For many people, working from home or starting a home-based business can be an attractive option if they’re trying either commit to it full time in the future or earn a few extra dollars on the side.
Compared to starting a business traditionally which includes having a workspace which will cost you extra, a home-based business can be cheaper which would mean that you can make your business profitable quicker. Not only that, but there are a number of tax advantages of having your home and office under one roof.
If you qualify, you can deduct a part of your home’s operating and depreciation expenses on your home as business expenses. However, people do make critical mistakes while starting a home based business so here are six must-haves for starting a business from home.
1. A clear picture of what you are supposed to do
Just like starting any business, a clear picture of what you are supposed to do is the most important part of starting a business from home. Because they’re operating from home, people often make the mistake of starting a business project that they don’t have industry knowledge or experience about just because it looks profitable and they think that they can afford to take the risk because of the substantial low costs involved.
Firstly, you need to evaluate your talents and examine you skills which are the things you can do better than others. For example, a creative person may have excellent skills for drawing, writing or designing whereas a person who has the talent for paying attention to detail may have strong organizational skills.
After that, you need to put your talents and skills together to generate a business idea that you feel is your strongest suit and take it from there. A clear business idea that you’re going to pursue will help you stay motivated and focused on your business.
2. Understanding of the needs of the market
After you’re decided on the type of business venture you’re going to pursue, researching about the industry or the market you’ll be competing in is a vital part of any business operation. Your market research doesn’t have to be full-scale expensive one; rather you should try to keep it simple like posting an online questionnaire or a survey.
The benefits of conducting market research are many, one of them being that you will get to know what you’re potential customers are looking for and all the shortcomings of your competitors. This will help you in creating a comparative advantage for your business due to which making your business profitable will be much easier.
3. Having a profit angle
Once you are aware of the needs of the market you’re going to be working in, figuring out your profit angle is important. From your business idea, you need to know the answers to two questions; how much are people willing to pay for the product and can you make a sufficient income from that? These questions can be asked during your market research, and according to these, you should set the price of your product so that it encourages your customers to buy from you rather than your competitor while remaining profitable.
Whether you’re thinking of doing something minor like providing a fitness service or something a little bigger like getting into supply management, you will need some kind of funds to finance your business. Securing those funds can be a tricky business if you’re not well prepared. One of the most common routes for funding is a bank loan that you can get.
For that, you will need to prepare a detailed business plan that will gain the confidence of the lenders giving them an impression of you being a motivated and responsible business owner. You’ll also need to have an accurate estimate of the amount required since you don’t want to put the bank off by asking for too much.
Having a good personal credit score and the way you pitch your business plan is optional but can make the difference between you securing or not securing the loan. Taking a loan from the bank does, however, have its drawbacks like having a fixed time window to repay the loan and paying a hefty interest rate on top of that.
If you’re not comfortable taking a loan from the bank there are other options like crowdfunding, small business loans and venture capitals available that may be better for you. It all depends on the type of business you’re thinking of starting.
5. Awareness of the legal barriers
The excitement of starting your home business can sometimes get to people, and they might completely miss the most important part of their startup, legal barriers. There have been cases where people running a profitable business from their garages or homes had to shut down their activities because they didn’t know that what they were doing was illegal.
In some states, there are local laws against businesses that have to have many people over or that are creating too much noise. Not only will you’re business be affected but you also risk retaliation from your neighbors. If you are working a job besides your business, make sure that it doesn’t clash with your employment contract, for example, many companies make their employees sign a no-competition clause in which your activities can’t be directly competing with the company you work for, or you can’t be using company resources to advance your own businesss.
6. Marketing your business
You can have the best or the unique product/service in the market and it won’t mean much if people don’t even know about it. The essential part of any new business is marketing your product but since you will be operating form your home, your business won’t be at the forefront of the market you’re competing in and you will have to work more on your advertisement than your competitors.
This includes online/poster ads, strong social media presence and other activities designed to draw in customers. You should divide your funds available keeping the advertisement expenses in mind as it will take a huge proportion of your funds at the beginning. Marketing your business can also include building a brand, setting up a professional website, using search engine optimization to drive traffic to your website and using a promotional strategy, among several other tactics.
Here is a little guide that can help you with loan assistance and business set-up in general. I hope it helps. Stay safe!
David Simmons is a financial analyst and accounting expert. He has in-depth knowledge about setting up small businesses as well as creating profitable investments. He regularly contributes articles related to business and loans at ebroker.