Whether you’re tired of the 9-5 commute or simply ready to pursue your passion, there’s any number of reasons why you may be looking to start a small business at home. 

The only problem is knowing where to begin. 

In this guide, I’ll draw on my own experience as a home-based business owner to outline the 8 essential steps you need to take to turn your home business idea into a profitable reality. 

How to Start a Small Business at Home in 8 Steps

1. Define Your Business Idea

The first natural step towards starting your home business is determining exactly what kind of small business you’re going to run. 

If you know you’re ready to take the plunge but haven’t yet figured out what you want to do, you’ll find a whole host of inspiration in our guide to the 10 best side businesses to start.

Of course, if you’re anything like me, your head is probably full of ideas, meaning the biggest challenge is picking just one. 

The easiest way to make this difficult decision is to ask a few key questions, including: 

• What am I good at?
• What do I know a lot about?
• What do I enjoy doing?
• What can I do within my current budget?

Check out my beginner’s guide to starting a side business to learn why these questions can be important when you’re first figuring out your new venture. 

2. Create Time to Work on Your Business

No matter what business you ultimately decide to start, it’s important to set dedicated time aside to work on it. 

That way, you avoid procrastinating on bringing your new business idea to life, and give yourself time to focus, free from the countless distractions vying for your time and attention. 

What’s more, if you’re planning to start a business with a full-time job that takes up a large chunk of your schedule, planning a set time for that business may be essential, ensuring you still have time to work on your goals. 

To make this work, you can: 

A. Establish a Schedule

Set specific hours or days each week that are solely dedicated to working on your business ideas, whether that’s first thing in the morning before work, late at night once the kids are in bed, or perhaps at the weekend. 

B. Prioritize Tasks

Make a to-do list and prioritize tasks based on their importance and urgency. 

Start by defining your long-term goals and working backward to determine the specific, actionable steps you need to take to achieve them. 

C. Stay Consistent

Consistency will make all the difference in the early days of your home-based business. 

Even if you can only dedicate a few hours per week, make those hours count each week, and you’ll soon start to build momentum. 

Of course, all this isn’t to say that you can only work on your business during set hours. 

Those occasional spare moments during the morning commute, your lunch break, or even the doctor’s waiting room can all be used to complete quick tasks such as jotting down ideas or taking care of email. 

3. Create a Dedicated Work Space

Never underestimate what a difference a dedicated workspace can make. 

Set up at the dining table with the kids running around or your spouse watching TV close by, and you’d need a will of steel to be able to concentrate. 

Having a set space to work in not only eliminates background distractions but also signals to others that you’re not to be interrupted. 

As much as my family and I love spending time together, they respect that when I’m at my work desk, I’m not to be disturbed so that I can get my work done. 

Naturally, having a room that you can turn into a home office would be ideal, but really, any comfortable, well-lit space where you can work distraction-free will suffice. 

4. Tackle the Formalities of Starting a Business

Whether it’s an entire office or the corner of the bedroom, the first task you should complete in your new workspace should be taking care of the formalities, those aspects of starting a business which, though they may not be the most exciting, are undoubtedly essential. 

These formalities include: 

A. Business Name

Deciding what to call your business can be the sort of thing that keeps you up at night, either because you can’t think of a single name or, as is often the case, you’ve got too many good ideas to choose from. 

My advice? 

Keep it simple. 

In some cases, your best option may simply be to use your own name. If you’ve already built up a reputation in your industry, calling your business “John Smith Accounting” or “Sarah Jane Design” allows you to piggyback off that reputation and gain your first clients. 

Naming your business after yourself also helps you to present a personable, approachable image, something which can be invaluable for any type of service-based business, whether it’s freelance writing, lawncare, or graphic design. 

If you decide not to use your own name, there are three key questions you can ask to pick the perfect business name. 

Is the domain name available?

Domain name availability is an essential factor in naming a business in the digital age. 

Imagine if you wanted to start a home-based catering company called Crafty Catering but another business already owns CraftyCatering.com. Isn’t there a good chance that customers could accidentally wind up on the website of an entirely different business when looking to buy some of your tasty treats?

