Setting up a business from home can be a cost-effective way of earning money while retaining flexibility over your working hours.
But where do you begin? This handy checklist covers many of the practicalities that you need to think about when you’re planning how to start a business from home.
Now that you’re in the process of starting a business from home, you’ve already decided what line of business you’re in, but whether you’re opening a dog-grooming parlour or tutoring maths, most home business owners find it helpful to create a written definition of their business. Once you’ve done this, you’ll find it much easier to explain your new venture to others – including to your customers! Think about:
- Your product or service definition: for example, piano lessons for adult beginners.
- Your target market: describe who your customers are and where they’re located. This could include online.
- Your unique selling proposition or USP: why would a bride choose your wedding cake business for her big day rather than anyone else’s?
- What is your competitive advantage? It could be your location, opening hours, or specialist expertise.
- Overall, what’s your business plan?
When you’re planning how to start your own business in the UK, one of your first decisions will be whether simply to register as being self-employed, or to register your business as a limited company. The best option depends on a wide range of factors including whether you’ll be buying goods that are subject to VAT, whether you’re selling to other businesses or direct to consumers, and your expected turnover. Many home businesses – particularly those that provide services start out on the self-employment route.
Whatever legal structure you choose, make sure you cover the necessary steps:
- Tell HM Revenue and Customs (HMRC) if you’re becoming self-employed.
- Register your new limited company with Companies House.
Although you’re doubtless eager to start trading, it’s worth spending enough time sorting out the practicalities involved when you start a business from home:
- Get a PO Box® unless you’re happy to use your home address on your business marketing materials and other documents.
- Consider whether you want to get a separate phone number or whether you’ll use your home landline or personal mobile number.
- Open a business bank account.
- Set up a PayPal account, merchant account or similar service if you want to accept credit card payments.
- Set up and furnish the ‘home business’ areas in your home. If possible, try to keep your work and personal spaces separate.
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Accounting and finance
Setting up the accounting procedures for your new home business can take a little time, but once it’s done it will be relatively quick to record all of your transactions.
- Decide how you’re going to do your books and keep your accounts. If your business only has a small number of transactions, a simple spreadsheet may be enough. Alternatively, it may suit you to use home business accounting software.
- You will almost certainly need some capital to start your business. Even if you aren’t buying stock, you may need to pay for marketing materials. Can you finance this yourself or do you need a bank or other loan?
- Draw up a budget for your first year of trading.
Tip: Unless you have experience of drawing up accounts, you may find it useful to enrol on a training course to learn more about this important aspect of running a small business. There are many of these available online as well as face-to-face.
Making your first sale will be an unforgettable milestone in starting a business from home. These essential marketing activities will support your efforts:
- Set up a ‘brochureware’ website. You don’t need any specialist knowledge, software or a big budget to do this nowadays as there are many online services available that include ready-made templates for startup businesses.
- Decide whether you want to register your own domain (e.g. www.mybusiness.co.uk) for your website and email address. Again, this is now cheap to do, and almost certainly a good choice.
- Set up social media accounts on appropriate platforms such as Facebook, Twitter and Pinterest. Don’t forget to draw up a plan for making regular posts to these too!
- Get business cards printed.
It’s understandable that you’ll want to keep your costs down when you’re setting up your home business, but it’s also important to protect the assets of your new venture from the outset in case the unthinkable happens. This is where business insurance comes in, of course.
- Notify your current home insurance provider that you’re starting a business from home and check exactly what business-related cover is included in your policy, such as office equipment, tools, and stock, and public liability insurance for customers or clients visiting your home.
- Decide what other types of insurance your home business needs. Limited companies which employ anyone must have employer’s liability insurance, but business of all types should consider specialist cover such as public liability insurance, professional indemnity insurance, key worker insurance and product liability insurance.
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