Starting a business at home in 25 steps

This article is a step-by-step guide on how to start a business at home. We will cover everything from determining your business idea to launching your business. Following these steps can turn your ideas into a profitable business.

Building an income stream remotely has never been more attainable in the ever-evolving world of entrepreneurship. Whether you’re looking to turn a hobby into a lucrative venture, seeking a flexible work schedule, or wanting financial independence, making money at home can be the answer.

Starting a home-based business is a multiple steps process that requires commitment, planning, specific skills, and some money to invest.

A step-by-step guide to starting a business at home

1. Find business ideas to start at home

Consider your expertise, background, experience, knowledge, and hobbies before you validate any home business idea. Make sure there is a need for the product or services you want to sell. If you are not proficient in your chosen field, you must be willing to learn to acquire new skills.

The COVID-19 pandemic has significantly changed the labor market, with many people losing jobs or transitioning to remote work. According to the US Bureau of Labor Statistics, civilian employment fell by 8.8 million in 2020 due to the pandemic. But the pandemic has also created opportunities for starting a business at home. 

Here are five new business ideas that experienced growth during the COVID-19 pandemic:

• Food trucks experienced significant growth during the pandemic, providing opportunities for new brands to enter the industry.
• Home decor and interior design products saw increased profitability during the pandemic and are expected to continue growing until 2026.
• Remote team event coordinators can help businesses engage and connect with their remote teams through virtual team-building activities and events.
• Online fitness classes gained popularity during the pandemic and are expected to remain in demand even as gyms reopen.
• Businesses offering ethical and sustainable products are trending.
• SaaS-based business
• Online teaching

Since 2020, many companies and individuals have switched permanently from office work to remote. Many people took advantage of the rise of the gig economy, the resurgence of AI-based jobs, and the up-trend of SaaS companies to create profitable home businesses.

2. Competition analysis

Study the competition to provide a better or unique solution. Being able to stand out is essential to convert prospects into customers. Contrary to some beliefs, competition is often a good thing, and you should target a specific audience instead of an entire industry. 

Here are some of the best tools for competition analysis:

• BuzzSumo: Analyzes competitors’ content marketing strategies, website traffic analytics, SEO efforts, PR, and social media performance.
• SimilarWeb: Provides a comprehensive analysis of closest competitors to identify strengths and weaknesses.
• Pi Datametrics: Measures brand impact and analyzes emerging trends and audience intent for campaign performance analysis.
• SEMRush: Widely-used SEO tool with competitor analysis features, including SEO performance, social media, and advertising strategies.
• Sprout Social: Understands competitor performance on social media with multiple data points.
• SpyFu: Specifically designed for competitor research, it provides data on top-ranked competitors at a reasonable price.
• Sandboxweb.io SERP Analysis Tool: Offers SERP analysis and competitor data, including a free version and affordable pricing starting at $19 per month.
• Compete: Analyzes website traffic and provides keyword research, site comparisons, and audience insights for competitor analysis.

These tools enable tracking, analysis, and learning from competitors’ strategies to enhance marketing campaigns and achieve success.

3. Business idea validation 

Consider essential elements such as customer pool, scalability, trending vs. evergreen, potential income, competition, and market trends to validate your business idea.

To validate your idea, you can conduct polls, surveys, and beta tests. If you plan to sell online, use keyword research tools to estimate the number of potential customers.

The essential steps to validate a business idea include:

• Define your target market. 
• Create a buyer persona. Identify needs, pain points, and preferences.
• Conduct market research to assess industry, competition, and demand.
• Identify your unique value proposition.
• Test the concept through prototypes, surveys, or interviews.
• Evaluate market demand and customer interest.
• Assess financial feasibility and potential profitability.
• Seek expert advice and guidance.
• Build a prototype or pilot to validate functionality.
• Conduct market testing and gather feedback.
• Iterate and refine based on customer insights.

Validation helps reduce risks and make informed decisions before investing resources.

