How To Start a Small Business From Home

Shot of a young woman using a laptop and  going through paperwork while working from home.
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Out of the pandemic in 2020 came a new way to work. For some Americans, that meant working from home for their same company. For others who were laid off, it translated into perhaps finding a new career. And for about 4.3 million Americans, that meant starting an at-home business, according to the U.S. Census Bureau. The number of entrepreneurs grew by about 1 million over 2019, CNBC reported.

Whether out of economic need or a desire to fulfill a longtime dream, these entrepreneurs got to work in 2020 as their own bosses, and the trend hasn’t changed in 2021. Through August, applications were filed for 3.8 million more businesses.

Are you ready to realize your dream of owning a business? It can require a serious reality check. Walk yourself through the initial steps of how to start a small business from home to see what it will take for you to successfully become a small-business owner in your state.

Use Resources From the Small Business Administration

Learning how to start a small business from home can be overwhelming, especially when there is ample information to be researched, so leveraging resources such as the Small Business Administration is a strategic way to make progress more quickly. The SBA was created to aid small-business owners and serves as a resource for aspiring entrepreneurs.

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Some of the resources available through the SBA include training in small-business operations, writing business plans and how to obtain small business loans and grants. Mentorship from experienced business owners is also available, so you can get guidance through different phases of launching and developing your business. Many of the resources provided by the SBA are free, and it has an extensive library of information for learning.

Identify Your Target Market

If you provide a product or service, it’s important to identify your target market so you can understand your customers’ wants and needs. So, whether you start a home-based business that refurbishes antiques or an online business that sells eco-friendly home goods, knowing your demographic of consumers will determine how you market your product. Study your competitors and various customer forums online to spot underserved needs your business can meet.

Make a Business Plan

A business plan, or executive summary, is a blueprint of where you want your small business to go. It should include information such as, but not limited to, the following:

  • Company description
  • Market analysis
  • Organization and management
  • Financial forecasts
  • Marketing strategy, including advertising and social media

Be as thorough as possible so you have a good idea of how much capital and staffing you need to launch and sustain your business. Your business plan likely will be required when you apply for a small business loan or other financing.

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Finance Your Business

Starting a business requires an investment of funds. If you do not have personal funds, or seed money, to start your business, then there are other financing options you can consider. You need to get your personal finances in order before you apply for a small business loan because most lenders require good credit.

What Is an Angel Investor?

They are financial backers who invest their own funds into your business. Equity crowdfunding is another financing alternative in which a group of people invest in your startup in exchange for equity in your business.

Review your business plan, what you know about yourself and the information you gather about your investors and lenders before you make a decision. Your financing decision needs to reflect what is beneficial for your business but also what works for you personally.

Select the Legal Structure for Your Business

Your business structure can impact your company’s agility, financing or tax requirements and other factors. As you start your small business from home, you will find the simplest legal structure is a sole proprietorship in which you are responsible for all assets and liabilities.

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Other structures you might consider are a partnership, a limited liability company or a corporation. Each of these has its own liability and tax implications, so consult an accountant or attorney to help you decide which business structure is best for you. If you are starting a family business or business partnership, make sure all parties are clear and in agreement on the business goals and finances before proceeding with loan applications and launching the company.

Get Business Licenses and Permits

Before you open for business, make sure that you’ve obtained all the necessary licenses and permits. Your business could be subject to different federal and state requirements, including laws that apply to online transactions only. As you research these rules and regulations, remember to add the costs of staying compliant into your long-term business plan.

As you create your timeline for launching your business, factor in how much time you need to learn what you don’t know yet and variables you can’t control, such as getting loan approval. Break these big steps into smaller, specific tasks to help you achieve your goals and determine how you will define success for each stage of this process.

Jami Farkas contributed to the reporting for this article.

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About the Author

Allen is a writer with over 10 years of experience as a real estate investor, and business owner. He is a San Francisco Bay Area based writer specializing in personal finance, investing, and entrepreneurship. He holds a BA in Economics from the University of California, Berkeley.
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