How to Start a Home-Based Business
6 Steps to Success
The best home-based business is the one you start because you are passionate about the work and interested in the process involved—not the one in the work-at-home ad that might be a scam or the one a friend is recruiting for on social media.
Starting a home-based business can create flexibility in how you spend your time and make your money. But it isn't a quick process or a guarantee of financial success. It requires a long-term commitment and a clear understanding of the work involved.
To create a home-based business with a solid foundation and earning potential, you'll need to invest time and resources into identifying the right business for you and creating a plan.
Assess Your Talents
- A strong communicator?
- A quick learner?
Your talents are related to your personality traits, which are an important part of determining whether you are suited for self-employment. Common traits for successful business owners are:
- Openness to experience
- Motivation toward achievement
- Comfort with risk
Be honest as you assess your talents and personality to determine whether a home-based business is the right path for you. If you don't feel you are suited to self-employment, but you still want additional flexibility in your work life, consider looking for a job that allows telecommuting.
Examine Your Skills
You're born with talents but you develop skills over time.
For instance, a creative person may have excellent skills for writing, artistic, or design skills. A person who is naturally detail oriented may learn strong accounting or organizing skills.
Running a successful business often requires learning new skills, such as marketing or cold-calling. But when it comes to developing a business idea, start with the skills you already have. They will often indicate where you are best suited to use your natural talents.
Combine Your Talents and Skills to Generate Business Ideas
When it comes to developing a business, the skills you have invested time and energy in learning are often the foundation of great business ideas.
For example, a detail-oriented person with accounting and organization skills could start a home-based business as a:
- Tax preparer
- Financial consultant
- Business manager
- Professional home organizer
- Virtual Assistant
Combining your talents and skills will help you generate multiple business ideas. Some of them will be jobs that don't interest you, while others will require more education or certification than you currently have.
As you brainstorm, you get a sense for which business ideas are a good fit for your personality, skill set, and interests. This will allow you to narrow down your options to businesses that you are genuinely interested in pursuing.
Determine Whether Your Ideas Work As Home-Based Businesses
Not all businesses are going to work well as home-based businesses, and some won't work at all. Starting a business out of your home requires considering a variety of factors, including your location, zoning, legal restrictions, licensing, work style, personality, and your family's needs.
You are not going to be able to start a manufacturing business in a residential neighborhood, for example, and a business that involves a lot of clients coming and going may not be practical from a home office. Narrow down your list of ideas to businesses that:
- Are feasible to conduct from a home office, rather than needing separate workspace
- Allow most of the work to be done from home, rather than on site
This will leave you with a list of business ideas that are practical and possible for you to start from your own home.
Determine the Likely Profit
To start a successful home-based business, you need to consider its potential profitability. You may have a great talent for something and the skills that enable you to express it, but if people aren't willing to pay you for the product or service, it won't work as a business.
For each home-based business idea, you need to know:
- How much are people willing to pay me for this product or service?
- Can I make a sufficient income from that?
For instance, suppose that you want to start a creative business using your sewing skills to make homemade quilts. Because of the time involved, you're only able to make two quilts per month. You discover that people are willing to pay $300 for each quilt you produce. That produces revenue of $600 per month, minus the cost of expenses related to quilt production and advertising.
If you are looking for a little extra income each month doing something you enjoy, this may be sufficient. However, if you want to make a living from your business, less than $600 per month will likely not be enough.
Most businesses need time to start generating a profit. Take this into consideration, and give yourself a window of time when you don't expect your business to be profitable. However, you eventually need to be reliably meeting your income targets in order for your business to be successful.
Determine what your minimum income requirements are per month and only consider business ideas that have a real chance of generating that level of profit.
Create a Business Plan
Business plans aren't just necessary for startups seeking a business loan. The primary reason to create a business plan is to find out if your idea has a chance of becoming successful.
Once you've chosen a home-based business idea you're passionate about, write a business plan, including:
- An executive summary of your business idea
- Research into your target market and competition
- A description of your ideal customer
- Your marketing strategy
- Financial planning
- Your operating plan
The research and thinking that you do as you work through the business plan will help you refine your business idea and plan for how you will successfully launch yourself into your market without costly real-world trial and error. If your business plan shows you that your idea isn't viable, don't be afraid to shelve it, choose another home-based business idea, and go through the process again.