How to Start a Home-Based Business and Work From Home

Did you know that 50% of U.S. entrepreneurs start their business at home?

And for good reason. A home-based business can provide a quicker startup path, greater flexibility, and lower startup costs. 

However, you still have to follow the same startup steps as every other business to succeed. Plus, there are additional considerations because you work from home.

This guide will cover the specific steps for starting a home-based business.

We will not go in-depth on steps that apply to all business types and recommend checking out our full startup guide to dig deeper.

1. Questions to ask before starting a home-based business

• Can you focus and stay motivated?

When working from home, you’ll be dealing with far more distractions—household chores, pets, TV shows, and that comfy bed calling for you to take a nap.

• Do you have a support system?

Whether it’s a mentor, family, or some other form of support—you should have someone who can help when you get stuck. Ideally, this person will have remote business experience and better relate to your situation.

• What are your goals?

Why are you starting a business? Why does it have to be from home? What is your long-term vision? You may need to rethink starting a remote business, depending on your answers. 

• Is your home suitable for running a business?

You need to determine if your current home setup is built for running a business or if you need to make changes to create a suitable workspace. 

• Can you balance work and personal life?

As a business owner, work-life balance is not guaranteed. Long hours spent pouring through your numbers, finishing orders, etc. Balance can be even more difficult for home-based businesses where your office is always just a step away.

These questions are specific to starting a home-based business. They don’t cover your other considerations when becoming a first-time entrepreneur. 

For additional guidance, check out what to do before starting a business.

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2. Identify a business idea that works remotely

There are specific qualities that make for a good business idea. The idea solves a problem, shows clear market demand, and fits your goals.

However, even if an idea meets the criteria above it doesn’t mean it will work as a home-based business. Here are additional qualifications you should consider:

• Digitalization: Can the business be operated entirely online or with minimal physical interaction? 

• Independence: Can the business be run independently without needing a large team or physical infrastructure?

• Scalability: Can the business be scaled up without significant physical infrastructure? 

• Supply chain: Does the business require minimal physical inventory or a supply chain you can manage remotely?

Remember, you must conduct thorough market research and speak directly with your potential customers. An idea may look good on paper and meet the requirements to function remotely, but it won’t be viable if there’s no demand.

Check out our complete guide on idea validation for more information.

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3. Write a business plan

Writing your business plan will help you think through every aspect of your home-based business. It’s where you:

• Describe your product or service.
• Document your research.
• Create a financial plan.
• Outline marketing and sales efforts.
• Provide an overview of your operations, business structure, and team.

You should address everything in this list to create a complete business plan. And since you’re starting from home, pay special attention to:

• Operations: 

What does the day-to-day look like, and can it work in your home office, garage, or shed?

• Financials: 

How does being remote impact startup costs, and how do you intend to scale to achieve profitability? 

Is that possible from home, or must you invest in another space?

• Product/service description: 

What about your product or service allows it to be sold from the comfort of your home? Is there a competitive advantage for doing so?

While having a detailed business plan is essential, it can be helpful to start with a one-page plan. It’s quicker, easy to update, and provides a working overview of all the above components.

Plus, you can always expand it into a more traditional plan later. 

Need help to write your plan? Check out our business planning guide for step-by-step guidance.

Dig deeper: How to build remote work into your business plan

4. Understand the legal requirements

A home-based business has to follow all of the same legal requirements as every other business, including:

• Choosing a business structure
• Registering your business name
• Applying for a state and federal tax ID
• Obtain the right licenses and permits

There are also some unique legal considerations you’ll need to account for:

• Home business permit: 

Some local governments require home-based businesses to obtain a particular home business permit.

• Zoning laws: 

Check your area’s zoning laws to ensure that running a business from home is allowed.

• Homeowners Association (HOA) rules: 

If you live in a community with a homeowners association (HOA), check the HOA rules to see if there are any restrictions on running a business from home.

• Business insurance: 

While not a legal requirement, you should have some business insurance. Some home insurance policies do not cover home-based businesses and may need to purchase additional coverage.

5. Figure out your startup costs and finances

Starting a home-based business is often more cost-effective due to eliminating rent and other associated expenses. 

Depending on your business, you may have virtually no startup costs. But that doesn’t mean you can skip out on budgeting and forecasting. 

At a minimum, you should account for:

• Your home office setup
• Utilities
• Technology and equipment
• Legal expenses
• Marketing/advertising

Remember, the startup costs for a home-based business can vary widely depending on the nature of your business and your circumstances. Creating a detailed budget and forecasting revenue and expenses is essential for sufficient funds.

Lastly, don’t wait to separate your personal and business finances. You may find it tempting to intermix funds when working from home, but this will make performance harder to track and potentially lead to legal issues. All it takes to get started is opening a business bank account. 

Dig deeper: Do you save money by working from home?

6. Set up your workspace

You need to choose a dedicated space to run your business. Somewhere with minimal distractions and a way to separate your work and home life. 

Ideally, this room can become a dedicated office. The reality is not everyone has that much extra space. If so, you must set strict boundaries for how and when to use the space.

Once you have a space in mind, make the necessary adjustments to turn it into a productive work environment. Here are a few things to consider:

• Introduce bright, natural lighting: Proper lighting reduces eye strain and helps create a pleasant working environment. Natural light is best but experiment with different light tones to find what works best for you.

• Get creative with storage: Utilize storage solutions like floating shelves, vertical file cabinets, or desks with built-in storage to maximize space and organize files and supplies.

• Prioritize comfort: Invest in a good chair with proper back and arm support, and consider a stand-up desk to alternate between sitting and standing.

• Upgrade your equipment: At a minimum, you need a high-speed internet connection. You’ll likely need additional tools and services to run your business, but these entirely depend on your business idea.  

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7. Manage your time 

Improving your time management and focus will be an ongoing process. But, there are a few ways to set you, and any employees, up for success. 

• Use project management tools: 

Utilize online tools like Trello or Asana to organize tasks, set deadlines, and monitor progress.

• Set clear expectations: 

Communicate tasks, deadlines, and expectations to yourself and your team. Setting deadlines and making regular updates help keep everyone on the same page.

• Encourage regular breaks: 

Short breaks throughout the day can improve productivity. Encourage your team to take regular breaks to clear their minds and recharge.

• Regularly communicate: 

Use communication tools like Slack or Zoom to stay connected with your team, contractors, or vendors to facilitate collaboration.

• Avoid multitasking: 

Focus on one task at a time to ensure quality work and avoid mistakes.

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Learn more about what it takes to start a business

By following these steps, you’ll be well on your way to starting a home-based business. But there is far more you can learn about starting a business.

Check out the following guides to learn how to promote and grow your burgeoning business:

• How to start a business from scratch
• How to market your business
• How to put the right team together
• Set up your business finances