Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.
8 min. read
Updated February 20, 2024
Did you know that 50% of U.S. entrepreneurs start their business at home?
And for good reason. A home-based business can provide a quicker startup path, greater flexibility, and lower startup costs.
However, you still have to follow the same startup steps as every other business to succeed. Plus, there are additional considerations due to you working from home.
This guide will cover the specific steps for starting a home-based business. We will not go in-depth on steps that apply to all business types and recommend checking out our full startup guide to dig deeper.
When working from home, you’ll be dealing with far more distractions—household chores, pets, TV shows, and that comfy bed calling for you to take a nap.
Whether it’s a mentor, family, or some other form of support—you should have someone who can help when you get stuck. Ideally, this person will have remote business experience and better relate to your situation.
Why are you starting a business? Why does it have to be from home? What is your long-term vision? You may need to rethink starting a remote business, depending on your answers.
You need to determine if your current home setup is built for running a business or if you need to make changes to create a suitable workspace.
As a business owner, work-life balance is not guaranteed. Long hours spent pouring through your numbers, finishing orders, etc. Balance can be even more difficult for home-based businesses where your office is always just a step away.
These questions are specific to starting a home-based business. They don’t cover your other considerations when becoming a first-time entrepreneur.
For additional guidance, check out what to do before starting a business.
Don’t let these common misconceptions about working from home set your new business up for failure.
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There are specific qualities that make for a good business idea. The idea solves a problem, shows clear market demand, and fits your goals.
However, even if an idea meets the criteria above it doesn’t mean it will work as a home-based business. Here are additional qualifications you should consider:
Remember, you must conduct thorough market research and speak directly with your potential customers. An idea may look good on paper and meet the requirements to function remotely, but it won’t be viable if there’s no demand.
Check out our complete guide on idea validation for more information.
A fully online business can be a great option to start from home. Here are a few options to consider.
Writing your business plan will help you think through every aspect of your home-based business. It’s where you:
You should address everything in this list to create a complete business plan. And since you’re starting from home, pay special attention to:
What does the day-to-day look like, and can it work in your home office, garage, or shed?
How does being remote impact startup costs, and how do you intend to scale to achieve profitability?
Is that possible from home, or must you invest in another space?
What about your product or service allows it to be sold from the comfort of your home? Is there a competitive advantage for doing so?
While having a detailed business plan is essential, it can be helpful to start with a one-page plan. It’s quicker, easy to update, and provides a working overview of all the above components.
Plus, you can always expand it into a more traditional plan later.
Need help to write your plan? Check out our business planning guide for step-by-step guidance.
Dig deeper: How to build remote work into your business plan
A home-based business has to follow all of the same legal requirements as every other business, including:
There are also some unique legal considerations you’ll need to account for:
Some local governments require home-based businesses to obtain a particular home business permit.
Check your area’s zoning laws to ensure that running a business from home is allowed.
If you live in a community with a homeowners association (HOA), check the HOA rules to see if there are any restrictions on running a business from home.
While not a legal requirement, you should have some business insurance. Some home insurance policies do not cover home-based businesses and may need to purchase additional coverage.
Starting a home-based business is often more cost-effective due to eliminating rent and other associated expenses.
At a minimum, you should account for:
Remember, the startup costs for a home-based business can vary widely depending on the nature of your business and your circumstances. Creating a detailed budget and forecasting revenue and expenses is essential for sufficient funds.
Lastly, don’t wait to separate your personal and business finances. You may find it tempting to intermix funds when working from home, but this will make performance harder to track and potentially lead to legal issues. All it takes to get started is opening a business bank account.
Dig deeper: Do you save money by working from home?
You need to choose a dedicated space to run your business. Somewhere with minimal distractions and a way to separate your work and home life.
Ideally, this room can become a dedicated office. The reality is not everyone has that much extra space. If so, you must set strict boundaries for how and when to use the space.
Once you have a space in mind, make the necessary adjustments to turn it into a productive work environment. Here are a few things to consider:
If you’re trying to avoid overspending on your office setup, here are a few tips for making a useful space without overspending.
Improving your time management and focus will be an ongoing process. But, there are a few ways to set you, and any employees, up for success.
Utilize online tools like Trello or Asana to organize tasks, set deadlines, and monitor progress.
Communicate tasks, deadlines, and expectations to yourself and your team. Setting deadlines and making regular updates help keep everyone on the same page.
Short breaks throughout the day can improve productivity. Encourage your team to take regular breaks to clear their minds and recharge.
Use communication tools like Slack or Zoom to stay connected with your team, contractors, or vendors to facilitate collaboration.
Focus on one task at a time to ensure quality work and avoid mistakes.
Follow these steps to optimize your time when working from home.
Are you struggling to focus on your business while at home? Here are ten ways to increase productivity.
Are you bringing on remote workers or contractors? Learn how to help them stay productive and find motivation outside of an office setting.
By following these steps, you’ll be well on your way to starting a home-based business. But there is far more you can learn about starting a business.
Check out the following guides to learn how to promote and grow your burgeoning business: