Are you interested in starting a home business? Today, working remotely has become increasingly popular, which provides an abundance of opportunities for aspiring entrepreneurs.
Starting a successful home-based business can be overwhelming for many people just beginning their journeys. Our guide will help simplify the process with the essential steps and advice from small business owners who have already launched their business ventures from their residences.
We focus on helping you by discussing the following topics. Just click on a link to jump right to the home business information that interests you.
Get ready to start a small business at home.
- Start a successful home-based business by carefully considering the type of business, creating a comprehensive plan, obtaining necessary permits and licenses, setting up an ergonomic workspace, marketing your venture effectively, and delivering quality products or services.
- Identify and focus on specialized market segments to help ensure success in any home-based venture. We show you how.
- Learn from inspiring success stories of individuals who have turned their ideas into thriving home businesses with hard work and the right strategies.
What is a home-based business?
Home-based businesses can be any size as long as the primary office is in the small business owner’s home. Small business owners have lots of options to choose from, including:
- Local service businesses
- Online and dropshipping businesses
- Freelance business ventures
Christopher Mondragon started Queen Bee Cleaning Services as a home-based cleaning business. Now it makes over $1.5 million annually.
Check out Chris Mondragon’s FREE training to kickstart your own cleaning business. You can learn more about his inspiring journey by watching the interview below.
Read on for all the info you need to decide on a profitable home business idea that will work for you based on your skills and interests in combination with the resources available to you.
What are some advantages of a home-based business?
A home enterprise has several advantages over other small business ideas. Some of the best benefits of a home business include:
- Flexible schedule
- Lower startup costs
- Lower overhead costs
- Increased productivity
- More opportunities
- Higher pay
- Less risk than renting a space
- More room for personal growth
- Tax deductions
- Great creative outlet
- Reduced personal expenses
What are some disadvantages of a home business?
When starting a small business from home, many business owners struggle with aspects like:
- Self-discipline required
- Paying attention to daily tasks
- Lack of privacy
- Separating work and home life
- Lack of space
- Not taken as seriously
- Lack of coworkers to collaborate with and learn from
- Feelings of isolation
- Procrastinating or overworking
Many small business owners will attend networking groups that help them overcome these common challenges. Start practicing good habits early to give your home-based business idea the best chance of success.
Factors to consider when starting a business at home
Starting a home business can be a huge advantage or disadvantage to a business venture. Ask yourself the following questions before starting your own business from home:
- What type of business suits your skills, interests, and resources?
- Do you have the space for your new business?
- Does your neighborhood have rules against certain small businesses?
- Will your family be supportive if you start a small business at home?
UpFlip Cautionary Tale
Many local business owners will find that their neighborhood has rules about running small businesses from home. I have lived in neighborhoods that don’t allow local service trucks, ones that won’t allow any small businesses, and ones that will only allow online businesses.
Make sure you understand the rules for your area before you start a service-based business from home.
How to start a home business
Successful home business ideas will normally follow a nine-step process for the best odds of success.
- Decide on a home business idea
- Write a home-based business plan
- Name your home-based business
- Get an LLC for your at-home business
- Get business licenses for your home business
- Get a home business bank account
- Set up your home office
- Market your home-based business
- Serve your customers
Keep reading to find some of the best home business ideas.
Decide on a home business idea
The first step in starting a home-based company is choosing a business idea. The best small business ideas from home normally fall into the following categories:
- Online Business Ideas
- Service Business Ideas
- Professional Services
We’ll provide you with some home business ideas for each of the three categories next.
Online business ideas
Many successful business owners choose to start an online small business. These make a great new business from home because they don’t require a lot of space and can be started with just the internet and a computer. Consider options like a:
This business idea requires creating an online store, finding dropshipping suppliers, and marketing their products. Learn more about dropshipping.
Affiliate marketing business
Small business owners can make a great living through affiliate marketing. You’ll need a marketing and sales plan because you’ll be paid on commission for selling other companies’ products.
Social media business
A social media manager uses digital marketing skills to help other businesses with marketing on social media. Make sure you don’t forget to build your own social media presence, too. Check out our interview with a successful social media manager.
Whether you have a subscription box business or a dropshipping business, you’ll need an online store. You could even buy an existing eCommerce business.
Check out more online business ideas.
Service business ideas
Check out some of the most popular service businesses that many small business owners run from home.
Car detailing business
Start a small business at home in the car detailing industry. You’ll be washing cars all day. This profitable business can make a ton of money.
Find out how Alan Tursunbaev turned an idea for a summer into a small business that brings in $50K per month.
