Have you dreamed of starting your own home based business? You are not alone. A recent survey of U.S. businesses indicates that a home based business is one of the top business structures for entrepreneurs. According to Forbes, more than half of all small businesses are home-based. More than 16 million people currently work from home in the United States, and this figure that is expected to continue growing in the next few years.
Thanks to advancements in the internet and technology, as well as how the social aspects of our lives revolve around technology, it has become easier for people to create and run businesses without huge operating expenses. These are probably the biggest reasons behind the explosive small home based business growth across the country. These factors suggest that the number of people working from home in the U.S. will continue to increase, as much as 65 percent in the text four to five years.
These figures are not just about a home based business’ startup phase. According to the Global Entrepreneurship Monitor report, more than half of the business entrepreneurs that start off as home based businesses continue to operate their businesses from home long after those businesses have grown, taken on employees and are considered a success.
The benefits of a home based business
So why is a home based business such a popular option for entrepreneurs? There are many reasons. Here are eight of the top reasons people turn to starting their business at home:
- More family time. Many of the home based businesses in America are started by stay at home mothers or fathers. A home based business is attractive to parents of young and school-age children. Parents can have time to raise their kids and be home for them when they return. If a child is sick, a parent doesn’t have to take the day off or leave an employer hanging. It’s less stressful to juggle the demands of work and family when you work from home. The flexibility a home based business provides makes it a great solution for busy families.
- More time for the priorities. Working for home means less time commuting and the ability to get your work done undistracted from office politics. Think of all the time you can save not having a daily commute! The U.S. Federal Highway Administration found that the average American spends 348 hours of every year commuting. That’s almost thirty hours per month or about four hours per week in time you will regain to put towards more important things. Not to mention the amount of money you save in gas, driving, and other commuting expenses. And you no longer have to budget time and energy for useless meetings, company memos and the things that eat up your time during the day.
- Personal freedom. Most entrepreneurs are mavericks. A life in an office with hard and fast rules has never appealed to them. Working from home gives entrepreneurs a level of personal freedom that is soul satisfying. Work on your own schedule, even if it’s in the middle of the night. Take days off as you need and make up for it by putting time in on a Sunday, it’s up to you. So long as you have discipline, drive, and motivation, the personal freedom is a great benefit of a home based business.
- Your work efforts are proportional to the potential for making money. There’s a simple principle that doesn’t always translate in the work world: the harder you work, the more money you can make. In a home based business, your earning power is directly related to your work performance. The days of waiting to get noticed for an important promotion or hoping for a raise are over. Your destiny is in your hands; work harder, produce more, and make more.
- Increased chances of success and opportunity. Starting your own home based business is a lean and mean operation. You can create your own success. You can jump on business opportunities quickly before it’s too late. There are no bosses, management or committees in your beginning stages of a home based business that need to weigh in and potentially miss opportunities.
- Opportunities to learn and develop professional skills. An entrepreneur wears many hats: chief financial office, sales director, marketing professional, strategist, business development manager, web technician, brand manager, shipping and order fulfillment manager are just a few titles. The experiences you get from running all the aspects of a business are invaluable and make you more marketable in the future.
- Startup ease. A home based business needs much less startup money than a franchise or freestanding business. This makes a new business more possible than ever before because the obstacles of having major capital to get started are gone.
- Tax advantages. There are quite a few tax advantages to having your home and office shared under one roof, especially if you own your home. You can deduct the part of your home that you use to run your business as operating and depreciation expenses as cost of doing business expenses. This can be a percentage of your mortgage, property taxes, home maintenance, insurance, and utilities.
If these benefits sound like the perfect fit for you, here are nine tips for starting a home based business:
Starting a home based business tip 1. Do your research.
Is there a market for your business? You could make the best, award winning chili ever, but if there is not a good customer base or market for your product, you will not be able to make money off your idea.
Do a little online research and check out your competition, both locally and nationally. It’s likely you will find similar businesses to yours, so how will you make yours stand out from the competition? To have an edge over your more established competitors and succeed, you’ll need to find a special angle for your product or service.
Take your time to test your market before jumping into a home based business. If you are selling a product like candy, try making small batches in attractive but simple and inexpensive packaging and approach businesses or customers that may be interested in your product. Their advice could be helpful to fine tune what your home based business is about.
Starting a home based business tip 2. Get a business plan together.