Is it short?

Long business names not only make for long and frustrating domain names, they’re also more difficult to remember than names that are short and sweet. 

Since you want potential customers to remember you, it therefore goes without saying that your name should be short and to the point. 

Is it catchy? 

Using elements like alliteration, rhyming and word-play can spark customers’ curiosity, compelling them to learn more about your products or services. 

If all that failed, don’t worry, there is another option. 

You can always use an online business name generator. 

There’s a ton of these online which offer various easy-to-use tools to generate names for all types of businesses from fashion brands to YouTube channels, freelance services and more. 

B. Business Structure 

Next, you need to know what type of business structure best suits your new venture. 

For most solo entrepreneurs, setting up as a sole proprietor is typically the best course as it offers simplicity, minimal paperwork, and complete control over the business. 

However, establishing a limited liability company can be useful for small business owners who seek personal asset protection and want to separate their personal finances from business liabilities. 

Although it’s more expensive of the two options, an LLC structure does have the added advantage of providing a more formal and professional image, which can be advantageous when dealing with clients, suppliers, or investors.

See our comparison of business entities for advice on how to select the best structure for you.

C. Licenses and Registration

The kind of business licenses you need to apply for vary wildly based on two key factors: 

• What kind of business you’re starting
• Where you plan to operate. 

See our guide to business licenses for a complete state-by-state breakdown that helps you work out exactly what you may need to apply for.

D. Insurance

Overall, there are seven major types of business insurance, and though you’re unlikely to need them all, it is worth ensuring that you have the right protection in place before you start selling your products or services. 

That way, you can launch your business with the peace of mind that comes from knowing you’re well covered should anything go wrong. 

E. Set up a Business Bank Account

Creating a new bank account to keep your business income and expenses separate from your personal assets not only ensures financial clarity and organization but also helps maintain legal and financial compliance.

Though all major banks offer business banking, there are a number of online-only platforms. While you may never need to set foot in a physical bank, it’s nice to have a relationship already established with a local bank in case of a problem, or you need funding.

5. Create Your Business Plan

Your business plan will prove to be an essential document if you’re applying for small business loans and other sources of funding to help get you started. 

Even if you’re self-funding the entire endeavor, however, it’s still worth creating a detailed plan to help guide you on your journey to success. 

The very process of creating a  business plan in the first place can prove to be an invaluable experience, giving you an opportunity to really consider all the challenges that may lie ahead and how you’ll overcome them. 

• Executive Summary – A brief, basic overview of your small business idea, goals, and key highlights.
  
• Company Description – Detailed information about your business, mission, vision, and legal structure.
   
• Market Analysis – Research your target market, competitors, and industry trends.
   
• Products or Services – Description of what you offer and how it meets customer needs.
   
• Costs and Pricing – The costs of what you provide, including breakdowns of expenses and profits.
   
• Financial Projections – Forecasts of your business’s financial performance over the next few years.
   
• Appendix – Additional supporting documents, such as resumes, market research data, or legal agreements.

If you need a hand with any of these sections, you’ll find it in our comprehensive business planning tutorial. 

6. Gather Your Tools and Prepare for Launch

With all the groundwork done, you can finally get to the really exciting part: 

Working on the products you’re planning to sell or the services you’ll deliver.

If you haven’t already done so, now is a good time to make a list of the resources you’re going to need. 

This might mean materials to create products, certain software, or marketing materials like business cards and a website. 

Once you’ve got your list together, go out and gather all the tools you’ll need and put them to work. 

Precisely what that entails depends on the nature of your business. 

If you’re a graphic designer, it may be that you create a portfolio of your best work on Fiverr to help land clients.

If you’re selling handmade arts and crafts, it may be creating your inventory and uploading it to Etsy. 

Or, if your goal is to start a tutoring service, it may be that you begin by creating lesson plans and perhaps making multi-media content such as video to help your eventual clients. 

