How to Start a Small Business at Home
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Many popular businesses, such as Microsoft and Apple, started their journey in a garage. If you have similar aspirations, start the process by learning how to start a small business at home. The process is similar to opening a brick-and-mortar business—sometimes with lower startup costs. Some of the steps are different, such as the need to obtain an at-home business license and learning online marketing.
Here are 5 steps for starting a business from home:
1. Come Up With a Home Business Idea
If you don’t already have an idea, the first step to coming up with an idea can be the hardest step. Many entrepreneurs know exactly what type of at-home business they’re going to open. For example, someone who has worked in an industry for several decades can leverage their knowledge and network to do consulting. Other entrepreneurs may know they want to create jewelry and sell it on Etsy.
If you’re one of the entrepreneurs who know you want to create a business but don’t have an idea yet, there are steps you can take to figure out your perfect business. Mostly, business success comes from skills you already have versus skills you will build as the business operates
Here are 5 steps for starting a business from home:
1. Come Up With a Home Business Idea
If you don’t already have an idea, the first step to coming up with an idea can be the hardest step. Many entrepreneurs know exactly what type of at-home business they’re going to open. For example, someone who has worked in an industry for several decades can leverage their knowledge and network to do consulting. Other entrepreneurs may know they want to create jewelry and sell it on Etsy.
If you’re one of the entrepreneurs who know you want to create a business but don’t have an idea yet, there are steps you can take to figure out your perfect business. Mostly, business success comes from skills you already have versus skills you will build as the business operates
Leverage Your Competencies
A great way to come up with a business idea is to brainstorm about your existing skills. Focus on identifying the skills that are unique to you or that you particularly excel at. Evaluating your previous professional experiences should give you a hint. Think of instances in which you were able to provide value to the organization for which you worked: do you notice any trends?
Identify certain skills that have enabled you to both produce results for someone and generate income. You can also look at your hobbies. Do you possess certain talents or skills that can be valuable to a group of people? Your business is much less likely to fail if you’re focusing on what you’re good at.
For example, a retail store manager may possess a combination of these skills:
Sales
Customer service
Inventory tracking
Organization skills
Team management
Communication skills
Knowledge of retail trends
Once you identify your core skills, the next step is to come up with business ideas that leverage those skills. If nothing immediately comes to mind, try expanding your scope by adding complementary skills that you can grasp quickly.
Going back to our retail store manager example, let’s assume that person has been providing social media marketing as a freelancer. They can combine their retail experience with their social media marketing skills to create an ecommerce store and promote the products online.
Using this brainstorming strategy, think of a unique and income-generating business idea that takes advantage of your core competencies. Give this strategy several weeks to work. One idea will preoccupy your thoughts over others. The next step will be to research your idea to make sure it’s a good one.
2. Identify Your Target Market
Once you have your at-home business idea, the next step is to identify your target market. Your target market is a particular group or segment of the population that is most likely to buy your product or service. You should identify and research your target market to ensure there are enough customers available to purchase your product.
Create Customer Personas
A customer persona is a fictionalized representation of a specific type of customer based on demographics and interests. Typically, a business will have several customer personas if they are selling to multiple customer types. You need to figure out which customer personas fit your business, because it’s important to know the demographics you should target in your market research.
Additionally, you’ll use customer personas to develop your marketing strategy. It’s wise to market directly to your potential customers. For a new and unknown brand, specifically marketing to targeted individuals is more effective than trying to market to everyone.
To help you develop your customer personas, consider listing several bits of information about your customers, such as a description, specific demographics, personality, preferences, product objectives, and pain points. Break this information into different sections and fill out each for the type of customer you will target.
A great way to come up with a business idea is to brainstorm about your existing skills. Focus on identifying the skills that are unique to you or that you particularly excel at. Evaluating your previous professional experiences should give you a hint. Think of instances in which you were able to provide value to the organization for which you worked: do you notice any trends?
