While the concept of starting a business out of your home might seem out of reach, the fact of the matter is that every entrepreneur starts from scratch and many successful businesses started from a garage or home office. Starting a home-based business is an excellent option for entrepreneurs who are seeking flexibility in this unusual environment, where we are already spending more time at home as it is. According to the U.S. Small Business Association, 52% of all small businesses are run primarily out of the home.
A groundbreaking idea turns into a business plan that turns into a very long list of to-do’s to check off before getting your business off the ground. While the process looks extremely similar from businessperson to businessperson, all the small details will make your experience vastly unique from other entrepreneurs.
When you’ve made the courageous decision to launch your home-based small business, there are plenty of details to settle on. Here are some significant items to add to your small business checklist before taking those first steps:
Run The Numbers
It’s important to know how much money you’ll need to launch your home business, not only because that will determine the funding options you seek out, but also because you’ll get a better idea of cash flow and how profitable you can be. Compare your projected cash inflows and outflows before you carry out any business, as one survey shows that 12% of entrepreneurs state cash flow as their biggest obstacle.
The same research also concluded that 68% of business owners regret not taking the time to learn about financial management in the first year of operations. To get the most reliable numbers and learn the best financial management tips both before and after the launch, speak with a financial advisor who can account for any factors that an inexperienced business owner might overlook.
Get Business Financing
Did you know that 64% of small business owners start with less than $10,000? Depending on the nature of your business, chances are that you’ll need much more than that to get things started, which lends to the question: where will this money come from? While you do have a leg up in some aspects, given your lack of need for office space, it’s still important to consider the various other expenses that go along with starting a business either way. When it comes to financing, there are a few options to consider:
These loans are guaranteed by the Small Business Administration (SBA) to help companies receive funding from partnering lenders. They come in the form of SBA loans, lines of credit, equipment loans, small-business credit cards, and many more.
Personal loans offer a more flexible alternative for small business owners in that they can be used for countless major purchases and have typically lower interest rates than credit cards. However, some lenders may be strict with how you use this money, in which case you may need to explore other options.
Home Equity Loans (HELs)
This financing option allows homeowners with at least 15% equity in their home to borrow against what they’ve paid toward their mortgage. Receiving up to 80% of the equity you’ve built, you can then use a lump sum of cash toward whatever you want. Remember to weigh the pros and cons of HELs before going this route.
Crowdfunding, bootstrapping, raising venture capital. There are plenty of ways to acquire the funds your business needs. From launching a crowdfunding campaign to dipping into your own personal savings to presenting a business plan to investors, you can access a lot more cash without adding more debt to your resume.
Create a Business Plan
Oftentimes, applying for business financing requires you to have a formal business plan. This is a document that includes details about the future of your business, most importantly including important financial information and projections, which helps lenders decide whether or not they can trust you as a borrower and if your company will make enough money to pay back the loan.
Though business plans vary in length and structure, their vital sections remain the same. Make sure you include an executive summary, company information, a marketing plan, and most imperative, your company’s financial plan. Keep this document handy, because this plan will change as your business grows.
Size Up The Competition and Plan Your Offerings
Before launching your business, consider the current environment and what products or services have been in high demand during the pandemic. This can help determine a viable business venture in an evolving world. Depending on your home’s capabilities, there are a handful of industries that have seen a surge in interest during this economic downturn, including: home improvement, gaming, personal care and pet products. Consider your interests and strengths as well as market gaps when working through this part of the business planning process.
It’s also critical that you keep a close eye on your competitors and similar industry leaders even after your business takes off. Pay attention to what they’re doing right – what customers do they have that you could service better? Stay up to date on current news, marketing campaigns, and new innovations regarding your competition. Attend to what they’re doing wrong, too. Learn from their mistakes to minimize any potential losses in the future.
The small home-based business checklist can look different to every entrepreneur, and your personal list is most definitely not limited to the to-do’s listed above. Your journey is unique, and especially if you’re a first-time small-business owner, it can be hard to determine whether or not you’re doing all the right things. When your strategies don’t work out the first time, don’t be discouraged. Seek out advice from colleagues or other seasoned home-based business owners, utilize any resources, and watch your small business thrive.