How to Start a Small Business at Home

Jamie Johnson offers good advice on “How to Start a Business at Home’ in the US Chambers newsletter CO. Subscribe here: In this article, Jamie points out that 69% of entrepreneurs start their businesses at home and offers six steps to accomplish your goal of starting a home-based business.

Starting a new business venture isn’t easy, but these six steps will help you make much-needed progress

Starting a business requires you to do your homework, but with this guide, it’s well within the reach of any entrepreneurial spirit. — Getty Images/Lordn

In the U.S., 69% of new entrepreneurs will start their businesses out of their homes. If you’ve been thinking about starting a small business at home, here are six steps to help you get started.

Come up with your business idea

The first step to starting a small business is coming up with a winning business idea. Ideally, you’ll develop a business venture that interests you and meets a need in the market.

A great way to do this is by identifying a problem that frustrates you. Is there an issue that you continually encounter that you wish someone would solve? That could be your next business venture.

But, you don’t necessarily have to reinvent the wheel. Take a look at the businesses that are already out there, and ask yourself how you could improve upon what they’re already doing. Are there any gaps in the marketplace that you could fill?

Decide what you’re going to sell

A lot goes into starting a business, but the first place to start is to figure out what you plan to sell. Your success as a business depends on your ability to sell products or services to your customers.

Come up with a list of ideas for products or services you can offer. From there, you should consider the following questions:

  • Is there a demand for this product or service?
  • How will this benefit my customers?
  • Would I purchase this product or service?
  • What could I reasonably charge?
  • Is there enough demand for me to make a profit?

Write a business plan

Next, you’ll write a business plan. A business plan will help you gain clarity as you’re getting started, and it will help tremendously if you decide to apply for small business financing in the future.

According to the SBA, most business plans fall under the category of a traditional business or a lean startup. You’ll go into great detail in a traditional business plan. These plans can be several dozen pages long and are required by most lenders and investors.

In comparison, a lean startup business plan focuses on a high-level overview of the business. You’ll summarize the most important aspects of your business, and it will only be about a page long. This will be much faster to create, but if you seek out funding, investors may ask for more information.

“It can help to partner with more established businesses to get your name out there and grow more quickly.”


Decide on your business’s legal structure

Choosing the correct legal structure is an important part of running your business. If you want to get started quickly and with as little hassle as possible, a sole proprietorship may be right for you.

With this type of business model, you don’t have a partner or executive board to answer to, so you’re in complete control of all the decisions. Keep in mind, though, that there is no legal separation between you and the business; you’re responsible for any debts and lawsuits that the business incurs.

In contrast, a limited liability company (LLC) provides more flexibility and creates a legal separation between you and the business; however, there is more paperwork to fill out, and you’ll have to file your business with the state.

[Read more: Sole Proprietorship vs. LLC: Which Should You Choose?]

Apply for your EIN

Your Employer Identification Number (EIN) is a federal tax number that will identify your business entity. If you ever plan to register your business as an LLC or hire employees, you’ll need an EIN.

Without an EIN, you’ll have to use your Social Security Number to identify your business, so applying for an EIN can help you keep your Social Security Number safe. You can apply for free on the IRS website and receive your EIN within minutes.

Set up a business bank account

Once you’ve established your business entity, you should set up a business bank account. This is important because it separates your finances from your business finances.

It’s a good idea to partner with a local bank so you can establish a personal relationship. Many people find that smaller banks are more helpful and can respond quickly if a problem occurs.

Look into insurance

Several risks come with running your own business, including lawsuits, data breaches, or business interruption. So you should start by making sure you have the right insurance.

A good place to start is by looking into a Business Owner’s Policy (BOP). This type of insurance includes three different types of coverage:

  • General liability insurance: This insurance covers bodily injury, property damage, or personal injury.
  • Commercial property insurance: Commercial property insurance protects the equipment used to run your business.
  • Business income insurance: If you’re unable to run your business for some reason, business income insurance can help pay for necessary expenses like payroll.

It’s a good idea to speak to an insurance agent for recommendations that are specific to your business.

Set up a home office

If you plan to work from home, it’s a good idea to set up a designated home office. This can either be an empty room in your home or just a designated corner in your bedroom.

But you want to choose an area that will offer you a certain degree of privacy. Also, be mindful of the background, especially if you have to conduct client calls regularly.

[Read more: How to Create an Effective Home Office Setup]

Work with an accountant

Taxes are confusing to most people, and they get even more complex when you’re running a small business. Plus, you need advice on how to structure your business, how to set up payroll, and how to track your expenses. That’s why it’s a good idea to hire an accountant.

An accountant can help you with all of this and ensure that your business is up to date with the most recent tax laws. And in the unlikely event that your business is audited, an accountant can walk you through this process.

[Read more: When and Why You Should Change Business Entities]

Check on any legal requirements

Anytime you’re starting a new business, it’s a good idea to check on the state and local requirements. Some states will require a business license or permit, and you could be fined for failing to follow these requirements.

Depending on the type of business you plan to run, you may need to look into local zoning laws. Once you’ve chosen a business structure and fulfilled your state’s registration requirements, check to see if any other laws could affect your business.

Come up with a marketing plan

Marketing is crucial for building a successful business, but too many business owners go into it without a plan. This lack of planning often leads them to spend a bunch of money without seeing any real results. Or worse — something does work, but they have no way to recreate it.

That’s why it’s essential to start with a marketing plan. A marketing plan will outline how you plan to get the word out about your new business. It will typically include:

  • An overview of your marketing goals.
  • A description of your target market and customer.
  • A timeline of tasks to be completed.
  • Important metrics to track along the way.

From there, you can outline your plans for your website, social media channels, and company branding.

[Read more: The Best Online Marketing Strategies]

Test your business idea

Now it’s time to get out there and test your business idea, which means you need to focus on making some sales. After all, successful businesses are measured based on profitability.

There is no perfect plan to launch your business, and you may encounter many missteps in the beginning. It can help to partner with more established businesses to get your name out there and grow more quickly.

Regardless of the strategy you implement, you should be prepared to adjust as you go. The important thing is that you’re creating a solution that’s relevant and fills a need for your customers.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your situation.



Johnson, Jamie. “How to Start a Small Business at Home,” 26 April 2021, Startup, US Chamber,