Starting a Business from Home - What You Need to Know

min read

Starting a Business from Home - What You Need to Know

Understanding the concept of home-based business

As the name may suggest, a home-based business is a small business that operates from the business owner’s home. As well as location, home-based businesses often have only a small number of employees.

Several reasons could spur the decision to start a home-based business. Perhaps you’re looking to say goodbye to the 9-5 and seek a more flexible work schedule, or maybe you’re looking to operate from home to spend more time with your family. Whatever your motivation, starting a business from home continues to be on the rise, with around 50% of small businesses beginning their business journey from home.

While a home-based business can offer you several benefits, from not needing to rent an office space, to being flexible on the hours you work, there are some obstacles you may encounter along the way. Operating from home may leave you feeling lonely at times, and you may find it tough to switch off at the end of the day when your home is also your workplace. But there are solutions to these challenges, which we’ll cover later on. You won’t know what works best for you until you try it, right?

Essential steps to start a home-based business

Ready to put your entrepreneurial spirit into action? Here are some essentials you’ll need to tick off your list to start a business from home.

Decide on a business idea: A great business idea is the first step in your journey. If you know you want to start a business but can’t settle on an idea, our ideas to start a business are sure to leave you feeling inspired.
Form your business: To form a business in the UK, you’ll need to register your company with Companies House. You can choose to do this yourself through the Companies House website for £50, or to save yourself the hassle, we can take care of the formation process for you for free (yes, really!).
Decide on a workspace: Try to find a space within your home you can dedicate to your new business. Not only is this a way of keeping your home and work life separate physically, it can also help you get into the work mindset each day. You could turn your spare room into an office, or transform the garden shed into your workshop. Get creative and bring your business vision to life.
Get your workspace ready: Once you’ve chosen where you’re going to work from, it’s time to get decorating. Make sure you have all the equipment you need (if you’re looking to keep costs to a minimum, could you consider renting or borrowing some equipment at first?), and create a workspace you’ll feel happiest in. After all, you’re in charge! Who’s to stop you from painting your new office pink to celebrate your new venture?

Legal considerations for home-based businesses

Depending on the type of business you’re looking to start, there may be legal considerations you’ll need to look into beforehand. You may need permission to start your home-based business, or you may need to take out insurance. Here are some legal considerations that may apply to you:

You’ll need to check if you need permission from your mortgage provider or landlord, local council or local planning office to run your business from home.
You may need business insurance to protect your business against the unexpected. The type of insurance you’ll need will depend on the type of business you’re looking to start, and if you plan to hire employees. Looking to hire others to support you on your journey? You’re legally required to take out employer’s liability insurance. If you regularly interact with or serve members of the public, you may choose to take out public liability insurance as well.
Looking to start a food business? While you don’t need to hold a food hygiene certificate to prepare or sell food in the UK, you must ensure you receive food hygiene training. The government provides free online food safety training courses to help you brush up on your knowledge.

Setting up a home business while working full time

There’s nothing stopping you from setting up a business when you’re already employed. Perhaps you’re planning to eventually leave your current job once your new business takes off, or only looking to start a business for some extra cash. If you can manage your current job responsibilities while becoming an entrepreneur, you should take full advantage of the opportunity!

Here are some considerations to keep in mind should you choose to follow your business dreams while working full time:

Don’t rush: Try not to let yourself become overwhelmed - there’s no rush when it comes to starting your business. Prioritise your existing work and if you have some free time to spend on making your business plans come to life, go for it. You can start a business at any age, there’s no need to panic.
Maintain a work/life balance: Working full time while trying to start a business leaves you with little ‘you’ time. Perhaps you have little ones to take care of, or need to factor in time to unwind. Make sure to consider the needs of your family and yourself - try to take regular breaks and adapt your schedule to meet the needs of your family and your wellbeing.
Be mindful of your employer: Depending on the nature of your day job, you may have certain rules within your contract that you’ll need to follow. You could end up in trouble if you develop an idea while at work, for example, which you then decide to use to start your business. Make sure you have the evidence to hand that your business idea was developed outside of your paid employment.

Getting started on your business at home

Starting your own business is truly the adventure of a lifetime. If you’re ready to become your own boss, we’ve covered everything you’ll need to start a business from home below.

Choose the right business idea

Your new business is likely to take up a lot of your time, so it’s important to choose something you care about. Of course, making a profit is important, but enjoying the work you do matters most. If you’re stuck on where to start in choosing a business idea, a bit of self-reflection can get you started. Ask yourself why you want to start a business. Maybe you’re looking for financial independence, or to fill a gap in the market. From there, you can tie your ‘why’ with your passions or talents. Maybe you’re a winning writer, or a connoisseur in the kitchen - with passion and determination, a business idea will appear when you least expect it.

