This checklist is a basic guideline for all home business owners. We’ve included lots of resources and tools that have helped us save time and money in our own business. Hopefully they can help you save time and money too!
Some steps apply to all businesses, while others do not. Keep this in mind as you go through the checklist. Some steps may not be applicable to you now, but the information may come in handy as you grow your business.
To find step-by-step instructions for starting a specific business, check out our Home Business Ideas page and choose your business.
That said… Let’s get started!
Step 1: Know Your Market
￼Before doing anything, you want to research your market to make sure that your business has the possibility to be profitable.
You’ll want to look at things like consumer trends, current markets (local, national and international), industry knowledge, competition and future growth.
This may sound overwhelming at first, but by using a few simple strategies, you can get the information you need without going through too much pain.
First of all, take a look at the current market in your industry. What products and services are being offered and what are their price points? Which items are the hot sellers right now – or getting lots of attention in the media?
You can do this by looking at trade journals, news websites in your niche or even search for your type of product or service on Social Mention or HowSociable to see what people are saying. Do you notice any common trends?
This information can tell you a few things: (1) why people are buying (to solve a problem? fix an issue? improve their lives?) (2) how much they are willing to pay for these products and services and (3) the level of competition in the marketplace. Once you have this information, you can tailor your business to be more profitable.
For example, let’s say you want to start a landscaping company. Through your research, you find out that many consumers in your area are interested in getting help with drought tolerant landscaping. Instead of starting a generic mow and blow business where there will be lots of competition, you might consider starting a xeriscaping service which shows higher growth potential and less competition in your area.
Do you want to sell a new product or service? You can find out what consumers think about your idea before you start developing it. You can conduct a survey online using QuickSurvey.com or SurveyMonkey Audience, and they have people in your market ready to take your survey.
When conducting your research, also take note of who your target customers are as people. This will help you reach them more easily when we get to marketing.
- Are the people you are trying to reach male or female?
- What is the average age of your target market?
- What is their average family size?
- What is the average income bracket?
- Where does your target market congregate? Where do they shop?
- Where are they located geographically?
- Do your potential customers live in apartments or houses or rural areas?
- Which radio stations, tv shows and magazines do they like?
- What type of work do they do?
- What are their interests outside of work?
Step 2: Write a Plan
Once you think you have a potentially profitable idea, it’s time to lay out your strategy (aka write a business plan).
Now, don’t be afraid of the business plan. It doesn’t have to be overly complicated and time-consuming.
In fact, some of the software programs available today actually make this task interesting and fun. You can figure out financial projections, outline marketing activities and organize a budget too.
The main thing to remember when starting a business is that you don’t want to wing it. I mean you can, but that increases your risk for lost money and time, and most entrepreneurs are already working on a shoestring budget anyway.
Knowing what you are getting yourself into – before you get yourself into it – enables you to make changes and adjustments before you make huge costly mistakes.
You can hire someone to help you write your plan, you can write it yourself using business plan software or you can look at sample business plans and use those concepts to put together your plan at no cost.
Step 3: Check Your Zone
You may need to check zoning requirements for your business to make sure you can operate in your neighborhood (for example, if you plan to run a group home, day care, or a business where you have clients visiting your home frequently). Some cities have restrictions on signage, parking, noise, etc for businesses operating in residential neighborhoods. You want to contact your city.
Step 4: Name Your Business
￼Choose a name for your business. You will then need to register your company name with with the city or county clerk.
This is a simple process that involves a short application and fee.
Thereafter, business name registration is renewed every few years for as long as you own the business. Get instructions on registering your company.
At this point, you want to decide how you will structure your business. Will you operate your business as a sole proprietor or do you want to set up a partnership or corporation? How to set up a sole proprietorship.
The majority of home business owners start as sole proprietors, as this is the simplest and lest expensive business structure. However, it’s a good idea to take a look at your options to make sure you choose the right option for you.
Not sure? Check out: Why incorporate?
Step 5: Apply for a License
￼Apply for a business license with your local city office. Requirements vary by city and state, and the type of business you’re starting will also determine the type of license and permits you will need.
Many home-based businesses can operate with just a general business license, but you want to check to make sure.
You can go into your local office, or some cities allow you to download applications right from their websites. The application is generally a few pages and asks for basic information about the business.
There is usually an annual fee required, and the cost varies by city. Find out how to apply.
Step 6: Protect Your Property
Does your business involve a product that you have developed, such as music, art or a software program? If you want to protect your work, you may want to take a look at trademarks and patents. Patents protect inventions and discoveries. Trademarks protect phrases, symbols or designs identifying a seller of products or services. Visit this page on how to do this.
