How to Start a Small Business at Home

  1. Identify your small business idea.
  2. Start as a side business or hobby.
  3. Decide on your software.
  4. Create a business plan.
  5. Decide whether you’ll be an LLC or sole proprietorship.
  6. Create a business bank account.
  7. Determine if your business idea works well from home.
  8. Set up an office.
  9. Get to work!


Decide what you’re going to sell

A lot goes into starting a business, but the first place to start is to figure out what you plan to sell. Your success as a business depends on your ability to sell products or services to your customers.

Come up with a list of ideas for products or services you can offer. From there, you should consider the following questions:

  • Is there a demand for this product or service?
  • How will this benefit my customers?
  • Would I purchase this product or service?
  • What could I reasonably charge?
  • Is there enough of a demand for me to make a profit?

[Read more: The Complete Guide to Selling Online]

Subscription Box Business

The subscription box business is booming and there are plenty of big success stories with millions of customers including Ipsy, Dollar Shave and Birchbox. You too can have your own subscription box business!

Ipsy is one of many highly successful subscription
Ipsy is one of many highly successful subscription box services. An attractive and impactful landing page is important for this business.

This business has been around for a long time even before the Internet took off. I remember years ago for example that a friend subscribed to a monthly service sending her assorted chocolate candies. But digital marketing is what really helped these businesses reach the big time.

It can be a great business. You can choose a product space that you enjoy working in. Then you can add your own personal touch with the products that you choose to include, the design of your box, and your marketing. Plus you can skip the hassle of creating the actual products yourself – you can include items made by other companies inside your box.

A subscription box business is by nature a repeat customer, steady income business. Each month you ship out the product and the customer sends you money. Not only does it have great income potential but if you should get tired of the business you can sell it for even more money. In fact you may be able to sell a growing subscription box business for a healthy multiple, not just of profits, but of sales.

What can you offer in your subscription box? Just about anything! Some common choices include soaps, puzzles, makeup, socks, games, perfume, wines, cookies, candles, clothing and more. One of my friends offers a selection of coffees from around the world.

A cool option with this business is to work with a variety of product companies to get them to provide small amounts of their product as samples. They might even provide you these samples at no cost or very low cost. In addition you can make extra money by offering your customers larger amounts of these sample products.

So how do you succeed in this business? You need to totally nail down your marketing including defining your market niche, your product selection, your offer, your marketing message and your marketing channels. You’ll have to test a lot of options to find out what works best.

To learn more, start streaming the courses on BusinessTown, including Developing Your Marketing Message, Start-a-Business 101, How to Create a Business Plan, and The Complete Guide to Digital Marketing. You can try BusinessTown for free.


Decide on your business’s legal structure

Choosing the correct legal structure is an important part of running your business. If you want to get started quickly and with as little hassle as possible, a sole proprietorship may be right for you.

With this type of business model, you don’t have a partner or executive board to answer to, so you’re in complete control of all the decisions. Keep in mind, though, there is no legal separation between you and the business; you’re responsible for any debts and lawsuits that the business incurs.

In contrast, a limited liability company (LLC) provides more flexibility and creates a legal separation between you and the business; however, there is more paperwork to fill out, and you’ll have to file your business with the state.

[Read more: Sole Proprietorship vs. LLC: Which Should You Choose?]

3. Research Your Competitors

Virtually every business has a direct competitor. As an entrepreneur, you need to know which companies are operating in the same market as your company so you can differentiate your business from theirs. When creating marketing materials, you don’t want your content to mirror that of competitor businesses.

Here are a few tips to gather information about your competitors:

  • Conduct a Google search: Use Google to find local competitors. Visit their homepages and take note of their business models, contact details, and featured customers.
  • Google My Business: Every business looking for local customers gets a free Google My Business Listing. Some businesses thoroughly fill out this listing and provide great information about their business.
  • Use social media: Only 54% of small businesses have websites, but there are over 50 million business pages on Facebook. If you can’t find competitors on Google, you may find them on Facebook, Twitter, or LinkedIn.
  • Physical marketing materials: Collect and consume as many marketing materials from your competitors as possible. Consider collecting flyers, ads, and brochures.
  • Post a job ad: 51% of employees are open to leaving their current jobs. Take advantage of this statistic by posting a job ad designed to attract your competitors’ employees. Once hired, they can give you insight on how your competition operates.

