thousands of dollars annually.
We would be remiss to say that this is all it takes to start a business, but these six steps can make your entrepreneurial dreams a reality pretty quick. You really can’t go wrong when you have the right workspace, a quality business plan, state registration, top-notch insurance, and reliable accounting software. The rest you can fill in as you go. Good luck!
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