4. Make a business plan

A business plan describes business goals, methods & strategy, and the timeframe to achieve your goals. It helps you focus on business core competencies and values to develop your startup quickly. Like a roadmap, it guides you through every stage of your business.

The essential elements of a good business plan include:

• Executive Summary: Provides an overview of the company, its goals, and the plan’s key points.
• Company Description: Describes the nature of the business, its mission, vision, and legal structure.
• Market Analysis: Presents research and analysis of the target market, including industry trends, customer demographics, and competitors.
• Organization and Management: Outlines the business’s organizational structure, key personnel, and roles and responsibilities.
• Product or Service Offering: Details the features, benefits, and uniqueness of the products or services.
• Marketing and Sales Strategy: Defines the target market, marketing approach, pricing strategy, and sales tactics to reach customers.
• Financial Projections: Includes economic forecasts, such as sales projections, expenses, and profit margins, as well as a break-even analysis and cash flow statement.
• Funding Request: If seeking funding, clearly state the required amount and how you will use it.
• Operations and Implementation: Outlines the day-to-day operations of the business, including production processes, distribution channels, and logistics.
• SWOT Analysis: Assesses the business’s strengths, weaknesses, opportunities, and threats to inform strategic decision-making.
• Risk Assessment and Mitigation: Identifies potential risks and challenges and outlines mitigation plans.
• Milestones and Timelines: Sets measurable goals, milestones, and a timeline for achieving them.
• Appendix: Includes supplementary information such as market research data, resumes of key team members, and supporting documents.

A good business plan is comprehensive and well-researched. It serves as a roadmap that aligns with the goals and objectives. Writing a business plan is vital for finding funding and establishing new partnerships. 

5. Choose a business legal structure

The most common business entities are LLCs (Limited Liability Companies), sole Proprietorships, general partnerships, Corporations (S-Corp and C-Corp), and non-profits. Choosing a business legal structure may depend on your location, type of business, and goals. 

Here are the most common types of business entities:

Business Entity	Description	Best For
Sole Proprietorship	A business owned and operated by a single individual.	Small businesses with low liability risks and simplicity.
Partnership	A business owned and operated by two or more individuals/entities.	Businesses with multiple owners sharing profits and losses.
Limited Liability Company (LLC)	A hybrid entity that provides limited liability protection while offering flexibility.	Small to medium-sized businesses with liability concerns and tax flexibility.
Corporation	A separate legal entity from its owners, offering limited liability protection.	Businesses planning to raise capital, have complex ownership structures, or pursue growth opportunities.
S Corporation	A special type of corporation that allows pass-through taxation.	Small businesses seeking the benefits of a corporation with pass-through taxation.
Nonprofit Organization	An organization formed for charitable, educational, or other specific purposes.	Charitable, educational, or socially-driven organizations.
Cooperative	A business owned and operated by its members, who share common goals.	Businesses focused on cooperative principles and shared ownership.

These are some of the most popular business entities, but other types or variations may depend on the jurisdiction. If you have any doubts, it will help you to get legal services online or to contact a law firm.

6. Find a business name

Choose a brandable or SEO-friendly business name. The Looka Business Name Generator provides relevant ideas, checks name availability, and gives logo ideas.

Branding is essential because it can widely impact your success. It is not about the name but the message attached to it and what people would get from purchasing your products.

Here are a few steps to determine if a business name is available:

• Conduct a domain name search to check availability as a website address.
• Search the USPTO trademark database for registered trademarks.
• Check state and local business directories for similar names in your area.
• Perform a web search to identify existing businesses or online presence.
• Consider seeking professional legal advice for trademark concerns.

You can also use social media platforms and online forums to gather information about the availability of a business name. Conduct searches on popular social media platforms. For example, the desired name could be used for a Facebook group. 

7. Registering your business name 

Business name registration refers to officially registering a unique name for your business with the appropriate government authority. Once approved and registered, the business name becomes legally protected and exclusive to your business within the jurisdiction where it is written.