Remember, you don’t have to do all of these competitor research tactics. You may find that you receive plenty of information simply from doing a Google search and studying competitor websites and directory listings.

Competitor Comparison Table

Once you collect information about your competitors, arrange the information in a table to compare each. In the table, list your competitors’ names, distance from your home business, what they do better than your business (advantages), and what your business will do better than theirs (disadvantage).

7. Choose a Legal Structure

Almost all home businesses should register as a legal business entity, such as a limited liability company (LLC). This would protect a business owner’s personal financial assets if a lawsuit ever occurs against the business. Incfile is an online legal service that assists business owners with registering their company as a legal entity with the state.

The table below shows the requirements for each business structure:

Business TypeRequirementsSole Proprietorship• Social Security number• Two pieces of personal ID (driver’s license, passport, or Social Security card)• Doing Business As certificate LLC• Federal Employee Identification Number• Signed operating agreement• Signed Declaration of Unincorporated business• Business license, if availableC Corporation• Federal Employee Identification Number• Certified Articles of Incorporation• Corporate Charter• Business license, if available S Corporation• Federal Employee Identification Number• Certified Articles of Incorporation or Corporate Charter• Signed corporate resolution and signature card by account signers• Business license, if available

At-home Business License

If you have customers, employees, or are creating products in your house, your city may require an at-home business license. This license is generally required to ensure that the business operating out of a home isn’t doing anything to cause harm to the public.

The house may be subject to an inspection from a city official. To determine if your city requires an at-home business license, check with your city’s official business registration website.

FREE Ebook: How To Start Your Business Step-by-step blueprint that shows you how to go from idea to launch in 30 days This email address is invalid. Email

FREE Ebook: How To Start Your Business This email address is invalid. Email

Virtual Assistant Business

As a virtual assistant you’ll help busy entrepreneurs, freelancers and business executives get caught up with all of the little chores they don’t have time to do. Most work is fairly basic and routine. You should be comfortable with common computer applications such as word documents and spreadsheets.

There is a huge demand for virtual assistants. Most assignments are part time and many customers will give you the flexibility to do the work on your own schedule.

Virtual assistants are more in demand than ever! T
Virtual assistants are more in demand than ever! This website connects entrepreneurs and other busy people with virtual assistants.

The issue with this business is that it is highly competitive, especially for simpler, entry level work. So ideally you should develop a specialty, or strong relationships with your clients, that will allow you to charge higher rates over time.

You’ll need a website, a service niche of some sort and a willingness to network, but opportunities to become a virtual assistant do exist for those who are organized and willing to help others. And it’s a relatively easy home based business to start and succeed at.

To learn more about starting a business see my course Start-a-Business 101. You can start watching this course and all the other courses on BusinessTown for free.

Step 3: Make Sure You Can Do the Tasks That Need to Be Done

    There's a lot to be done in starting and r
There's a lot to be done in starting and running a home business. Credit: ImagesBazaar | Getty Images

There is a lot that goes into starting a home business. Along with the tasks, is the ability to deal with hassles and frustration, fatigue, and slow results. If you can't do the tasks, or stay the course when things get hard, then a home business may not be for you. To make sure you have the stamina to succeed, answer this question honestly: Can you handle the day-to-day general tasks that starting a small business requires, like:

  • supplying product/service
  • distribution of product
  • invoicing/billing
  • setting appointments
  • ordering supplies
  • bookkeeping
  • marketing
  • filing
  • answering the phone
  • checking and replying to e-mail
  • manage energy levels
  • deal with disappointment
  • manage overwhelm

Some of these tasks you can delegate to a virtual assistant, but many home business owners are solo-preneurs, starting on a shoestring budget and having to wear all business hats. If you plan to start on your own, make sure you have the stamina to carry you through until you can hire help. It helps to learn how to prioritize and manage time

Step 3: Design and build your website

Once you’ve got your market and product, and you’ve nailed down your selling process, now you’re ready for your small-business web design. Remember to keep it simple. You have fewer than five seconds to grab someone’s attention — otherwise, they’re gone, never to be seen again. Some important tips to keep in mind:

  • Choose one or two plain fonts on a white background.
  • Make your navigation clear and simple, and the same on every page.
  • Only use graphics, audio or video if they enhance your message.
  • Include an opt-in offer so you can collect e-mail addresses.
  • Make it easy to buy — no more than two clicks between potential customer and checkout.
  • Your website is your online storefront, so make it customer-friendly.