Step 7: Get a Tax ID
You may need to get a Federal Tax ID Number, or Employer ID Number (EIN), from the IRS. You can apply through their website, by phone, fax or mail.
If you don’t know if you need a Federal Tax ID Number for your business, answer these questions:
1. Does your company have employees?
2. Is your business a corporation or a partnership?
3. Do you file tax returns for any of these items: Employment, Excise, Alcohol, Tobacco or Firearms?
4. Do you withhold taxes on income, other than wages, paid to a non-resident alien?
5. Do you have a Keogh plan?
If you already have a Tax ID Number, but have misplaced it, you can call the Business and Specialty Tax Line at (800) 829-4933 and have them look it up for you.
For fastest service, apply online. It can take up to five weeks to get your EIN if you apply by mail.
The EIN you receive is your permanent number and can be used for business tasks such as opening a business bank account, applying for a business license or filing a tax return.
Step 8: Open a Business Bank Account
Open a business bank account. You will want to keep your personal and business finances separate with a separate bank account. Those who try to use one account are likely to drive themselves crazy.
Having a business checking account is also handy because it enables you to write checks from your business account and accept checks made out to your business name. Interview and compare several banks to find the services you want.
Business bank accounts are not necessarily any more expensive than a personal account. If your company needs minimal services, you may be able to open an account for free or very cheap.
Step 9: Get Tax Instructions
￼Something fun about running your own business is paying taxes. Depending on how you structure your company, what you sell and if you hire employees, you will be subject to different types of tax. If you are self-employed, you will typically make estimated tax payments throughout the year.
I am no tax accountant, so I won’t give you advice in this department. However, I will tell you where you can find out all about these taxes, including tax forms. You can also work with a tax accountant who can provide guidance along with tips on maximizing tax deductions.
AICPA.org has a CPA finder on their website, if you are looking for a credentialed accountant.
Step 10: …and State Taxes
Thought we were done with fun tax stuff? No. Register your business with your state for collection of sales tax, if applicable, and register your company with your city/county for local taxes. The Small Business Administration provides registration information by state on this page.
Step 11: Find Out About Financing Options
Will you need financing to start (or grow) your company? These days, there are lots of alternatives to traditional bank loans, which can be difficult to come by.
Explore your options with peer-to-peer financing, crowdsourced funding, microfinancing and other forms of unsecured loans.
You may not need a loan now, but if you know where to get money when you need it – you can grow your business a lot faster and not miss out on profitable opportunities.
Also, consider getting a business credit card that can help you establish business credit – making it easier to acquire additional funding in the future.
Step 12: Set Up Your Bookkeeping
Invest in an accounting program or hire a bookkeeper to help you manage your finances. Besides saving your sanity, this step will save you many hours at tax time and will likely save you money because you can stay up-to-date on your income and expenses and know exactly where your money is at all times.
When it comes to accounting programs, you can get software like Quickbooks Pro or work in the cloud with online services like FreshBooks, Xero, WaveApps and more. Get list of resources and instructions here.
Step 13: Get a Business Address
￼Get a business address for your business. Or wait… do you want all of your prospects and customers to know your home address at 1234 Apple Street?
All kidding aside, a business address has multiple benefits, in addition to keeping your home address private. Prospects and customers also like seeing a professional downtown address in a big fancy building. It just makes you look bigger, established and more trustworthy.
Virtual offices can be found virtually everywhere (ok, not funny), and they offer a professional street address where you can receive mail, a phone number and address that can take calls plus private offices and conference rooms that you can use if you need to occasionally meet with clients.
Step 14: and a Business Phone
Similar to an address, a dedicated business phone line is a smart idea. You don’t need the kids picking up the phone chatting it up with customers. OK, that would be pretty funny.
But anyway, phone numbers, phone lines and even toll-free numbers cost way less than you might think. In fact, there are “all-inclusive” virtual services that offer voice, fax, text, voicemail and even video conferencing capabilities for less than $30 a month.
With virtual phone systems, you can access all of these services even if you are out of the home office. If you are trying to run a one-person business and you don’t stay in your home office all day, this is a great tool.
Step 15: Find Out if You Need Insurance
Don’t overlook the fact that you might need insurance for your business. And no, your homeowner’s policy doesn’t necessarily cover property or liability damages due to business activities.
That said… some insurance companies do offer add-ons to these policies that include limited property and liability coverage for home-based businesses – and they can be surprisingly cheap.
Alternatively, a business owner can get an in-home business policy that provides property and liability coverage and can cover lost income as well. If the home business conducts work off-site (out of the home), make sure that the insurance policy adequately covers business activities wherever they take place.
If you need to find an insurance agent, you can use the IIABA (Independent Insurance Agents & Brokers of America).