You get the idea; go out and create whatever you need to create so when your first customer does come along, you’re 100% ready to give them whatever they’re buying from you.  

7. Create and Implement a Marketing Plan

Of course, those customers can only come and buy from you if they know that you exist, which is why you’ll need to devise and implement a thorough marketing plan. 

At a bare minimum, you’ll need:

A. A High-Quality Website

Use a beginner-friendly tool like Wix, or take advantage of the advanced features of WordPress to create a business website that functions well on mobile device, utilizes Search Engine Optimization to help you get found in Google search results, and above all else, showcases your products or services in the best possible light. 

B. Google My Business

Speaking of Google, service-based business owners in particular should also consider setting up a free Google My Business profile to boost your visibility in locally-based search results. 

C. Social Media 

It perhaps goes without saying that you’ll need some kind of social media presence to succeed in today’s always-online world. 

However, that doesn’t mean that you should necessarily sign up to all the major platforms and attach equal importance to each one. 

Trust me, I’ve tried that multiple times, and although it’s not impossible, simultaneously managing accounts on Facebook, X (Twitter), Instagram, and Linkedin can be an overwhelming headache that takes time away from what’s really important: 

Providing great service for customers. 

Instead, it’s best to follow one of two paths. 

Either outsource the whole thing to a social media manager or; 

Do your research and consider the best platforms to promote what you do. 

If your home business is art or design based for example, then visual platforms such as Instagram are perhaps a no-brainer, while those of you planning to start a business consultancy on the side should have a better look with the B2B (Business to Business) crowd on Linkedin. 

D. Offline Marketing 

This may be the golden age of digital, but that doesn’t mean that there aren’t plenty of opportunities to attract customers via more traditional means. 

Business cards, flyers, and posters can all work wonders in boosting your brand visibility out there in the real world, keeping you at the forefront of people’s thoughts when they have a need for what you have to provide. 

Even if your business is in a typically online-only industry, such as eCommerce, offline marketing can still encourage people to check out your brand the next time they’re online. 

8. Review and Rework Your Strategy

Even with an effective marketing plan in full effect, it may take a while to build up a solid client base. 

The best way to speed that process along is to continually evaluate your efforts and tweak your approach, doing more of what works and less (or, preferably, none) of what doesn’t. 

Again, how you do this will depend on your business type. 

Platforms like Google Analytics are a great place to start as they can provide you invaluable insights into your website traffic, revealing information such as which pages attract the most visitors, audience demographics, and more. 

Elsewhere, consider which of your products and services are generating the most revenue, and consider how you might change your approach, whether that’s ditching those underperforming offerings altogether, marketing them to a different audience, or revamping its features. 

The more regularly you carry out this self-auditing process, the more you’ll learn about the obstacles standing in the way of your success and the opportunities to overcome them. 

Related: 10 side hustle ideas that you can start from home

How to Start a Home Business: A Final Piece of Advice

They say that failing to plan is planning to fail, and I’m certainly not going to argue with that.

However, I’ve certainly met enough would-be entrepreneurs who spend so much time in the planning stage that none of their home-based business ideas materialize into anything more than that; ideas. 

If you’re serious about your entrepreneurial aspirations, don’t become one of those people. 

Finish reading this article, then go out and make it happen by completing each of the crucial steps above, particularly: 

• Setting time and space aside to work on your idea
• Taking out the relevant insurance policies, permits, and tackling other legalities
• Creating an effective business plan to determine how you’ll achieve your goals 
• Creating and implementing a marketing strategy utilizing both online and offline methods
• Evaluating your results and doing more of what works. 

At this stage, you don’t need to worry too much about getting everything perfect. It’s OK if you don’t hit on the world’s greatest business name on the first try, nor is it the worst thing in the world if your marketing strategy isn’t finely tuned right now. 

The key to success is to simply get started. You can always make adjustments as you learn more about what your customers want and the best way to give it to them. 

Eager to get started but don’t have the funding for a home business? You may not need it. Check out these 5 profitable side hustles you can start with no money to learn how you can launch a side business with zero investment.