How to Run a Business from Home

Starting a business from the comfort of your home isn’t always comfortable.

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But, if it is something you’re passionate about, it can afford you both a living and more flexibility than a standard job in an office. Before you get started running a business from home, there are legal factors to take into consideration, as well as financial aspects that are necessary to understand. 

Working from home is much different than running a business out of your home. Here’s everything you need to know!

The Legal Aspects of Running a Business From Home

When you start a business from your home, there are various legal considerations. These laws vary by state and locality, so it’s important you can define the type of business you plan to run. Then, it’s best to check that you are allowed to legally run your business from your home. 

  • Licenses: You most likely need a license to run your business. For certain types of businesses, like a hair salon for example, you may need additional licenses or permits. The same goes for daycares that are run from homes. Get in touch with your state office for business registration to find out more. 
  • Variance: In some instances, your business may be illegal to run from your home in your area. Your best next step for action is request a variance, which is a government exception. If you’re a small business that won’t have people coming into your home or affecting traffic in the area, then you have a higher likelihood of receiving a business variance. 

How to Run a Home-Based Business

No matter your reason for starting a home-based business, there are some tips and steps that look the same for every at-home entrepreneur. From the inception of the idea to marketing the new business to the world, you’ll want to touch base on each of the following steps in your process of building. 

1. Brainstorm Ideas: After checking in with your localitlie’s business registration restrictions, it’s best to start by brainstorming various ideas for your business. You can run a salon, daycare, e-commerce business, service-based business like tutoring or another type of business from home. 

2. Combine Talent and Skills: The optimal way to go when deciding upon the business you’ll run from home is to pick something that combines both your talents and skills. This will help to ensure you are passionate about the work you will be performing day in and day out. Some people have the education and experience they already need to run a business from home. If you have more to learn, don’t be afraid to take online certification classes, attend trade school, rely on a mentor, read books or ask people in your network questions. 

3. Funding: Like any type of business, you’ll have to have funding to get it off the ground. There are a variety of kinds of funding methods you can rely on for capital. Some of the most popular funding methods include: business line of credit, merchant cash advance (particularly fitting for commerce businesses even if you have bad credit), small business loan, or crowdfunding. While it is sometimes possible for a startup to self-fund, it requires extra disposable income or being okay with going into debt. However, if you are confident you will be making sales as your business gets up and running, then a merchant cash advance can give you quick funding upfront for a promise of a portion of your future credit card sales for repayment. 

4.Write a Business Plan: Running a business requires planning and organization. Writing a business plan can help you stay on track to achieve your goals. It is also a necessary piece of documentation to have if you plan to apply for business loans or investment. A business plan typically includes: an executive summary, financial planning, marketing strategy and a budget. 

5.Separate Personal and Business Finances: Importantly, you’ll want to separate your personal and business finances, especially when working from home. A lot of your personal life and work life will overlap when it’s all taking place in the same location. As such, it’s even more important to separate your finances. This begins with opening a separate business bank account and tracking business expenses separately from what you spend personally. 

6. Insure the Business: Whether you rent or own your home, you will likely already have renter’s or home insurance. When you open a business in your home, you should ensure that you have the right home-based business insurance protection. This typically requires both general liability insurance and professional liability insurance. You could even want a Business Owner’s Policy (BOP), depending on what industry you’ll operate in. 

7. Understand Tax Deductions: Business owners who work from home can claim tax deductions for certain portions of the business activities that take place inside their home. For example, you can deduct a portion of your rent (based on the percentage of space you use for your “home office”), utilities, repairs, maintenance and real estate taxes. 

8. Create Your Business Identity: Once you have all your financial plans and logistics figured out, you can get into the fun work of building your brand. With enough brand awareness, people will hopefully be able to recognize your logo and know what your business is. To get to this ideal place, you must begin with creating your business’ assets, which include: a logo, typography, color palette, packaging, a business website, and marketing materials, to name a few. 

9. Designate a Workspace: You’ll want to designate a workspace inside your home that is dedicated to the business. For some, this means having an office or studio for work. For others, it may be cornering off a part of your living room for business activities. It doesn’t matter how big the space is – the importance is being able to step into it and knowing you’ll be productive. It’s also nice to be able to limit distraction in this portion of the home so you can set your work hours when you’re spending time in that location. Again, this also will play a role in your tax deductions as you can accurately estimate the square footage used for the business versus living. 

10. Get the word out: After you’ve set up all the behind-the-scenes factors to ensure your business can run smoothly (i.e. finances, funding, brand identity, etc.), you can step into the spotlight! Oftentimes, this is one of the hardest parts of any business. Building your brand and marketing your value will entail preparation, funds, and time. While you can do it alone, it’s recommended to rely on experts in respective fields like social media, paid advertising, SEO, influencers and the like. If you can commit to providing a product or service of quality with great customer service, then word of mouth can become your best and most useful tool for marketing. 

The Bottom Line

Running a home-based business has a lot in common with running a business from an office space. Some things that overlap include building a brand, writing a business plan, sorting out business funding and applying a marketing plan. Some things that make it different are the extra considerations around what’s legal and illegal to do from inside your home, as well as the implications for your business taxes. 

Having a home-based business can offer benefits like flexibility and lower overhead costs. At the same time, it can require extra coordination, organization and motivation to get up and get to work, since you’ll be tempted to go relax on the couch or stay in bed. But, if you know there is a home-based business you want to try that can glean profits, then follow the aforementioned steps and get to working. Go big and stay home! 

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