Starting a Home-Based Business

First Financial Bank
Starting a home-based business is a dream many people have, and for good reason. As millions have quit their jobs and businesses have failed during the pandemic, many people are taking matters into their own hands and starting home-based businesses.

And many are finding success and may never choose to go back to working in someone else’s business.

How to Get Started

Some simple but vital steps are necessary to start your home-based business. You may have a passion for an idea, but you want to ensure that your idea sells and that you meet all of the legal requirements to get things off the ground:

Assess Your Skills and Talents

You don’t necessarily have to have talent in an area for a home-based business but it helps. Some people have had an ongoing interest in something and they are motivated to learn more about it by opening a business. If you don’t have a clear idea of the type of business you want, take some time to write down your skills and talents.

Can the Business be Run From Home?

A home-based business requires more than an idea and a home. There are permits, licensing, bookkeeping, and the actual tasks of the business itself. Plus you need to consider the space allowances – will you and any other family members have room to continue living comfortably? If you have to do major remodeling to accommodate your home-based business, this expense needs to be factored into your decision making.

Market Research

Market research is a critical step to take in developing a home-based business. Investigate and research the demand for your service or product. Your competitors may be down the street or across the world. Find your competitors and evaluate their strengths and weaknesses.

Evaluate Costs

Determine your start-up costs. Some businesses will have low start-up costs and others much higher. The costs can range from the materials needed to create a product offering to the e-commerce software.

Write a Business Plan

Writing a business plan can be an overwhelming idea but you will need it if you plan to get a loan. Even if you don’t plan to get a loan initially, it is a good exercise for understanding and documenting your plans to share with your trusted advisors, such as your tax professional. In the process of writing your business plan, you will set goals, describe your product or service and provide a detailed financial analysis.

Home-Based Business Insurance

You may need more than one kind of business insurance depending upon the type of business you have. For example, if you are a consultant, you may only need liability insurance, but if you have machinery, equipment and vehicles related to your business venture, you will need more. No one enjoys paying premiums for insurance coverage, but if and when you need it you will be glad you have it. Here are some of the insurance types you may need:

  • Liability Insurance: Liability insurance protects your business if the business is sued, it can provide coverage for your defense and legal settlements.
  • Business Property Insurance: Business property insurance covers designated equipment or business property.
  • Product Liability Coverage: Product liability coverage covers your business against damages caused to a person or property by your product.
  • Business Auto Insurance: If you use a car, even your personal one for your business, your policy probably won’t cover you.
  • Employee Insurance: If you have employees working for you then you might need worker’s compensation insurance.
  • Other Insurance to Consider: Other types of home-based insurance to consider are plans to cover loss of profit, claims from employees, and insurance to cover data breaches.
Discuss this with your advisors to determine what makes sense for your specific situation and business.

Home Based Business Legal Requirements

Another crucial part of starting a home-based business is meeting all state licensing and permit requirements. The last thing you want is to have your business shut down or incur a financial penalty because you haven’t met home-based business legal requirements. You may not need all of these licenses and permits, but make sure you check with your local authority to meet all requirements.

General Business License

Every business in any state or locality must obtain a business license. A general business license may be issued by your city, county, or state. As part of this process, you will want to ensure that you are also meeting zoning ordinances.

Professional License

To operate specific home-based businesses like lawyers, child care, accounting, real estate, and others your specific industry may require certification or licensure to operate. Every state has different requirements for professional licensing, so check your state’s requirements.

Health and Safety Permits

Whether you need a health and safety permit depends on the home-based business you have. For example, if you are selling a food product you may need a safety inspection to ensure safe food handling and storage. If you are opening a home-based daycare, the inspection will be focused on a variety of factors to ensure you meet the regional (municipal, county and/or state) requirements for providing a safe environment for your tiny clients. Other types of businesses, such as web design or business services will most likely not require an inspection.

Zoning and Property Use Permits

Some neighborhoods are not zoned for home-based businesses. In addition, there could be zoning restrictions on parking, accessibility, or the type of business you can operate. In some cases, you can apply for a variance on a zoning or property use restriction. Check with your local government for specifics and to determine what you need to navigate successfully.

Starting Your Successful Home-Based Business

The passion and commitment you have for starting your home-based business needs a strong foundation to be prosperous. The backbone for any successful home-based business is the marketing analysis, insurance, permits, licensing and a strong financial plan. Work with your trusted advisors to put your best foot forward in fulfilling your dream of a home-based business.

Need help building your business plan? Check out this article. Want to discuss your plans? Give us a call at 800-562-6896.

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