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How to Start a Home-Based Business

Up until recently, going to work meant traveling from home to a plant or office. Today many people do some or all of their work at home. A private market-research firm estimates that as many as 13 million people squeeze extra hours into their work week by taking work home from their full-time jobs, while some 9 million people work exclusively at home. Many people find that working at home is an ideal arrangement and decide to formally set up businesses there. The SBA estimates that more than 3 million of these home-based businesses are now operating throughout the country.

Everyday, people are striking out and achieving economic and creative independence by turning their skills into dollars. Garages, basements and attics are being transformed into the corporate headquarters of the newest entrepreneurs -- home-based business people. And with recent technological advances and a rising demand for "service-oriented" businesses, the opportunities seem to be endless.

Is a Home-Based Business for You?

Before you dive headfirst into a home-based business, it's essential that you know why you are doing it and how you will do it. To succeed, your business must be based on something greater than a desire to be your own boss; an honest assessment of your own personality; an understanding of what's involved; and a lot of hard work. You have to be willing to plan ahead, then make improvements and adjustments along the road. While there are no "best" or "right" reasons for starting a home-based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

  • Are you a self-starter?
  • Can you stick to business if you're working at home?
  • Do you have the necessary self-discipline to maintain schedules?
  • Can you deal with the isolation of working from home?

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment; if at all possible, you should set up a separate office in your home. You must consider if:

  • Your home has the space for a business and
  • You can successfully run the business from your home.

Legal Requirements

A home-based business is subject to many of the same laws and regulations affecting other businesses -- and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.


Zoning: Be aware of your city's zoning regulations. If your business operates in violation of them, you could be fined or closed down. Restrictions on certain goods: Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, explosives, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink or clothing.

Registration and accounting requirements:

You many need a:

  • work certificate or a license from the state (your business's name also may need to be registered with the state),
  • sales tax number,
  • separate business telephone and
  • separate business bank account.

If your business has employees, you are responsible for:

  • withholding income and social security taxes, and
  • complying with minimum wage and employee health and safety laws.

Finding Your Niche

Choosing a home business is like choosing a spouse or partner -- your decision must be approached with a great deal of care. You need to learn as much about the market for any product or service as you can. Before you invest your time, effort and money, take a few moments to answer the following questions. Answers to these questions will help you separate sound ideas from those with a high potential for failure.

  • Can you identify and describe the business you plan on establishing?
  • What will be your product or service?
  • Is there a demand for your product or service?
  • What advantages do you have over your competitors?
  • Do you have the talent and expertise needed to compete successfully?

Developing A Business Plan

If you've researched your market, thought over the pros and cons of a home-based business, and decided to go ahead, it's time to put together a business plan.


Developing a business plan forces you to take an objective and critical look at your business idea. Even more, the finished product is a tool that will help move your business toward success.

A business plan should be neat, written clearly, and should include several things. The cover page should list the business name, address, mailing address, telephone number and the names of the owner(s). Identify your primary goals and objectives.

Next, give an accurate and concise description of the business:

  • What is the principal activity? Be specific. Give product or service descriptions.
  • How will the business be started?
  • Why will it succeed? Promote your idea. Use your market research.
  • What skills and experience do you bring to the business?

Marketing is the core of your business. Carefully think about the following questions, then include your marketing strategy in the business plan:

  • Can you market your business from home?
  • Who and what is you market?
  • What pricing/sales terms are you planning?
  • How will you be competitive?

The Financial Plan

Money fuels all businesses. With a little planning, you'll find that you can avoid most financial difficulties. When drawing up a financial plan, don't worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Start-up costs: To estimate your start-up costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses. Business experts say you should not expect a profit for the first eight to 10 months, so be sure to give yourself enough cushion.

Additional Assistance

The Virginia Cooperative Extension Service also provides valuable assistance to current and prospective home-based business owners. Contact Ann Lasovica, Virginia Cooperative Specialist, Home-Based Business, at (804) 524-5253 or e-mail at:

lastovic@vt.edu
Last updated: 5/8/2013 3:05:11 PM