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.
Sometimes the best ideas are born from challenging situations. During the pandemic, it’s been inspiring to see businesses pivot and new entrepreneurs leaning in and starting a business from home. If this sounds like you, we’re here to help! This step-by-step guide is intended to help learn how to start a business from home.
Develop your home-based business idea
Ensure market demand meets your contribution
There are multiple steps to starting a home business, but the first one you need to ask yourself is if there is a need for your business? Have you identified a gap in the market you can fill? Or is there something you’re extremely passionate about and want to share with the world? Either is a great reason to open a business. When developing your business to start from home in the UK, it’s important to understand what unique strengths and skills you have and what the market will pay you to do. The concept of ‘Ikigai’, is a useful tool 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. A product is a tangible good that can be consumed, so elements like manufacturing, warehousing and shipping need to be considered. Services on the other hand, like consulting, require relationship building and frameworks for knowledge sharing. Combination businesses, like restaurants, need to manage both tangible and intangible components, for example, food and customer management.
Business models differ significantly depending on whether you want to offer a product or service, or a combination of both. When considering what small business to start from home, it’s important to identify which direction you want to go in.
Get Started With Square eCommerce
Sell more online with Square’s eCommerce solutions.
Identify your customer
Your ability to clearly define the customers who will buy your offering is key to your success when starting a business from home. Here’s a series of questions you should answer to find clarity about exactly who will purchase your product or service:
- Define your product: How would your customer explain your product or service in their own words?
- Define the opportunity for your business: What problem does your business help your customer solve?
Define the demographic of your customer. For example:
Where is your customer located?
How old are they?
What’s their gender identity?
What is their profession?
How much is their annual income?
Understand your customer’s behaviour. For example:
How does your customer make purchase decisions?
Who is influential in their lives?
What worries them?
What excites them?
Run a competitive analysis
Before you start running a business from home, it’s important to understand who else is doing what you’re doing, by developing a competitive analysis. Look at other brands online and read their product reviews. Better yet, pretend you are your customer and purchase that product or service. For instance, if you want to make and sell candles or soaps, buy some from another brand. Or if you want to offer your gardening expertise, hire a gardener. Here’s what to look for when assessing your competition:
- What’s the price of the product or service?
- What’s the quality of the product or service?
- What are the key benefits that are communicated?
- What was the experience of interacting with the product or service? How did the business meet your expectations?
- What customer is the business appealing to and where is their focus location?
Answers to these questions will help you create a business plan and marketing plan when starting a business from home.
Articulate your unique selling proposition
When you know what other businesses are out there, you can see how your home-based business differs – and what you want to highlight that you do differently. This is called your unique selling proposition (USP) – and it’s all about what you can do better than anyone else. You should be able to sum up this proposition in a short sentence.
For example, FedEx’s original USP was ‘When it absolutely, positively has to get there overnight’ - highlighting a problem that can be solved with their product. Another example from Innocent Drinks is their campaign “Taste good. Does good.“ that helps communicate the company’s use ethos of using sustainably-sourced natural ingredients and donating 10 percent of their profits to charitable organisations.
Don’t be fooled. This deceivingly simple exercise requires time and attention. Chances are, your first attempt won’t be your last. Your USP is why people will want to buy from you, work for you and invest in you, and is the basis for your elevator pitch.
Build your business model
Your business model is your ‘How’, or your plan for making money. It identifies the key sources of revenue by selling your product or service to your intended customer. Your model also identifies your funding streams and your suppliers, and other stakeholders, in your business. The Business Model Canvas from the University of Oxford is a popular tool for mapping out these elements.
Pricing your goods and services is an important consideration when building your home-based business model. There are three ways businesses typically price their product:
- Competition-led: Where do you want to sit alongside your competitors?
- Cost-led: How much does it cost to produce your product or service?
- Value-led: What is the price your customer is willing to pay for your product?
Your pricing model is a determining factor of your expenses and revenue for operating over time.
Register your business
Once you’re confident starting a business from home will be profitable, it’s time to make it official! There are three steps to registering a business in the United Kingdom:
- Claim your business name: Make sure it’s memorable and desirable for your customer, and that no one else already has it!
- Choose your legal business structure: From ‘sole trader’ to ‘limited company’, different business structures come with varying benefits and obligations.
- Get the necessary permits: Different businesses require different permits. For example, you need a specific licence if you want to sell food or trade in the street. There are also specific rules you must adhere to when selling goods online.
To find out more on these steps, check out our guide on how to register your business as a name and entity legally in the United Kingdom.
Set up your software stack
Once your home-based business is official you can launch your website and 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 and
- its ability to integrate with other applications, like accounting software, so all of your systems play nicely with each other.
Prepare 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 a number of 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 Online Checkout.
For when you’re able to trade in person, Square’s contactless card reader allows you to accept payments from contactless cards, contactless devices and chip cards.
So now you know how to start a business from home! But starting a business from home is just the beginning. Promoting and operating your business to be a successful enterprise requires ongoing work (and in the current climate, it requires flexibility). Follow along on Town Square for more about how to successfully market a business and how to run a business over time, or find out more about Square payment processing options.