Related: Top 10 Best Chatbot Platform Tools to Build Chatbots for Your Business

24. House or office cleaning

Cleaning businesses are incredibly appealing due to their low cost of entry—it essentially comes down to the cost of cleaning materials alone. Not only that, but you can guarantee that cleaning services will always be in demand.

We’ve covered the entire process of starting a cleaning business in our How to Start a Cleaning Business guide, right here on Bplans.

See Also: 6 Creative Ways to Figure Out If You’ve Got a Good Business Idea

22. Drop shipping

I won’t even begin to get into drop shipping here—especially when Shopify has such an excellent drop shipping guide already.

The appeal of drop shipping is obvious: it involves little when it comes to specific skill set, can be done from anywhere, doesn’t involve startup capital, and can be hugely lucrative.

Step 8: Determine Your Startup Costs and Funding Sources

    It takes some investment to launch a home busi
It takes some investment to launch a home business.

While you can start a home business on budget, it's not likely you'll build a profitable one without incurring some expense. Calculate your startup costs — the amount of money you need to open up shop. It's okay if you don't know specific costs, but you want to get as close as possible, perhaps even over-estimate expenses. Here are common start-up expenses:

  • Professional services such as a lawyer or an accountant.
  • Office furniture or equipment.
  • Supplies and materials required for your product or service.
  • Inventory.
  • Business licenses and other fees (i.e. franchise fees, permits, etc).
  • Construction costs if you need to build or alter a room to create a home office.
  • Website fees; domain name, hosting, website design (if you hire a professional designer).
  • Business cards and other printed marketing materials.
  • Other items specific to your business idea.

Once you have your list, look for ways you might be able to cut costs, and fund your business without going in debt. For example, can you make due with the computer and printer you currently have. Can you barter for website design?

You need to also consider:

  • How much will you need to pay your bills until the money starts coming in from your home business?
  • Will you be keeping your full-time job or is there another breadwinner in the family that can help you until you develop an income stream?

As you move closer to starting your business, keep a tally of expenses you didn't anticipate and add them to your list.

Finally, since it takes money to make money, look for funding sources for your business that ideally won't put you in debt. 

  • Where will the initial investment come from? Savings? Selling assets? 
  • Will you need a silent partner to help provide working capital, especially until you reach your break even point and being making a profit?
  • Are you willing to use your home equity to finance your business?
  • Is it possible you qualify for a loan? Check your city and state's websites on business resources as many localities have programs to help small business. You can also check into SBA loans from the U.S. Small Business Administration?

13. Register your business

If you’re planning to operate as self-employed, you’re not required to register your business. But you run the risk of missing out on tax benefits and personal liability protection if you don’t. If you decide to register as self-employed (or as a sole proprietorship), you’ll report your business income on your personal Form 1040.

Sole proprietors enjoy some of the lowest tax rates but, because you and your business are the same entity, you can be held personally liable for business debts. As with most things, there are pros and cons for every business registration. Choosing how to register your business can be tricky, but your local SBA can help you choose the right business structure and register correctly.

9. Put financial systems in place

More than 60% of experienced business owners say the first thing you should get help with when starting a new business is setting up your financial systems correctly. 

According to the QuickBooks survey, these business owners wish they’d invested in things like expense tracking and invoicing sooner. Learn from their mistakes. Now is the time to invest in financial bookkeeping or accounting software for your business or recruit the help of an expert (like a bookkeeper or accountant).

FAQs About Home Business Ideas

  • How do I start a small home business?