To register your business name, follow the US Small Business Administration guide or use a business registration service like Incfile and ZenBusiness.

Consider cost, services, and customer support when choosing a platform to register your business name. Select a solution that meets your needs efficiently, allowing you to focus on business growth.

8. Business registration and license 

Regarding your business structure and location, you may need to register your business. Check if your type of business requires registration in your state to get legal benefits, personal liability protection, and tax benefits.

Here is a table outlining the needed licenses for different types of businesses:

Business Type	Required License(s)
Retail Store	Business License, Sales Tax License
Restaurant	Business License, Food Service License
Construction Company	Contractor License, Business License
Professional Services (e.g., Law Firm, Accounting Firm)	Professional License, Business License
Daycare Center	Childcare License, Business License
Food Truck	Mobile Food Vendor License, Business License
E-commerce Store	Online Business License
Freelancer/Consultant	Professional License (if applicable), Business License
Salon/Spa	Cosmetology License, Business License
Real Estate Agency	Real Estate License, Business License
Home-based Business	Home Occupation Permit, Business License

Please note that specific license requirements may vary depending on the jurisdiction and industry regulations. Researching and consulting with local government agencies or professional associations is important to ensure compliance.

9. Apply for licenses and permits 

A federal license or permit is mandatory if a federal agency regulates your business activities. State licenses and permits vary depending on business location and activities.

Here is a table listing some popular platforms for applying for business licenses and permits in the mentioned countries:

Country	Best Platforms for License/Permit Applications
United States	LegalZoom, Incfile, ZenBusiness, Rocket Lawyer
United Kingdom	Gov.uk, Companies House, Local Council Websites
Canada	Canada.ca, Business Registration Online (BRO), Provincial Government Websites
Australia	Business.gov.au, Australian Business Licence and Information Service (ABLIS)
Ireland	Citizens Information, Business Registration Online (CRO)
India	Ministry of Corporate Affairs (MCA), State-specific Government Portals
New Zealand	New Zealand Business Number (NZBN) Website, Ministry of Business, Innovation and Employment

This list is not exhaustive, and there are other platforms or government websites specific to each country that can provide license and permit application services.

10. Get your EIN 

An EIN (Employer Identification Number) refers to a unique nine-digit identification number given by the IRS (Internal Revenue Service) to businesses for tax purposes. It is also known as a Federal Tax Identification Number (FTIN). You also need it to open a business bank account and apply for financial aid.

To get an EIN, you can follow these steps:

• Ensure you meet the criteria for obtaining an EIN as a business entity.
• Visit the official IRS website.
• Fill out the online EIN application form with your business information.
• Electronically submit the form through the IRS website or mail/fax Form SS-4.
• Once reviewed, the IRS will assign you an EIN and provide a confirmation notice.

Obtaining your EIN directly from the IRS website is free. However, you can use a third-party service for a company formation package. The EIN process is the same for U.S. and non-U.S. citizens. 

Here’s a table providing the equivalent of an EIN for various countries:

Country	Equivalent of EIN
USA	Employer Identification Number (EIN)
UK	Unique Taxpayer Reference (UTR)
Canada	Business Number (BN)
France	Numéro SIREN (for businesses)
Germany	Steuernummer (for tax purposes)
Ireland	Business Registration Number (BRN)
New Zealand	Inland Revenue Department (IRD) Number
Australia	Australian Business Number (ABN)
India	Permanent Account Number (PAN)

Note that the equivalent may vary depending on the country and the type of business. Always research the specific requirements for your business and location.

