How to start a small business at home in 2024

Starting a small business at home can help you turn your passions, skills or ideas into financial prosperity. There are some unique perks and challenges to consider when deciding to start a home-based business. 

You’ll also want to have a solid plan and follow some key steps to get your business off on the right foot. It’s helpful to know where you can find ideas, answers to your questions and other resources you need to run an at-home business successfully.

Should you start a business at home?

There are many factors to consider when deciding to start a small business at home. On the one hand, it’s important to make sure there is demand for your business. On the other hand, you want to be able to handle the amount of business you receive. Gauging things like demand, profit margins and the ability to scale your business early on can help you avoid trouble down the road.

Across the country, at-home businesses make up a large portion of small businesses. C.E. “Tee” Rowe is the president and CEO of America’s Small Business Development Centers (SBDC), which provides free or low-cost support for small businesses in partnership with the U.S. Small Business Administration. “Here at America’s SBDC, we have seen an uptick in home-based businesses that started during the pandemic but continues to date,” said Rowe. 

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Pros of a home business

Here are some key benefits to starting a business at home:

• Increased flexibility: Set your own hours, freeing you up for other commitments as needed.
• Less commuting: Save time and money by skipping the drive to work.
• Comfortable work environment: Design your workspace how you want it. After all, it is your home.
• Money-saving perks: Pay lower startup costs compared to larger businesses by avoiding costs like renting retail or office space. Take advantage of tax breaks for at-home businesses.
• Reduce risk: Protect yourself by limiting your liability and avoiding the cost and risk of maintaining commercial space.
• Rewards for your hard work: Work hard for your business, and your business reaps the benefits instead of some other employer.

Cons of a home business

These are some of the disadvantages of starting a business at home:

• Limited space: You give up part of your home, and even then, you may still need more space for your business.
• Distracting work environment: Crying babies, barking dogs and loud neighbors can all be distracting when running a business at home.
• Professional boundaries: Some people may feel awkward about meeting to discuss business at your home or a public location.
• Increased mental health risks: Running a home business can feel isolating for some. A lack of social interaction, time outside, work-life balance or effective time management can also threaten mental health.
• Growth restrictive: If your home-based business scales too rapidly, you may outgrow your workspace quickly. In this situation, success creates a problem for home businesses to solve.
• Increased costs: Whether you’re paying new employee salaries or wages or forking over more money for higher utility bills, you may feel the financial squeeze.

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7 steps to start a home business

After considering the pros and cons, does the idea of taking the reins and starting a home business appeal to you? You’re not alone. 

“When we work with individuals seeking to start a home-based business, it is frequently based on a desire to control their own circumstance and success, which are great reasons, but it always needs to be thought out carefully,” Rowe explained.

Planning is key. From creating a business plan and determining your business structure to securing funding and setting your marketing strategy, there’s a lot to think through. Follow the steps below to get on the right track to starting a small business at home.

1. Find your niche

Plenty of successful at-home businesses arise from emotion: a passion to do what you love, a frustration with the status quo or excitement to seize on a timely opportunity.

If you’re struggling to find your niche, ask yourself:

• What do you love to do that others may find challenging?
• What is a need that no business currently has the right solution for?
• What are you good at? What do people ask for your help with?
• What high-demand skills or services do you have to offer?

2. Draft a business plan

Having a business plan is essential for running your business effectively. As Rowe pointed out, “Every business needs a solid, comprehensive plan to guide them to success. That plan needs to focus on skills, finance, revenue and marketing.”

A business plan outlines the direction of the business — its goals, strategies, structure, ways of measuring success and plans for dealing with things like change and risk. Simply put, it’s the roadmap to success for your business.

When creating your business plan, include key sections such as an executive summary, a business description, market analysis and financial projections. For more on what to cover, check out this step-by-step guide to drafting a business plan.

3. Select a business structure

According to the IRS, the most common business structures are sole proprietorships, partnerships, corporations and limited liability companies (LLC). Each business structure comes with its own set of operational, legal, financial and tax considerations. 

A sole proprietorship is a business owned and operated by a single individual, while a partnership is jointly owned by two or more individuals who share responsibilities. 

In contrast, corporations — like C corporations and S corporations — are independent legal entities. C corporations limit shareholder liability but are highly complex. S corporations feature pass-through taxation, distributing income (and losses) to shareholders.

