How to Run a Successful Business From Home
Operating a business from home offers many benefits, including saving on overhead cost and commute time.
If you’re planning to start one or re currently in the early stages of your business from home (BFH) venture, you can achieve success with the right amount of planning, time and effort.
In this article, you will learn more about the essential steps and smart ways to run and operate a business from your home office, which include:
- Have a business plan in place
- Comply with business licensing requirements
- Set up a business account
- Create a home office
- Set business hours
- Develop a system of accounting
- Fortify your technology system
- Insure your business
- Pay business rates
- Manage business tax
1. Have a business plan in place
Before starting out on a BFH venture, you need a business idea. You also need to identify your target market, know your competitors, define your unique value proposition (why your products or services are better than your competitors), and determine your marketing strategies. All these considerations are laid out in your business plan.
Your business plan should also identify your source of funding. While you won’t need to build a physical store or hire employees during the initial stage of your business, you still need funds to market your products and services, say, building a website or setting up an online ordering and delivery system to reach your customers.
You can use your savings or borrow from family and friends to kick-off your business idea. Alternatively, you can apply for a startup business loan or seek out investors. If you decide to go with the latter, you need to make your business plan stand out.
2. Comply with the business licensing requirements
You need business licences and permits to operate, as well as a business name and ABN. Certain businesses may require specific permits, say, an in-home daycare that needs a daycare license or a food service that needs a food preparation license.
These licenses and permits are issued by the local, state and federal government agencies. Some certifications are issued by specific organisations like training providers.
If you want to know the requirements you need to submit to acquire licenses, contact your state or town office of business registration. For relevant codes of practice in your industry, research online or ask other BFH entrepreneurs you know.
3. Open a business bank account
A business bank account will help you separate your business finances from your personal and household funds. You can easily track your business profit and cash flow.
You can also establish your business credit score, which is essential to get approved for business loans, in case you need to secure one in the future.
4. Create a home office
Develop an area in your home for your office. Make this space exclusive for business dealings to get yourself in "business mode" as soon as you enter this area.
Depending on the type of business you are running, your home office can be small or large. For instance, if you're selling items online, you may need to clear out a spare bedroom or clean up a basement to have a large area to comfortably work and stock products. You can also use unused shelves and walk-in closets for storage.
5. Set business hours
Just because you're working from home doesn't mean you don't need to follow a schedule. Setting business hours will help you develop a routine to efficiently organise and prioritise the things you need to do. It will also help you effectively separate your work life from your personal or family life.
Moreover, people who live around the house with you will learn to respect your time. For instance, if you set 9 AM to 4 PM as your office hours, your wife or kids will try not to bother you with various requests unless they're very important. They may not even enter your home office during these specific hours.
6. Develop a system of accounting
Manage and track your business spending efficiently by keeping your receipts, invoices, and statements. You can use a ledger or online accounting software like Xero and Quickbooks.
If you can afford it, it is best to hire an accountant who not only can help you organise your accounting system but can also provide advice on accounting matters for your business. For instance, if the accountant is able to identify the costs that you can offset as business expenditure, like heating and electricity bills, you may be able to claim tax deductions for some of these costs.
7. Fortify your tech
Perhaps the most overlooked hurdle to overcome in a work-from-home environment is problems with equipment that you will be using on a daily basis. It is often far too easy to rely on technology to behave on its own.
To ensure that your broadband package is of a necessary standard, you may wish to opt for a business broadband service. Not only will you receive better, business-specific customer support should anything go wrong, you may also be entitled to compensation should a disruption in service occur.
Familiarise yourself with the technology that you will be used during working hours. While this may seem like a common-sense move, a disruption could lose you a days’ worth of business, which is a dangerous prospect in the early stages of development.
8. Insure your business
When setting up a business at home, you will need to check your insurance policy and likely take out additional cover for any business activity within your household. This is not an expensive addition and most companies will combine any additional cover into one domestic and business policy.
Many homeowner or rental policies don't cover damages or injuries related to the business use of your home. Your insurance agent may recommend adding business liability coverage to your current policy or purchasing a new policy altogether.
If your business requires clients to enter your property, you may be advised to take out public liability insurance, another inexpensive addition to your insurance policy.
9. Manage your taxes
Depending on whether or not you have employees working alongside you in your property, you may be required to pay business rates on top of your council tax. You will also be asked to pay these rates if you convert any part of your property into a shop/workshop or if client visits become a daily occurrence. A quick call to the VOA (Valuation Office Agency) will verify if you are required to pay business rates.
You can also take tax deductions for business use of your home. If you have a designated space from which to run your home business, you may qualify for deductions on your federal tax return.
10. Prepare a Contingency Plan
Running a business from home isn’t for everyone. Have an alternative plan in place if you are struggling to motivate yourself in a comfortable environment. You may find that renting a desk in a nearby office pushes you to be more proactive.
Additionally, if you feel that your business is expanding at an unexpected rate, you will need to have a contingency plan in case you require more workspace for yourself and/or other employees.