11. Manage your business finances 

Learning to perform (or outsource) accounting and bookkeeping for small businesses is essential. Here are some fundamental principles to consider when it comes to managing business finances:

• Create and update a budget to track income and expenses.
• Monitor and manage cash inflows and outflows.
• Maintain accurate financial records by performing bookkeeping and accounting.
• Review and reduce costs where possible to manage expenses.
• Set prices to cover costs and generate profit.
• Assess business performance through financial statements.
• Make timely payments and control interest rates for proper debt management.
• Identify and mitigate financial risks.
• Stay informed about tax obligations and optimize deductions.
• Project future revenue, expenses, and cash flow.

Regularly assess your financial performance, adapt to changing circumstances, and seek professional advice when needed. Maintaining a strong financial foundation can enhance your business’s stability and position it for long-term success.

You can create a bookkeeping spreadsheet to keep track of financial data. Platforms like Quicken, QuickBooks, or FreshBooks help you save time and manage your business finance properly.

12. Open a business bank account 

When you feel ready to invest money into your business or accept payment. Some examples of business accounts are: 

• savings account 
• checking account
• credit card account
• merchant services account

13. Apply for a business credit card 

Get a business credit card to separate your personal and business finances. Big companies use business lines of credit or corporate cards, whereas other business cards have lower credit limits. 

The main types of business credit cards include:

Types of Business Credit Cards	Description	Best For
Small Business Credit Cards	Designed for small businesses and entrepreneurs.	Small businesses and entrepreneurs
Corporate Credit Cards	Issued to employees of larger corporations.	Larger corporations
Rewards Credit Cards	Earn rewards points or cash back on purchases.	Businesses that want to earn rewards on their spending
Charge Cards	Balance must be paid in full each month, no preset spending limit.	Businesses with disciplined payment practices
Secured Credit Cards	Require a cash deposit as collateral, help build/rebuild credit.	Businesses with limited credit history or poor credit
Cash Back Business Credit Cards	Offer cash back rewards on eligible business purchases.	Businesses seeking cash back rewards
No Annual Fee Business Credit Cards	No annual fee for card ownership.	Businesses looking to minimize costs
Business Credit Cards for Startups	Specifically designed for startup businesses.	Startup businesses
Business Credit Cards for Average Credit	Geared towards businesses with average credit scores.	Businesses with average credit scores seeking credit access

Consider interest rates, annual fees, introductory offers, and additional perks or services relevant to your business operations.

14. Get Business Insurance 

Business insurance helps protect business owners and the company’s assets. Some examples are general liability insurance, professional liability insurance, employment practices liability insurance, etc.

15. Define your marketing strategy 

A marketing strategy helps you reach future customers, increase sales, and elaborate an effective market positioning strategy.

16. Home office and workshop 

Set up a home office to manage your business. You may need a home workshop to confect your products. Workylife and Amazon are two excellent platforms for getting work-from-home equipment.

A home office is a dedicated space within a residence where you can work remotely to conduct business tasks and manage professional affairs. On the other hand, a home workshop is a designated area equipped with tools and equipment for DIY projects, hobbies, or small-scale manufacturing.

17. Finance your business 

Starting a business involves upfront costs. Once you determine your financial needs, you can fund your startup using self-funding, grants, loans, and venture capital. The SBA funding programs provide access to business funding.

Here are a few common ways to finance a business:

• Use personal savings or assets to provide initial capital.
• Seek financial support from trusted individuals in your network, including friends and relatives.
• Secure funds from banks or lenders with repayment terms, such as loans.
• Explore grants specifically available for small businesses.
• Receive investment from individuals in exchange for equity, like Angel Investors.
• Obtain funding from firms focusing on high-growth startups by levering Venture Capital.
• Raise funds through online platforms from a large pool of contributors using crowdfunding.
• Join programs that offer funding, mentorship, and resources (Business incubators and accelerators).
• Use revolving credit for short-term financing and expenses.
• Obtain specialized funding for equipment and leasing.

You can also visit the Treasury Department for urgent deployment of capital. Consulting with financial advisors or experts can also provide valuable guidance in choosing the most appropriate financing route.

18. Product conception and creation 

Your products or services should always aim to solve a problem or improve someone’s life. The main evergreen categories are health, wealth, relationship, entertainment, and social interaction. 