Identify certain skills that have enabled you to both produce results for someone and generate income. You can also look at your hobbies. Do you possess certain talents or skills that can be valuable to a group of people? Your business is much less likely to fail if you’re focusing on what you’re good at.
For example, a retail store manager may possess a combination of these skills:
Sales
Customer service
Inventory tracking
Organization skills
Team management
Communication skills
Knowledge of retail trends
Once you identify your core skills, the next step is to come up with business ideas that leverage those skills. If nothing immediately comes to mind, try expanding your scope by adding complementary skills that you can grasp quickly.
Going back to our retail store manager example, let’s assume that person has been providing social media marketing as a freelancer. They can combine their retail experience with their social media marketing skills to create an ecommerce store and promote the products online.
Using this brainstorming strategy, think of a unique and income-generating business idea that takes advantage of your core competencies. Give this strategy several weeks to work. One idea will preoccupy your thoughts over others. The next step will be to research your idea to make sure it’s a good one.
2. Identify Your Target Market
Once you have your at-home business idea, the next step is to identify your target market. Your target market is a particular group or segment of the population that is most likely to buy your product or service. You should identify and research your target market to ensure there are enough customers available to purchase your product.
Create Customer Personas
A customer persona is a fictionalized representation of a specific type of customer based on demographics and interests. Typically, a business will have several customer personas if they are selling to multiple customer types. You need to figure out which customer personas fit your business, because it’s important to know the demographics you should target in your market research.
Additionally, you’ll use customer personas to develop your marketing strategy. It’s wise to market directly to your potential customers. For a new and unknown brand, specifically marketing to targeted individuals is more effective than trying to market to everyone.
To help you develop your customer personas, consider listing several bits of information about your customers, such as a description, specific demographics, personality, preferences, product objectives, and pain points. Break this information into different sections and fill out each for the type of customer you will target.
Target Market Resources
Once you determine your customer personas, it’ll be time to do research and ensure there are enough customers available to make your business a success. The type of market research you do for this depends on your business. If you’re servicing local customers, you want to ensure there are enough prospective customers physically located near your business to make it successful. If you’re an online-only business, you need to focus on where customers are spending time online versus if they live near your home.
Regarding resources to do market research, ReferenceUSA is one of the best demographic resources with information on 147 million U.S. residents. Access to ReferenceUSA is free at thousands of libraries across the U.S. The U.S. Census also contains a wealth of demographic information for free.
3. Research Your Competitors
Virtually every business has a direct competitor. As an entrepreneur, you need to know which companies are operating in the same market as your company so you can differentiate your business from theirs. When creating marketing materials, you don’t want your content to mirror that of competitor businesses.
Here are a few tips to gather information about your competitors:
Conduct a Google search: Use Google to find local competitors. Visit their homepages and take note of their business models, contact details, and featured customers.
Google My Business: Every business looking for local customers gets a free Google My Business Listing. Some businesses thoroughly fill out this listing and provide great information about their business.
Use social media: Only 54% of small businesses have websites, but there are over 50 million business pages on Facebook. If you can’t find competitors on Google, you may find them on Facebook, Twitter, or LinkedIn.
Physical marketing materials: Collect and consume as many marketing materials from your competitors as possible. Consider collecting flyers, ads, and brochures.
Post a job ad: 51% of employees are open to leaving their current jobs. Take advantage of this statistic by posting a job ad designed to attract your competitors’ employees. Once hired, they can give you insight on how your competition operates.
Remember, you don’t have to do all of these competitor research tactics. You may find that you receive plenty of information simply from doing a Google search and studying competitor websites and directory listings.
Competitor Comparison Table
Once you collect information about your competitors, arrange the information in a table to compare each. In the table, list your competitors’ names, distance from your home business, what they do better than your business (advantages), and what your business will do better than theirs (disadvantage).
4. Define Your Unique Value Proposition
After completing your comparison table, you will know how many competitors are in your market and their important features. It will be extremely difficult for you to win over their customers if you offer the same products or services. You have to stand out and offer more value or address a specific need if you want to be successful.