While sole proprietorship is a common structure for just starting out, LLC is another popular option for at-home businesses. It combines elements of a corporation and a partnership, offering limited liability to its members and the flexibility of pass-through taxation. Members of an LLC can choose to be taxed as a sole proprietorship, partnership, C corporation or S corporation.

4. Register your business and get an EIN

After you choose a business structure, you’ll need to register your business with state and federal governments. Select a business name, pay fees and provide required documents, which vary by state.

After getting registered with your state, you can then apply for an Employer Identification Number (EIN) from the IRS. Once you’re approved, you’ll receive this unique nine-digit number that is essential for all sorts of business purposes, from filing your taxes to hiring employees. 

Not all businesses need an EIN, such as sole proprietors and single-member LLCs with no employees.

5. Get any required licenses and permits

Depending on your industry and federal, state and local requirements, you may also need to obtain licenses and permits for your business. 

Here are some examples of licenses and permits you may need, depending on your business:

• Occupational, professional or trade licenses.
• Online business permits.
• Sales tax permits.
• Health department permits.
• Safety permits.
• Home-based child care licenses.
• Zoning, signage, environmental and other permits to operate an at-home business, as required by local government, HOA or deed restrictions.

6. Obtain funding for your business

Many owners fund their businesses using their own savings. Self-funding is a viable choice if you can get up and running without much money, can come up with the needed funding from your own accounts or can ask for help from family or friends. 

You can also apply for a business loan. Banks will likely want to see a rock-solid business plan, strong financial projections, good personal and/or business credit history and any collateral you’ll use for your loan. If you are a good candidate for lending, make sure that shows in your application so that you can get the best funding and terms for your business.

If you don’t have much personal or business credit history, it may be easier to get a business credit card. This gives you benefits like payment flexibility, credit card rewards and essential early or emergency spending power. It will also help your business establish or strengthen its credit so you can get favorable terms on future loans and other credit.

7. Launch and market your business

You’ve planned out your business, defined its structure and gotten your business registered, licensed, permitted and even paid for. Now it’s showtime. For many who seek to start a small business at home, the launch is the most exciting part of the journey. You are now ready to conduct business.

It’s also important to get others excited about your small business — and keep them engaged. Here are some of the most common marketing strategies for small home-based businesses:

• Social media marketing: Reach potential customers on platforms like Facebook, Instagram, TikTok and X (formerly Twitter) by sharing engaging content and updates.
• Business website: More than just a place to sell your products or services online, your business website should help users find what they want to meet their needs. It should also help achieve business objectives by offering features like payment services or e-commerce functionality.
• Advertising: Platforms such as search engines and social media can help you reach your target audience.
• Content marketing: Write blog posts, produce videos or create helpful graphics to explain what your business offers and to establish trust and authority.
• Email marketing: To keep business coming back, build an email list to communicate using promotions, newsletters and updates.
• Word of mouth: In the early stages, many small home-based businesses rely on word of mouth. You can also ask for customer reviews on platforms like Google and Yelp.

Weigh the costs and benefits when deciding on your marketing plan, so you choose what’s best for your business.

Top home business ideas

Check out these home business ideas to find the right fit for you:

• Retail: Sell products you make — including crafts and customized gifts — or resell products you get for less than what you pay for them.
• Case-based services: Open up an in-home daycare, provide home-based care for adults or even take care of pets by offering pet sitting and mobile grooming.
• Events: Plan weddings and events. Create the perfect look as a makeup artist or stylist. Play music in a band or take your place on the 1s and 2s as a DJ.
• Art and creative services: Capture the moment as a photographer, or maybe you’d rather bring your vision to life as an artist. More of a words person? Write, edit or translate content. 
• Education: Teach the next generation how to do math, play an instrument or learn a new language. Provide adults with specialized training in arts and crafts, life coaching or test preparation.
• Health and wellness: Become a personal trainer to get people in the best shape of their lives or a mental health counselor to help them find their inner peace.
• Home and real estate: Transform homes by organizing, decorating or even staging. Produce virtual home tours for real estate agents, or become a realtor yourself.

Resources to start a business

For more resources and guidance on how to start a small business at home, check out these guides and articles:

• Follow our step-by-step guide on how to start a business from the ground up.
• Learn how to start an LLC if that’s your chosen business structure.
• Discover how to start a business with no money so funding doesn’t hold you back.
• Skip the overhead that comes with brick-and-mortar stores and find out how to start an online business.
• Explore options to accept payments online and start making money in your sleep.
• Find the cheapest payroll services to pay your employees and contractors.
• Build a successful business by attracting loyal, repeat customers. 

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