Product conception refers to the initial stage of developing an idea for a new product. It involves brainstorming, market research, and defining the product’s features and benefits.

Product creation encompasses designing, prototyping, manufacturing, and launching the product. It involves turning the concept into a tangible product ready for customers to use and enjoy.

Here’s a table comparing the process of creating a physical product, a digital product, and a service-based business:

Process Stage	Physical Product	Digital Product	Service-Based Business
Idea Generation	Identify physical product concepts	Conceptualize digital product	Define service offerings
Design and Development	Create product design and prototypes	Develop software or digital assets	Plan service delivery processes
Manufacturing or Production	Produce physical goods	Develop and refine digital assets	Prepare resources and staff
Distribution and Logistics	Establish supply chain and distribution channels	Digital delivery or online distribution	Arrange service delivery
Marketing and Sales	Develop physical packaging, marketing materials	Create digital marketing campaigns	Promote services and attract clients
Customer Experience	Focus on physical product quality and usability	Ensure seamless digital user experience	Provide excellent service interactions
After-Sales Support	Offer product warranties, repairs, or customer service	Provide digital product updates or technical support	Address customer needs and queries
Scalability and Growth	Expand manufacturing capabilities or distribution networks	Scale digital infrastructure and reach	Grow service capacity and customer base
Revenue Generation	Earn revenue through product sales or licensing	Generate revenue through digital product sales or subscriptions	Generate revenue through service fees or contracts

Creating physical products involves designing, manufacturing, and distributing tangible goods. Digital products are intangible items like software or online courses created through software development and content creation. Services are intangible offerings that provide value through expertise or labor, delivered through tasks or solutions tailored to customer needs.

19. Make a website for your business 

It is an asset for brand awareness and finding new customers. It’s even more important for people who want to make money online. 

• Get a domain name and web hosting
• Choose a website builder
• Keywords research and content creation strategy
• Create legal pages and a homepage
• Create pages according to your needs
• Create a blog and publish posts regularly 

20. Build a sales funnel and an email list 

A sales funnel guides your prospects until they become customers. The marketing rule of 7 states that people interact seven times (on average) with your brand before purchasing.

A high-converting sales funnel ensures 6-10 brand interactions using optimized content at each stage. Email marketing and retargeting campaigns are essential in a sales funnel.

21. Start networking and find partners 

Networking is a proven way to reach more customers and develop a business. Partnership and collaboration are great for brand recognition and authority. 

Networking and partnerships provide businesses with opportunities for valuable connections, insights, and collaborations. They enable access to resources, new markets, and potential business opportunities.

Partnerships leverage complementary strengths, leading to increased brand exposure, customer reach, and cost efficiencies. Such relationships drive innovation, enhance competitiveness, and contribute to long-term success.

22. Prelaunch

A prelaunch refers to the phase before the official launch of a product, service, or business. It is a strategic period where companies build anticipation, generate buzz, and engage with their target audience to create momentum leading up to the launch. Best practices for a successful prelaunch include:

• Build an Email List: Collect email addresses for dedicated prelaunch updates.
• Create Teasers and Sneak Peeks: Share enticing content to generate excitement.
• Utilize Social Media: Engage followers, run contests, and share compelling content.
• Partner with Influencers: Collaborate with influencers to develop interest.
• Offer Exclusive Access or Early Bird Offers: Reward early supporters with special benefits.
• Engage with Your Audience: Interact and build a sense of community.
• Develop Valuable Content: Educate and inform through blog posts, videos, or podcasts.
• PR and Media Outreach: Secure coverage to increase awareness.
• Feedback and Beta Testing: Gather input from customers to refine the product.
• Measure and Track: Monitor performance metrics and adjust strategies accordingly.

You can ensure a successful launch by implementing these best practices.

