Complete Guide for Starting a Business from Home

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Thinking of starting a business online? Check out this comprehensive guide of how to start a business from home and the considerations to take into account.

How to Start a Business From Home

Disclaimer: Nothing in this article should be construed as legal, financial or tax advice. Please always consult a knowledgeable professional advisor.

If you dream of starting your own business you’re in good company - small businesses account for 99.9% of all businesses in the UK. And what’s more, many of them began life at home.

There’s never been a better time to turn your idea into reality.
This step-by-step guide on how to start a business from home will help you understand the different stages and give you the tools you need to make your vision happen.

Develop your home-based business idea

Research home-based business options

The chances are you probably have a good idea of what you want to do and have been mulling it over for a while. But if not, and you’re still looking for something you can run with we’ve pulled together five home business ideas you could explore:

  • Homemade eCommerce - If you’re creative there are literally endless products you can make and sell from curated gift boxes and jewellery to personalised baked goods. You could turn your existing passion and skill into a profitable business and make money doing something you love.

  • Bulk buying - Another popular business idea is to purchase products in bulk and sell them individually online. They could be niche products that would appeal to a certain audience or products that fill a gap within a niche market.
    This type of business is ideal for starting at home, so long as the products are small enough to store and ship - you don’t want them taking over your entire home. Once you reach a certain point, you can also grow the business further, by hiring employees and expanding into additional storage.

  • Dropshipping - Dropshipping is an alternative to bulk-buying that works especially well for those who have less storage space available in their homes. Rather than purchasing products in advance, you take orders through an online store then send those orders directly to a third-party such as a wholesaler or manufacturer who stores the products and sends them directly to your customer.

  • Virtual services - From virtual tutoring and personal training to freelance writing and consulting, a service-based business is one of the simplest types of business to set up at home. You’ll usually just need three things to get started: time, expertise and a suitable home workspace.

  • Offline services - Much like its virtual counterpart, offline service-based businesses also follow a similar model, whereby you charge for your time and expertise. However, while virtual services can all be done from home, offline services tend to market themselves from home but operate in-person.
    Offline services can include house cleaning, dog walking, decorating and child-minding, among many others.

Ensure market demand meets your contribution

An idea is great but will it genuinely work as a business? Whether you’ve identified a gap in the market or have a passion you want to share with the world there has to be a demand in order for it to become a business.

As you develop your ideas, you’ll need to consider what unique strengths and skills you and your business can offer. Think about why this might appeal to the market and what the market will pay you to do. Channel your inner ‘Ikigai’ to help you define your business’s ‘reason for being’.

Product or service – or both?

Next, you want to decide what type of home-based business you want to run. You might be interested in selling a product to a consumer, so elements like manufacturing, warehousing and shipping will need to be considered. Services on the other hand, like consulting, require relationship building and frameworks for knowledge sharing.

There’s also combination businesses, like at-home salons and online food businesses that need to manage both tangible and intangible components, for example, food and customer loyalty, so it’s great to identify what direction you want to go in from an early stage.

How to set up a business from home: A step-by-step guide

Once you’ve got your idea sorted, it’s time to work out the details - how you’ll run your business, how you’ll fund it and how and to whom you’ll market it.

Writing a business plan

You’ve probably thought about your business idea for hours, days and even months and done a lot of research too. A business plan is a strategic document which helps you take all that information and put it into one cohesive format which helps guide you through setting up and launching your new venture.

If you like, think of it as a blueprint and a great opportunity to take a good, hard look at everything you’ll need to turn your idea into reality.

In your business plan you’ll include:

  • Company vision and goal
  • What products or services you intend to sell
  • What the current market looks like and any competition you may face
  • Pricing structure
  • Financing - capital you need to launch your business
  • Marketing strategy
  • Staff and management
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Creating a financial plan

Within your business plan you can create a financial strategy or it can act as a standalone document. This will detail how much it will cost to get your business started, your anticipated sales and any expenses.

  • Sales forecast - This will show the anticipated sales over the next one to three years. It will involve a fair amount of educated guesswork because you won’t have any sales data to look at if you’re just starting out but it will provide a guide to work to which you can adjust as you do start to sell.

  • Expenses - You’ll write an expense report by identifying all the fixed and variable costs of your business. Variable costs may go up and down regularly, for example raw ingredients or materials. Fixed costs such as equipment hire or subscription services will stay the same each year and change rarely, annually for example.

  • Cash flow statement - This will detail all the money expected to flow in and out of the business over the first year. It can be difficult to predict if you’re only just starting to trade but it pays to be as realistic as possible about what will come in and what expenses you may see. For example, understanding that some clients don’t always pay on time and you may incur unexpected expenses.