Wondering how to start a small home business? Here are 8 steps to starting an online business:

  • Choose an online business model that suits your business
  • Identify your target market
  • Identify the problem that your business is solving
  • Know your competitors and how you are different from them
  • Choose a sourcing strategy that your customers will love
  • Set up your payment system so you can get paid 
  • Test your business idea in the simplest way possible
  • Create your marketing strategy to start promoting your business
  • How do I make money from home business ideas?

There are many ways that online home business ideas make money. You could charge per product, create subscriptions, build affiliate links, and so much more. Once you have decided your business model you can start brainstorming the exact home business idea for you and get started.

7. Build your team

Unless you’re planning to be your only employee, you’re going to need to recruit and hire a great team to get your company off the ground. Joe Zawadzki, CEO and founder of MediaMath, said entrepreneurs need to give the “people” element of their businesses the same attention they give their products. 

“Your product is built by people,” Zawadzki said. “Identifying your founding team, understanding what gaps exist, and [determining] how and when you will address them should be top priority. Figuring out how the team will work together … is equally important. Defining roles and responsibility, division of labor, how to give feedback, or how to work together when not everyone is in the same room will save you a lot of headaches down the line.”

Step 5: Establish an expert reputation for yourself

People use the internet to find information. Provide that information for free to other sites, and you’ll see more traffic and better search engine rankings. The secret is to always include a link to your site with each tidbit of information.

  • Give away free, expert content. Create articles, videos or any other content that people will find useful. Distribute that content through online article directories or social media sites.
  • Include “send to a friend” links on valuable content on your website.
  • Become an active expert in industry forums and social networking sites where your target market hangs out.

Related: How to Create a Facebook Messenger Chatbot For Free Without Coding

You’ll reach new readers. But even better, every site that posts your content will link back to yours. Search engines love links from relevant sites and will reward you in the rankings.

Related Book: No B.S. Trust-Based Marketing by Dan S. Kennedy and Matt Zagula

Build up six months’ worth of savings for expenses

Admittedly, tapping into your savings account isn’t the ideal situation. Yet, it’s a pretty common practice among entrepreneurs. When designing your business plan, be frank with yourself about how much you’re spending and how much revenue you’ll likely bring in. Then, be realistic about how long it will take before you see a profit. Usually, it takes about at least six months before you start seeing any cash flowing in. Make it a goal to save at least six months’ worth of living expenses so you can devote yourself to your new business.

10. Grow your business

Your launch and first sales are only the beginning of your task as an entrepreneur. To make a profit and stay afloat, you always need to be growing your business. It’s going to take time and effort, but you’ll get out of your business what you put into it. 

Collaborating with more established brands in your industry is a great way to achieve growth. Reach out to other companies and ask for some promotion in exchange for a free product sample or service. Partner with a charity organization, and volunteer some of your time or products to get your name out there. 

While these tips will help launch your business and get you set to grow, there’s never a perfect plan. You want to make sure you prepare thoroughly for starting a business, but things will almost certainly go awry. To run a successful business, you must adapt to changing situations. 

Free download: Free download: We’ve created a sales plan template you can use to scale customer acquisition.

“Be prepared to adjust,” said Stephanie Murray, founder of Fiddlestix Party + Supply. “There’s a saying in the military that ‘no plan survives the first contact,’ meaning that you can have the best plan in the world, but as soon as it’s in action, things change, and you have to be ready and willing to adapt and problem-solve quickly. As an entrepreneur, your value lies in solving problems, whether that is your product or service solving problems for other people or you solving problems within your organization.” 

Apply for a small business loan when you need extra cash

If you’re looking for more capital and have been operating on a shoestring budget, consider applying for a small business loan. Banks and online lenders offer differing kinds of small business loans to customers looking for extra cash flow or investment funds. You can usually get more favorable terms with a traditional bank. Online lenders, however, are typically more lenient in their requirements. Just watch out for those high interest rates.

If you’re not looking for a lump sum loan amount, consider a business line of credit. In short, they’re like credit cards for your business. They’re good options for purchasing items on an as-needed basis. (You can read about them and other small business loan options, here.)

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