23. Launch date

Here’s a list of actions you can take on the launch date of your new product or service:

• Send an announcement to your email list and social media followers.
• Update your website and ensure it showcases the new offering.
• Create engaging posts to generate buzz and encourage sharing.
• Engage with your audience by answering promptly to inquiries and feedback.
• Collaborate with influencers or brand ambassadors to amplify the launch.
• Track metrics and make real-time adjustments based on data.
• Consider limited-time offers to drive immediate action.
• Seek coverage from relevant media outlets.
• Host a virtual event or live stream to unveil your product or service.
• Follow-up, nurture leads, express gratitude, and provide ongoing support to customers.

Remember to adapt these actions based on your specific product or service.

24. Hire people to scale faster 

In the beginning, most self-employed and home-based entrepreneurs work alone. But consider hiring freelancers, contractors, or employees as soon as your business becomes viable. You can use platforms like Toptal, Upwork, and Fiverr to find freelancers to delegate tasks. 

25. Update, monitor, and improve 

Gather customer feedback and check the competitors to produce a refined version of your product or service. Update your products, and offer upsells and bonuses to make more profit with one customer.

Here are a few ways to determine if a product is profitable:

• Compare production costs with the selling price to ensure a viable profit margin.
• Assess customer demand through market research and industry trends.
• Determine if the product can reach the break-even point within a reasonable time.
• Enable a competitive pricing update that covers costs and allows for a profit margin.
• Evaluate competition and differentiate the product for potential profitability.
• Create financial projections to assess potential revenue and expenses.
• Gather feedback to gauge customer satisfaction and willingness to pay.

Regular monitoring and adjustment are important to ensure sustained profitability.

Frequently Asked Questions

Q1: What are the first steps to starting a business at home?

A1: Identify a business idea that aligns with your skills and passions. Then, create a business plan that outlines your target audience, pricing, and marketing strategies. Ensure you have the necessary permits and licenses, if applicable, set up a dedicated workspace, and establish a work schedule.

Q2: Do I need special permits or licenses to start a home business?

A2: The requirements can vary greatly depending on the nature of your business and the local laws where you live. Home businesses might need specific permits or licenses. Be sure to check with your local government or a legal advisor for precise information.

Q3: How much capital do I need to start a home business?

A3: The amount of capital required can vary widely based on the type of business. Some businesses, like consulting, can have low startup costs, while others, like product creation, require much investment. Part of your business planning process should include estimating these costs.

Q4: How do I create a business plan for a home business?

A4: A business plan should cover your business concept, analysis of your target market, a marketing and sales plan, and financial projections. Tools and templates are available online to assist in creating this document.

Q5: Can I turn my hobby into a home business?

A5: Yes, many successful home businesses started as hobbies. However, it’s essential to conduct market research to evaluate the potential demand for your product and ensure you can build a sustainable income.

Q6: How do I balance home life and running a home business?

A6: Balancing home life and home business can be challenging. Establish boundaries, create a dedicated workspace, and set specific business hours. Additionally, use time management tools and techniques to maximize productivity.

Q7: Do I need insurance for my home business?

A7: Many home-based businesses will need insurance to protect against potential liabilities. You may need to enhance your homeowner’s insurance or get a separate business policy. It would help to consult with an insurance professional to understand your needs.

Q8: Can I hire employees for my home business?

A8: Yes, you can hire employees. However, remember that having employees involves additional legal and financial responsibilities. Also, consider if your home has the space to accommodate them or if they can work remotely.

Q9: What are the tax implications of running a business from home?

A9: Home businesses are subject to various taxes, including income and self-employment taxes. However, you may also qualify for home office deductions. It’s advisable to consult with a tax professional to understand your obligations and potential deductions.

Q10: How do I market my home business?

A10: There are many ways to market a home business, such as social media, content marketing, and networking. The best strategies depend on your target audience, business model, and industry.

Conclusion

Starting a home-based business is a multiple steps process that requires commitment, planning, specific skills, and some money to invest.