House cleaning service
You can make a great living when you start a small business that’s a house cleaning service. Just ask Chris Mondragon, who started Queen Bee Cleaning, which makes nearly $2 million per year.
Dog grooming business
There are lots of businesses involving animals. You could start a pet-sitting business, a dog-walking business, or even a mobile grooming business.
You can start a professional services small business at home. Consider one of the businesses below.
Renting commercial real estate
Real estate agents can make a great living and work from their own homes. Check out how Thach Nguyen has built a $100M real estate empire.
Whether someone needs a freelance writer, help with social media, inventory management, or financial projections, consulting is a great business.
Learn more about consulting businesses.
Perform market research
Once you have identified the best home business idea, it’s time to research how to make your small business idea work in more detail. This could involve conducting:
- Target market research
- Competitive analysis
- Research on barriers to entry
- Opportunities research
Once you’ve selected a small business idea, you should write a business plan.
Write a home-based business plan
Did you know a well-written business plan can help a company grow 30% faster than one with no business plan?
A detailed business plan is essential to any home-based venture’s success. It functions as a roadmap. Plus, the business plan details your goals, strategies, and financial outlook.
Check out our blog about business plans to download a business plan template and learn how to write your business plan.
Name your home-based business
Next, you’ll want to name your home-based business. Your business name is the foundation of your brand identity and will inspire your logo, marketing, and customer service.
Your unique business name should be easy enough to remember yet reflective of the values held by you and the company. Try our business name generator. You can find a small business name you love and check the availability on Name Cheap.
Get an LLC for your at-home business
Setting up a limited liability company (LLC) for your home-based business is an essential step in safeguarding yourself and preserving your individual assets.
An LLC provides its owners with restricted liabilities, meaning you won’t be personally liable for any debts or duties of your organization. They’re easy to create and manage and offer tax benefits for successful businesses.
Establishing an LLC for your at-home business requires registering with the Secretary of State.
By forming this type of legal entity, you protect both your small business and your personal assets. You might also consider a different legal structure like a sole proprietorship or a corporation.
Get business licenses for your home business
When starting a home-based business, it’s vital to acquire the essential licenses and permits. Depending on where you’re located and what kind of business you’re running, there will be various requirements for
- licenses such as general enterprise approvals
- sales tax documentation
- professional credentials
- any local requirements
Check local and state laws for any rules that might apply to your business. You may receive harsh penalties if you do not follow them. Make sure to keep track of your records and renewal periods, too.
All this needs to be done so that your company remains legit during its operations. Complying with legal requirements helps you avoid issues. Just ask Christopher Mondragon:
Get a home business bank account
For any home-based business, it is essential to open a bank account to separate business finances and personal ones. This simplifies tracking profits and expenses for bookkeeping purposes like tax filing.
To establish such an account, you’ll need your legal paperwork like your LLC registration, Tax ID, business licenses, and EIN (Employer Identification Number).
A dedicated credit card may be beneficial so that you can cover costs while your business builds credit history. All these play into managing your business finances. The better you manage the finances, the easier it will be to identify opportunities for improvement.
Set up your home office
A dedicated home office is essential for managing your work and keeping up efficiency. Designate an area that provides privacy and limits disturbances so you can focus on running the business from your house. Comfort should be of utmost importance. Get an ergonomic chair and make sure the lighting facilitates whatever type of work you’ll be doing.
You’ll also want reliable, high-speed internet and software that will help you manage your business. The software you need will vary depending on the type of company you’re starting. Check out our HR blog for human resource provider reviews. Other software we suggest is:
- Google Workspace: Get a free 14-day Google Workspace trial.
- Quickbooks: Get 50% off Quickbooks and manage all your business expenses.
- Customer Relationship Management Software: There are a ton of options. Research the ones best for your industry. Two of the best are Monday.com and Asana.
Market your home-based business
You need an effective marketing strategy to launch and grow a home-based business. It’s essential to have insight into your target audience and research the competitive landscape. Reach potential customers on social media platforms, websites, or by partnering with related service providers.
Track and measure your promotional efforts using key performance indicators (KPIs) like web traffic or customer inquiries to decide where to allocate advertising dollars. Google Analytics is the tool most small businesses use to monitor their success at getting people to their websites.
Most importantly, marketing is a long-term game plan that requires consistency and dedication. Be patient and you’ll stand out from other home-based business owners.
Serve your customers
Successful home-based businesses rely on providing their customers with stellar service. Depending on the type of business you start, this could be anything from offering personalized attention to delivering high-quality products. Practice operating on the old adage “Under-promise and over-deliver.”
