From dog grooming to dropshipping, crafting to freelance copywriting, there’s no shortage of businesses that you can run from your very own home.
But a business idea is just the beginning. There are plenty of practical hurdles you need to jump before you can start earning money. So, to help you get your new venture off the ground, here are some tips and things to consider.
1. Check your contract
Are you renting? Or paying off a mortgage? Some contracts include clauses that stop you from running a business from a residential property. So, make sure you check your tenancy agreement or mortgage T&Cs before you set up shop.
If you start a home business without following the proper procedures, you might be breaching the terms of your contract – which could leave you in quite a bit of trouble, from getting evicted to having your home repossessed.
2. Get the right permissions
Next up, the council. You’ll need to speak to your local council if you:
- Want to adapt your home for your business
- Will be getting a lot of customers or deliveries
- Want to advertise outside your home
- Plan on selling products that require a licence
These processes can take a while. So, try to plan ahead and give yourself plenty of time.
3. Define your Unique Selling Point (USP)
Once you’ve got the green light from all the right people, it’s time to start thinking about what makes your business unique. What can you do that no one else can?
A USP can be your customer experience, the price of your goods or service or the range of products you provide. You could also identify a niche in the market that’s currently underserved.
4. Choose a business structure
There are a lot of different business structures, each with their own tax obligations and legal requirements. Navigating them all can be a bit of a minefield. But if you’re setting up a business for the first time, we think these are the key three to know about.
A business with no legal distinction between the owner and their company. This means that you get to keep any after-tax profits, but you’re also responsible for any debts. As a sole trader, your personal assets (like your home and savings) are at risk if something goes wrong.
On the plus side, sole traders don’t have to register a company name or complete any forms for Companies House. You just need to let HMRC know that you’re self-employed by registering for Self-Assessments.
When two or more people come together to start and run a business. You’ll share the profits and losses equally, unless you have an agreement stating otherwise.
As you’d expect, working with a partner comes with pros and cons. You can combine your skills and experience – and you share any financial risks. But you also share profits, and even the best working relationships have the potential for compromises and disagreements.
Unlike sole traders and partnerships, limited companies pay corporation tax. They have what’s called ‘limited liability’ – so if your business is sued or loses money, you can only lose the money that you put in. This makes it a less risky option.
But setting up a limited company requires a bit more work than starting another kind of business, and you’ll need to register an official business name and address. This information is publicly available. So, if you’re running your business from home, you’ll need to think about whether you want it to be made public.
5. Define your workspace
If you’re going to be storing plenty of stock or providing a service that involves a lot of equipment, think about where it will all go and the security you have in place around this. You might need to clear out your garage or invest in some extra storage to keep everything organised, safe and uncluttered.
Even if you need just a laptop, think about how to set boundaries that let you separate your business from home and maintain that all-important work-life balance.
6. Set up your business banking
Limited companies and some partnerships need to have a business bank account Link opens in a new window, and even if you run your business as a sole trader, you may look into getting separate accounts for your personal and business transactions. This makes it easier to keep track of your spending, looks more professional when billing a customer, and will make tax returns much less stressful.
You might also get access to clever tools and services to help you budget, save time and manage your money on the go. And if you want to save for a rainy day, it’s a good idea to consider a business savings account too.
7. Keep track of your expenses
If you run your business as a sole trader, you can claim allowable expenses. In short, allowable expenses are essential costs that keep your business running. They’re ‘tax deductible’, which means they can be subtracted from your business turnover to reduce your tax bill.
If you run your business from home, you might be able to claim for things like energy bills, internet, Council Tax, rent and the interest on your mortgage repayments. But you can only claim for the portion that’s used for work. This means you’ll have to find a way to split your costs between business and personal use.
It’s common for new business owners to miss out by forgetting to claim their expenses – so it’s really important to find a system that accurately tracks and divides up your costs.
8. Don’t forget about insurance
Last but by no means least: business insurance. You probably have contents or home insurance, but this is unlikely to cover business essentials like your stock and customer data. Remember, you will need to let your home insurers know that you are wanting to run a business from your home.
For every new business, it’s worth looking into equipment cover. This can pay for repairs or replacements if something were to happen to your kit (like a laptop or specialist tools). Cyber insurance is also a good idea if you use a website or store sensitive data, such as your customers’ names and addresses.
And depending on the type of business you set up, you might also want to consider covers such as professional indemnity, stock, product liability, public liability and employers’ liability.
Tip: with Superscript, you can pick and choose your covers. So, you’ll only pay for what you need.
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