Once you determine your customer personas, it’ll be time to do research and ensure there are enough customers available to make your business a success. The type of market research you do for this depends on your business. If you’re servicing local customers, you want to ensure there are enough prospective customers physically located near your business to make it successful. If you’re an online-only business, you need to focus on where customers are spending time online versus if they live near your home.
Regarding resources to do market research, ReferenceUSA is one of the best demographic resources with information on 147 million U.S. residents. Access to ReferenceUSA is free at thousands of libraries across the U.S. The U.S. Census also contains a wealth of demographic information for free.
3. Research Your Competitors
Virtually every business has a direct competitor. As an entrepreneur, you need to know which companies are operating in the same market as your company so you can differentiate your business from theirs. When creating marketing materials, you don’t want your content to mirror that of competitor businesses.
Here are a few tips to gather information about your competitors:
Conduct a Google search: Use Google to find local competitors. Visit their homepages and take note of their business models, contact details, and featured customers.
Google My Business: Every business looking for local customers gets a free Google My Business Listing. Some businesses thoroughly fill out this listing and provide great information about their business.
Use social media: Only 54% of small businesses have websites, but there are over 50 million business pages on Facebook. If you can’t find competitors on Google, you may find them on Facebook, Twitter, or LinkedIn.
Physical marketing materials: Collect and consume as many marketing materials from your competitors as possible. Consider collecting flyers, ads, and brochures.
Post a job ad: 51% of employees are open to leaving their current jobs. Take advantage of this statistic by posting a job ad designed to attract your competitors’ employees. Once hired, they can give you insight on how your competition operates.
Remember, you don’t have to do all of these competitor research tactics. You may find that you receive plenty of information simply from doing a Google search and studying competitor websites and directory listings.
Competitor Comparison Table
Once you collect information about your competitors, arrange the information in a table to compare each. In the table, list your competitors’ names, distance from your home business, what they do better than your business (advantages), and what your business will do better than theirs (disadvantage).
4. Define Your Unique Value Proposition
After completing your comparison table, you will know how many competitors are in your market and their important features. It will be extremely difficult for you to win over their customers if you offer the same products or services. You have to stand out and offer more value or address a specific need if you want to be successful.
Using the data you gather from your research, you can come up with a unique value proposition. Think of this as what separates you from your competition, while at the same time something that your customers want. To come up with a unique value proposition, examine what everyone else is doing and the current market. Then, determine how you can provide a better solution, offer a better price point, or both.
For example, someone looking to start a PC repair home business discovers that all firms providing the same service in the area are retail shops. It is common practice for retail stores to strongly recommend item replacements in order to increase sales. In this scenario, there are several steps an individual can take to help build a unique value proposition using the data they’ve gathered:
Evaluate the current market: Customers drive to the store to get electronics fixed, only to get recommendations to purchase new items or wait several days for basic troubleshooting, paying high costs for their time or replacement electronics.
Determine a better solution: Offer home-based appointments to provide personalized laptop or PC repair and upgrade services. Basic troubleshooting is completed within a few hours, not days.
Offer a better price point: Customers mostly pay for labor, saving them the unnecessary expense of replacing functional components.
Defining a unique value proposition can help you penetrate the market and put your home business in a better position to succeed. Use the unique value proposition to make a clear and concise statement of why you’re better than the competition.
5. Test Your Home Business Idea
Next, you’ll want to test your idea to see if customers will actually pay for it. Your business idea may look good on paper, but you wouldn’t know for sure that you have something that works unless you put it in front of your market.
When testing your idea, generally avoid family and friends. Their feedback will be skewed due to your prior relationship. While it’s fine to get their feedback, the real test of success of a product or service is a paying customer with no prior relationship.
Here are a few tips to help you evaluate the viability of your idea:
Introduce Your Product or Service as Beta
Beta is when you’re testing out your product or service with the goal of receiving feedback. Find potential beta customers at trade shows, festivals, farmers markets, and other types of events where you can sell your product or service to a relatively small group of people. Consider offering discounts in exchange for customer feedback. While you can make some money with the beta, don’t let it distract you from your goal of testing and improving your idea.