Step 16: Establish an Online Presence
￼I personally think that every business should have a website, but some people disagree and think that a Facebook Page, Reviews on Yelp or another platform can be sufficient. Whatever you decide, get your business online.
Not only does a website give people a way to find out about your products and services, it is a simple and inexpensive way for you to make a great impression on them. Even if you don’t et up an online store, you can add pictures of your product line, video demonstrations, photos of your staff, testimonials from customers, awards you’ve won, previous jobs you’ve done and more.
Let’s face it. Today’s consumers are busy, and most will not get to the point of calling you or meeting you in person. You need to take every opportunity you can to essentially “sell” them on how great you are before you ever meet them. A website can do this for you – and when your site is doing the selling for you, you can do less selling.
You can spend thousands of dollars on developing a website, but you don’t have to. You can hire a web hosting company like these to design one for you for about $500 or you can use easy-to-create website platforms and save yourself some money.
Find a list of resources on this page, starting at free.
Step 17: Set Up Payment Processing
The easier it is for customers to pay you, the more money you can make. Therefore, it’s important to set up a merchant account for your business or use an online service like PayPal where customers can submit credit card payments to you online quickly and easily.
You can get free mobile card readers from companies like Square or GoPayment from Intuit that you can plug into your phone or mobile device and swipe credit cards on the spot. Take payments from customers instantly and forget the hassle of invoices, billing and having to wait for checks to clear.
Fees typically run only about 3% of the transaction amount, and you can lower your cost with different pricing packages too. You don’t have to worry about hefty up-front costs or a difficult installation process. Once you get going, it’s pretty easy, and of course fun when you start getting money.
Step 18: Create Your Home Office
Although setting up your home office is not usually a priority when launching a start-up, it can play a big role in your success, at least in my opinion.
When you have a designated work space that motivates you to do great things and enables you to get work done efficiently, you’ll notice that you enjoy your business more and you will put more effort into it.
Therefore, create a home office that works for you. Include comfortable furniture and objects that motivate and inspire you. Minimize distractions by keeping your workspace clean and files organized with a list of goals that you want to accomplish each day.
Get office equipment that makes your life easier (ie printers, phone headsets, software programs) and have supplies on hand for when you need them (ie business cards, envelopes, stamps, business forms) so you don’t end up running around like a chicken with your head cut off.
Step 19: Find Helpers
Get help if you need it. Don’t try to do everything yourself. I’ve made that mistake myself and it’s not pretty.
Now that doesn’t mean you have to spend a lot of money or hire staff (although if you want to hire employees, this website has some helpful information). There are lots of places online where you can find freelancers and independent contractors to do a laundry list of tasks for cheap. You can get so much more done – and work less!
Once you get started… you’ll never go back to doing these jobs yourself. You can see list of the 30+ jobs I’m talking about on this page – with resources on where to find these wonderful task-doers!
Step 20: Let People Know You’re in Business
I don’t mean go bombard your friends and family, become a telemarketing machine or start knocking on everyone’s doors. What I’ve found to be a great sales technique is to let people sell themselves. That way you don’t have to sell.
So how do you do this?
In short: give stuff away for free. Don’t run away just yet, let me explain.
By letting people try your products in services, get to know you and see you in action, you can gain their trust and they will like you. They will automatically want to buy from you and refer their friends to you if they like what you have.
This can be done in a variety of ways. Here are some examples:
- A landscaper could write an article on spring planting tips, how to build a water feature or planning a vegetable garden and then submit it to community newspapers and publications. Readers will see the landscaper as a knowledgeable expert who must be nice because he’s sharing helpful information for free.
- A fitness trainer could hold a free workshop for a mom’s Meetup group: on exercises mothers can do to get in shape. Busy moms are likely to appreciate these tips, notice that’s you’re smart, nice and in good shape – and they’ll probably call you if they want a personal trainer to help them get in shape.
- A baker could create a few cupcake bouquets and deliver them to local office buildings on a special holiday like Halloween or St Patrick’s Day. She could include business cards with information on ordering cupcake bouquets along with limited-time coupons. This lets lots of people see your skills, taste your product and get to know, like and trust you.
- A PR consultant could volunteer to send out a press release for a community event, an accountant or bookkeeper could offer her service to a charity group or a DJ could play music for free for a local fundraiser. You get the idea.
Another marketing tactic that I like is getting other people to sell for me. But instead of hiring a marketing firm or a bunch of salespeople, you can do this by submitting a simple 1-page press release.
You can find services that will do this for you online, and they can let hundreds or thousands of media organizations know about your company, your products and/or services. These media groups can then spread the word to even more people who read their publications, listen to their radio shows or watch their TV networks.
All you need to do is write your 1-page press release, and you can even find people to do that for you too. Find out all about press releases here.