Starting a Home Business – Factors You Must Consider

Tuesday August 4, 2020, Posted By

If you are looking for a change after leaving a job and want to do something on your own, starting a home business can be a good option. Perhaps you have a passion that you had ignored but are contemplating doing something now. Starting a home business requires long term commitment therefore you would need to consider some things before you take the big dive.   

Running a home business requires a good understanding of how business works. If you don’t consider the pros and cons before hand, you could end up with a false start and lose precious time, resources and money in the process.   

Find Your USP

The first thing to do is consider what you have. Let’s begin with you. What are the unique talents, skills and abilities that you have and excel at? Can your abilities help you produce results, be valuable as a service and generate an income for you? Looking back into your life, can you remember instances when you used an ability or talent that was valuable to people? Focus on your strengths and you will have a business that is less likely to fail.

Is Your House the Right Place for Your Business?

Check if what you are skilled in can work well as a home-based business. Not all businesses can work as a home business due to various factors. You will need to consider the location your house is in, the kind of licensing, laws and legal restrictions that apply and also whether it would be a hindrance to your family’s lifestyle and peace.

For example, if you have too many clients visiting you, it could affect your family or even your neighbours. You would need to consider if it is conducive to get another workspace if it affects them badly. You may want to drop off certain business ideas if you only want to work from home after considering these things. If you run your business from home you can claim the part of your house used for business as an expense in your tax return.

Is Your Business Idea Profitable?

There are many things you may be good at, but are they profitable? A good business needs to be profitable. Will people pay you for your product or service? Will you be able to make sufficient income from your business? Consider the time taken for production or providing the service and the amount you could earn for it and as to how much can you earn in a month? Consider the costs of the raw materials and added costs of marketing and promotions too.

If you want your business to survive you will need to make a profit. It might take time for you to actually get a good income. You would need to plan a reasonable income target and work towards it to have a successful business.

Who Are Your Competitors?

Whatever business idea you choose, there will be someone else too doing the same locally or in another region. They are your direct competitors since you will be operating in the same market and targeting the same clients. Do a Google search and collect information about your local competitors, understand their business models, collect contact details and marketing materials they use too. Check out their websites and social media pages to understand your competitor better. Get a good look at their products and services and how much they charge for them.

Having understood your competitors and their styles of operation now think if what you are offering to clients is different or better in any way. If you want your business to have an edge over the competitors you need to have something new or something more to offer. Can you offer something of more value to win over customers? Can you offer the same service in lesser time or at a better cost to the customer?

Test Your Business Idea

Before you launch into the deep, it is good to have a taste of what you are actually getting into.

Testing your idea with people outside your family and friends circle by giving them samples or service would get you valuable feedback. Getting feedback from a good number of people helps in determining the value of what you are providing. It also gives you a better idea about what you need to change, refine and improve in your product or service.   

Choose a Business Name

Once you have got the green signal to go ahead it is important to find a name for your business. This is a very important step as it impacts your business in every way. You will need to short list and check if your selected name is trademarked or currently in use. Once you find your unique name, you will need to register it.

On registration of your business check if your business name, trademark, web domain and social media usernames and domain names are available.

Choose a Business Structure & Accounting System

There are different kinds of businesses – sole traders, companies, or partnerships. You will need to find out which one suits you and your business idea the best. Each has its own pros and cons. This is an important decision since it affects how you grow your business to expand it or sell it in the future.

Choosing an accounting system is necessary as it enables you to run your business effectively.

An accounting system helps you create and manage your budget, set rates and prices, and file your taxes. You could consider the option of doing the accounts yourself or hire an accountant.

Create a Business Plan

Once you are sure that you are going ahead with your home business plan, you will need to get a business plan ready. Putting down all important aspects and information together will give you the big picture and help you know if your plan will be successful.

The Business Plan usually has the following parts:

  1. An executive summary about your business idea
  2. Company description – information about your company
  3. Products and services you will provide
  4. Market analysis & strategy – information about your target market and competitors
  5. Strategy and implementation – how you plan to reach your goals
  6. Financial plan and projections – investments, anticipated revenue and projected earnings

You can find some tools for writing a good business plan at this link: https://www.business.govt.nz/getting-started/business-planning-tools-and-tips/how-to-write-a-business-plan

Sources for Funding

Funding is a very important area. Some small businesses can be started with very little investment especially if you already have the skills, software or tools to get started. Depending on the amount of money you need you can plan how to raise the funds for it.

There are different ways of raising funds. You could apply for a personal loan or a small business loan. Another way to raise funds is through a crowdfunding campaign. The benefit of a

crowdfunding campaign is that you can presell your products before making them. However, you would need to have a good network of potential customers interested in your product. This is also a good way to know if there is a market for your product.  

Staff & Compliance Requirements

If you are starting very small you may not need to hire staff. However if you do need to hire, you will need to get updated about your duties as an employer, and make sure you implement good management practices, including health and safety. Compliance is important too, as there are some matters about your business you will need to report to the government. Get information about ACC levies and your tax obligations. You will need to keep accurate records, budget for upcoming tax payments, business expenses and deductions for your business and staff.

Get Started and Tell the World

Once you have everything in place, you need to bring in customers. Start with a good promotion plan to get your potential clients interested. Get ready to work hard and remember to be patient. As the saying goes ‘Rome was not built in a day,’ success does not happen overnight. You will need to work at it consistently till you see success. 

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