You may be tempted to spend several months (or years) creating a new product to sell before launching it to a large market. We recommend starting small and thinking big. Get your product or service out to a few people as quickly as possible to receive feedback so you can tweak the product or service before going full-fledged.
Work Part-time for Your Home Business
Entrepreneurs take calculated risks. If you’re currently employed, it’s wise to use your free time to evaluate whether your idea has the potential to generate income before jumping ship. Sell the product or service part time to determine if it will sell before giving up your full-time income.
Offer Your Product or Service at No Cost
If you’re offering a service, find clients who require your expertise. Offer to work for them for free, but request an online testimonial in return. By working for free, you can gain valuable experience, build your portfolio, and build a quality online presence with positive reviews.
Run a Crowdfunding Campaign
A great way to test your business idea without spending a lot of money is to run a crowdfunding campaign. This is preselling a product before you’re ready to deliver it so you can raise money to create it. Crowdfunding is a great way to determine if there is a market for your product. Typically, a crowdfunding platform charges a 5% fee of the total amount raised plus a 3% transaction fee.
For example, someone looking to start a PC repair home business discovers that all firms providing the same service in the area are retail shops. It is common practice for retail stores to strongly recommend item replacements in order to increase sales. In this scenario, there are several steps an individual can take to help build a unique value proposition using the data they’ve gathered:
Evaluate the current market: Customers drive to the store to get electronics fixed, only to get recommendations to purchase new items or wait several days for basic troubleshooting, paying high costs for their time or replacement electronics.
Determine a better solution: Offer home-based appointments to provide personalized laptop or PC repair and upgrade services. Basic troubleshooting is completed within a few hours, not days.
Offer a better price point: Customers mostly pay for labor, saving them the unnecessary expense of replacing functional components.
Defining a unique value proposition can help you penetrate the market and put your home business in a better position to succeed. Use the unique value proposition to make a clear and concise statement of why you’re better than the competition.
5. Test Your Home Business Idea
Next, you’ll want to test your idea to see if customers will actually pay for it. Your business idea may look good on paper, but you wouldn’t know for sure that you have something that works unless you put it in front of your market.
When testing your idea, generally avoid family and friends. Their feedback will be skewed due to your prior relationship. While it’s fine to get their feedback, the real test of success of a product or service is a paying customer with no prior relationship.
Here are a few tips to help you evaluate the viability of your idea:
Introduce Your Product or Service as Beta
Beta is when you’re testing out your product or service with the goal of receiving feedback. Find potential beta customers at trade shows, festivals, farmers markets, and other types of events where you can sell your product or service to a relatively small group of people. Consider offering discounts in exchange for customer feedback. While you can make some money with the beta, don’t let it distract you from your goal of testing and improving your idea.
You may be tempted to spend several months (or years) creating a new product to sell before launching it to a large market. We recommend starting small and thinking big. Get your product or service out to a few people as quickly as possible to receive feedback so you can tweak the product or service before going full-fledged.
Work Part-time for Your Home Business
Entrepreneurs take calculated risks. If you’re currently employed, it’s wise to use your free time to evaluate whether your idea has the potential to generate income before jumping ship. Sell the product or service part time to determine if it will sell before giving up your full-time income.
Offer Your Product or Service at No Cost
If you’re offering a service, find clients who require your expertise. Offer to work for them for free, but request an online testimonial in return. By working for free, you can gain valuable experience, build your portfolio, and build a quality online presence with positive reviews.
Run a Crowdfunding Campaign
A great way to test your business idea without spending a lot of money is to run a crowdfunding campaign. This is preselling a product before you’re ready to deliver it so you can raise money to create it. Crowdfunding is a great way to determine if there is a market for your product. Typically, a crowdfunding platform charges a 5% fee of the total amount raised plus a 3% transaction fee.