Once you’ve done your research and have decided that you have a potentially successful home based business idea, it’s time to put the plan down on paper. A business plan answers many important questions:
- Where do you want your business to be in six months?
- What will your business look like in five years?
- How will you grow your business?
- What will your projected income look like?
- What type of expenses are likely?
Don’t think that a business plan is only necessary if you need investors. A business plan asks many questions that are vital to a business’ success. Consider the business plan a home based business’ roadmap to future success.
There are many tools for writing a business plan. Some are software like Enloop and Liveplan. But the best route when writing a business plan is to enlist help from the government-backed SBA (Small Business Administration) or your local SCORE office. SCORE, the Service Corps of Retired Executives are known as “Counselors to America’s Small Businesses.” They offer free mentoring and business development services to entrepreneurs and business owners, by fellow entrepreneurs who’ve started and run their own businesses before.
Starting a home based business tip 3. Find out about the permits and requirements for a home based business in your state and county.
It’s important to figure out what type of permits and licenses you may need to run your business from home. All states vary. Some states do not allow a food-based business to operate as a home based business. But some states, such as California allows home-based food businesses that meet certain criteria to bypass being certified as a commercial kitchen.
Starting a home based business tip 4. Set your home based business up as a legal entity.
There are different ways you can structure your home based business. Whether you choose a sole proprietorship, an LLC or a corporation, it’s vital to form and operate the business as a company. This offers protections to the individual. A proper legal entity keeps the liabilities of the company separate from the personal assets of the owners.
Operate your business as a business. Don’t intermix funds or pay with personal credit cards unless absolutely necessary. Carry business insurance and keeping business accounts separate from personal accounts.
Starting a home based business tip 5. Know the tax rules.
A good accountant should be one of your first business allies. There are many tax rules related to a home based business, as well as a list of tax deductions that are possible, saving you money when April 15 rolls around. Be sure to sit down with an accountant and learn about what taxes are expected and what rules your home based business should be following not only on the IRS federal government level, but on the state and city level as well.
Starting a home based business tip 6. Put everything in writing.
It’s time to love and learn about contracts. Now that you’re a professional, get into the habit of putting everything in writing. Contracts are essential in order to protect yourself, your home, and your company in the future. Protect your business and reputation by spelling out all expectations and work conditions from partnerships, and vendors like website designers in writing. This will keep misunderstandings and costly legal issues to a minimum.
Starting a home based business tip 7. A professional image should be a priority.
It’s liberating to land a big contract while you wear your pajamas and your children do homework in the next room, but you want to look like a established and reliable company. Build a professional looking website, impressive brochures and high quality business cards. Make sure that all of your branding products and packaging reflect the image of your professional company. Your customers should never be able to tell that you just rolled out of bed.
This means you should have set office hours and a professional demeanor when answering your phone or speaking with customers. Set up a quiet, dedicated office area in your home. Don’t try to run a business from your kitchen table, it will be harder to get things done and keep organized.
An extra bedroom or a basement area could be a good candidate for an office space. Or add a room divider or partition in a large area to create a private office space that can be closed off from the rest of the room.
Starting a home based business tip 8. Marketing should be your #1 priority.
Marketing will be your most important task to make your home based business a success. It’s vital to spread the word about your business or no one will find you. You’ve saved considerable money working from home. Use some of that money and invest it into advertising immediately, consistently and regularly.
Fortunately, the internet is today’s best (and most cost-effective) way for a home based businesses to reach out to prospective customers. Make sure you get your website and overall online presence right.
Especially when it comes to social media, which has become a critical tool for business growth. According to AT&T, the average U.S. consumer spends 15 hours per week on social media. This number is growing, so expect social media to continue to develop into an integral marketing strategy for small and home based businesses.
Starting a home based business tip 9. Don’t forget to delegate.
While wearing all the hats is necessary at first, at some point, it’s important to delegate work load. There are reasons for this. First, working with the right experts means the job gets done better than you could do it yourself. Another good reason is that your focus and energy should not be on the mundane tasks and instead, be on the more critical parts of your business.
Online outsourcing is growing because it’s an inexpensive solution to a business’ needs. In outsourcing, you could hire a virtual assistant or specialist to do specialized work remotely for you. There’s a large pool of home based workers ready to help. Contract and pay-as-you go arrangements through outsourcing are affordable options for home-based businesses.