Every happy customer will help build strong relationships that lead to loyalty and often positive word-of-mouth referrals. These can help you grow your at-home venture even faster.
Home business FAQs
What business can I start in my home?
Most businesses can be started from home as long as there are no homeowner association rules or local government prohibitions. You probably won’t be able to start home-based manufacturing or energy companies, for example.
How do I start a small home-based business?
Beginning a small, home-based business can be achieved by following the essential steps we’ve outlined. First, consider potential ideas and determine if they are suitable for working from your residence.
Consider profitability by creating an organized blueprint of how to move forward. Pick out the right company configuration, give it an apt name, register it with your state authority, and attain an applicable tax ID number and licenses to pave the way for a successful at-home venture.
Can a tenant run a business from a rental property?
You may be able to start a home business if you rent. You’ll need to:
- Check your CC&Rs or lease.
- Talk with your apartment complex manager, HOA, or landlord.
- Research zoning laws.
- Check for other laws prohibiting home businesses.
- Get a landlord permission letter for home business activity.
You may need a signed letter of authorization (see our sample) giving permission to use the property for business purposes.
What are the three general rules for qualifying your home office as a business expense?
According to the Internal Revenue Service, you have to meet three main criteria to claim a home office as a business expense:
- Exclusive and regular use: Your home office must be used exclusively for business purposes on a regular basis. It should not be used for personal activities.
- Principal place of business: Your home office should be the primary location where you conduct substantial administrative or management activities for your business.
- Meeting clients or customers: You must use your home office to meet your clients, customers, or patients, or the office space must be a separate area used exclusively for business purposes.
As long as your home office is exclusively used for work and is where you consistently do admin work, you will normally qualify to deduct 100% of direct business costs and a percentage of indirect but relevant household costs.
What percentage of utilities can I deduct for home business?
According to the Internal Revenue Service, you can deduct utilities using two methods:
- Simplified Method: Up to 300 square feet at $5 per square foot for a total of $1,500.
- Actual Expenses: This method allows you to use the same percentage of the home you actually use for business. Keep reading to find out how to calculate it.
Using actual expenses, you can either use the percentage based on square feet that are used exclusively for your business, or, if the rooms in your home are approximately equal in size, you can use the percentage of rooms used.
For instance, my office is approximately 15×15 feet or 225 feet out of 1,600 square feet in my home, which equals 14%. I can’t use the rooms method because they are not approximately equal. That calculation would suggest my office space is 33% of the home, which is not a fair representation.
My utilities are around $12,000 per year, which means I can claim 14% of that or $1,687.50 of my utilities. Given my mortgage is $1,700 monthly, 14% of my annual mortgage is $2,856, making my total home office claim $4,543.50—a far better deduction than the Simplified Method’s $1,500.
What insurance do I need to run a business from home?
A home business will normally want a business owner policy (BOP) that bundles together three important coverage types:
- General liability insurance
- Commercial property insurance
- Business interruption insurance
It’s typically cheaper to buy a BOP compared to buying each policy separately and you can add additional coverage types as needed. Simply Business is a great place to get your business insurance because it compares rates from 16 major insurers.
Balancing work and life at home
While running a home-based business provides advantages, work-life balance may be compromised. You’ll want to create good rules for yourself to balance your personal time and work time. Here are some rules people suggest (and I wish I followed):
- Create a schedule for yourself with regular breaks and start-stop times. This helps keep your work from infringing upon personal time. My wife wishes I’d listen to this one.
- Maintain a separate space for your work so you can avoid being in it during personal time. This one is the easiest to follow.
- Schedule personal activities including exercise, hobbies, and dates. I try to do this one, but only exercise works flawlessly. My dog and I go for a mile walk every morning.
- Send your kids to boarding school if they start plying in your home office (jk).
Expanding and scaling your successful business
Once you start a small business at home, you’ll operate the business. As you build success, your business entity will likely need to hire more people, automate systems, or diversify income streams. Careful planning and research are essential for a successful business idea to grow. Some of the best ways to scale a business include:
- Introduce new services and products.
- Add another market segment.
- Explore partnerships.
- Upgrade technology.
- Add staff members. (This might mean you need to change the legal structure or move the business out of your own home.)
- Add new locations.
- Create a franchise.
- Increase the budget for your marketing and sales plans.
Ready to start your own business?
Now you know how to choose a business idea, create a business entity and legal structure, and some of the unique features of a home business. It’s up to you to take the time to create a solid business plan, build your business model, and market your business.
What business will you start from home?