  • Projected income - As well as a sales forecast it’s important to have an idea of what income or profit you will make from those sales so you can work out how much you will actually earn from your venture.

The simplest way to set up your home business is as a sole trader or self-employed. In this instance you need to tell HMRC you have gone self-employed and you will file a self-assessment tax return each year which includes the amount of profit you made from your home business and any tax due on it. Under this legal structure you get to keep all the profits but you’re personally liable for any debts.

Another common business structure is a partnership where you and your partner share the profits but you also share responsibility for debts and any liabilities.

Finally, there is a limited company. In a limited liability company the company is considered a separate legal entity so the profits and debts belong with the company. As a shareholder you will receive a share of any profits the company makes. The company will also have to file an annual company tax return while you’ll need to file a self-assessment if you receive dividends from shares you own in the company.

For more detailed information on company legal structures read our comprehensive guide

Setting up your home office

Working from home is convenient and it saves on office or retail space rent but it also requires some planning so the lines between home life and office life don’t become too blurred.

Where possible, have a separate space which is purely for work that you can close off and shut the door at the end of the day. If this isn’t possible you should at least carve out a work or office area that is off limits to family.

With working from home you need to be organised and disciplined with proper start and end times so work doesn’t bleed into the evening. On a practical note, make sure you have, if possible, a separate printer, computer and equipment so it’s not being used by the family and essential supplies don’t disappear.

Creating a website or online store

Once your home-based business is official, it’s time to launch your website or online store, as well as any supporting infrastructure.

Firstly, you’ll need a domain provider. It’s common practice to purchase domains that are the same and similar to your business name so that other people and companies don’t use your name too (knowingly or unknowingly).

You’ll also need to find a hosting platform for your website. If you’re [accepting online payments][], you can find eCommerce platforms, such as Square Online, that include payment processing or integrate with payment platforms. You can customise your virtual storefront and start accepting payments in no time.
When choosing the right online store platform, consider:

  • How easy it is to build using their templates to reduce design and development costs
  • Its ability to integrate with other applications, like accounting software, so all of your systems play nicely with each other.
  • Preparing your payment system

    Beyond accepting cash, you also need to accept card payments, which offers convenience for your customers and means you’re more likely to get paid the right amount straight away.
    There are several ways that you can accept payments when starting a business from home:

  • Set up your online store with Square Online to accept payments on your website
  • Use your computer to take credit card payments over the phone with Square Virtual Terminal
  • Easily create and send estimates and invoices from the free Square Invoices app
  • Set up easy checkout links to help you start accepting payments online with Square Payment Links.
    If you’re also planning to trade in person, Square’s contactless card reader allows you to accept payments from contactless cards, contactless devices and chip cards.

Establishing small business accounting

Keeping track of sales and expenses from the outset is essential for several reasons so you:

  • Understand what your sales figures are and keep accurate sales records
  • Invoice customers and keep track of what you’re owed
  • Understand profit you’re making
  • Know what your expenses are
  • Can make adjustments as you receive more data
  • Have accurate data to file tax returns and pay the right amount of tax

You can do this yourself if you know your way around accounting by simply using a spreadsheet or ledger. Many people these days opt to use accounting software such as Quickbooks or Xero. These programmes keep track of your sales and expenses, provide profit and loss reports and balance sheets and integrate with HMRC too if you have staff and need to make payroll.

You can integrate Square with your favourite accounting apps through the Square Marketplace.

Crafting a marketing plan

With everything up and running, it’s time to promote your business and attract some customers. This can be done in several ways, so we’ve listed a few ideas below:

  • Create an online blog or website: Make a digital space for your home business so that customers have a point of reference to return to. This could be a website integrated with your [], or a separate blog which showcases your brand and business ethos.
  • Use those SEO tactics: Search Engine Optimisation (SEO) helps ensure your website appears in relevant search results. To enhance your website or blog, you can include keywords that your customers might be searching for, create informative pages that link to your business offering and make sure your site is easy-to-follow.
  • Set up your business’ social media: From Facebook and Twitter, to TikTok and Instagram, the world of social media is a free and accessible way for you to engage with potential customers. Set up your own accounts and create a regular posting schedule to attract like minded brands, clients and consumers.
  • Go local: When starting a business from home, your local area can be the perfect place to generate some interest. Whether you leave a few business cards at your nearest coffee shop or offer exclusive discounts to local stores, it’s a great way to get your name out there. And don’t forget to list your business online so you appear on local searches.
    So, now you know how to start a business from home, it’s time to get going! Your business will require time, effort and lots of flexibility, but the rewards will make it worthwhile.

Follow along on Town Square for more about how to successfully run a business over time, or find out more about Square payment processing options and how they can help your home-based business grow.