Create a business plan

Writing your business plan is an essential part of your entrepreneurial journey. It details your company’s plans and objectives and how you set out to achieve these goals. Your business plan serves as your go-to manual to refer back to, covering the ins and outs of your business, from your financial circumstances to your market research. If you want to apply for a business loan, the bank will usually ask to see your business plan as evidence of how you plan to grow your business and what you’ll use the borrowed funds for.

Check out our guide on how to write a business plan for tips to get started.

Set up your home workspace

As mentioned, having a dedicated workspace at home is super important. Not only can it get you in the right frame of mind to start work each morning, it can also help you keep your work and personal life separate. After all, there’s no place like home - you’ll want to enjoy your happy place at the end of a long day.

Your work environment can affect your productivity. Factors to consider when deciding on your home workspace include noise (which can distract you from those important tasks), lighting and room temperature. Pay attention to the air quality of your workspace, the layout of the room and how comfortable you’ll feel while working. Don’t forget storage solutions, not only to keep your paperwork organised but also to prevent a cluttered desk!

If you’re starting a food business and will work from your kitchen, the above still applies. But if you’re working from a kitchen, it’s vital that you pay attention to the cleanliness of your workspace and adhere to good hygiene practices.

Managing finances as a home-based business

If you’re apprehensive about your new business’ finances, you’re not alone. It’s only natural to worry about your business’ livelihood, particularly if you don’t have much experience managing business finances. Here are some tips to help you stay on top of your business’ money matters:

Managing your cash flow: Your business’ cash flow is the money that moves in and out of your business over a period of time. You’ll want to aim for positive cash flow, where you’re receiving more income than you’re paying out. But there may be a time when you experience negative cash flow, for example, a client’s payment may be late. As long as you’ve planned for this negative cash flow and you revert to a positive one, this shouldn’t cause any major problems.
Monitor your spending: As a business owner, you may find you have several accounts to your name. It’s important to keep an eye on each of your accounts and keep track of what you’re spending. It’s all too easy to use your business bank card for a work lunch now and then, but this can soon mount up. Keep a log of your expenses so you’re not left with a hefty, unexpected bill!
Keep your funds separate: While it’s not a requirement to keep your business and personal finances separate, it can help to keep things organised. That way, you’ll have separate bank statements for your business and your personal spending, so you can monitor your funds and reach your goals.
Stick to a budget: Putting together a business budget can outline all the expenses needed to keep your business running and ensure you don’t overspend. Your budget can also forecast the revenue you expect to generate, so if you don’t hit your targets you can find a way to cut back on your expenses.

Using your home address for your business

To form a company in the UK, you’ll need a physical UK address. This address will be shown on the public register, and all mail from Companies House will be sent there. While you can use your home address as your business address, you may prefer not to, to protect your privacy. To avoid the cost of renting a physical office space, you could opt for a virtual office address instead. SUAZ’s virtual office service gives you a business address in the bustling city of Manchester which can be used to protect your home address and establish your professional image.

Balancing work and home life

Working from home offers flexibility and convenience, but does come with its challenges. Here are some challenges you may face as a home-based business and how to overcome them:

Maintaining boundaries: The blurring of boundaries between your work and personal life can be all too easy when working from home, making it difficult to switch off at the end of a long day. Setting aside a space that you use purely for work can help you differentiate your work and home life - and remind those you live with not to interfere when you’re busy!
Feeling isolated: It’s easy to feel lonely when working from home. After all, you’re likely to miss out on the social activities and interactions you gain from a typical office environment. Make sure to set aside time to see others, whether that be meeting for lunch (virtually or in-person), or attending networking events.
Managing your time: There are often more distractions when working from home. If you need to focus on a particular task or project, be sure to work in a quiet area, free from distractions, to meet your goals.

Growing your home-based business

You have your winning business idea and the determination to get you where you want to be. Next, you’ll need to find a way to get your business’ name out there so you can reap the rewards you’ve worked hard for.

Some strategies for growing your home-based business include:

Set clear goals to hold yourself accountable and put together your business plan.
Identify your niche - what makes your business stand out against your competitors? Tailor your service or products to appeal to your target market.
Get your name out online by building a website and social media presence.
Collaborate with other like-minded people by attending networking or industry events. Nurturing those relationships can lead to new business opportunities and partnerships.

Key takeaways

Starting a home-based business offers flexibility, convenience and the freedom to work in a way, and a space, that is entirely yours. To make your home-based business a success, you’ll need to establish clear boundaries between your work and personal life, which can be a challenge. With a strong business plan, motivation and a designated work space you’ll thrive in, there are no limits to what your next chapter can bring.

Ready to form your own business? Our professional company formation service can support you every step of the way, so you have one less thing to think about. Apply to form your company today and bring your dream to life.