Millions have taken the time during the COVID quarantine to start small businesses at an unprecedented rate.
More side-gigs are emerging while employees hold their ‘day jobs.’ Many of these startups are home-based retail sales and consulting financial services that can be done online without bringing customers, vendors, and others into a home office.
The Wall Street Journal reported that more than 3.2 million applications for employer identification numbers (EINs) were filed in 2020.
This surpasses the 2.7 million applications filed in 2019. The US Census Bureau counted 4.3 million new business applications in 2020, up almost 23% vs. last year, based on IRS tax filings.
No matter how you look at it, this trend is real and just as big locally. Pennsylvania reported a 26% increase in business startup applications.
Is 2021 your year to take the leap and start a business? Whether you will operate from home or elsewhere, be ready with these steps before you open your ‘doors’!
A well-written business plan is critical to your startup. It is your blueprint and documents the what, how, when, where, and why of your small business. Your goals, actions and timelines will define how you expect to open, grow, and succeed.
Many of the important choices in your plan should be supported by market research.
Your analysis will help you to shape a clear definition of the benefits of your products or services for a defined target audience, why and how your customers will buy from you, your competitive advantage, financial projections, and breakeven analysis.
Develop an understanding of all the costs of doing business at startup and ongoing. Remember to include the expenses associated with branding, marketing, website development and maintenance, taxes, rent, equipment, and utilities.
Running a business can feel lonely and frustrating, especially if you are embarking on this for the first time. The good news is nobody has to start a business alone.
Experienced business mentors from SCORE Chester and Delaware Counties are available to help you find answers to your questions, access business tools and market information, review your business plans and more.
All SCORE mentoring sessions are free and virtual – by video, phone or email. SCORE offers many live and recorded webinars on critical business topics; most are at no cost to you.
SCORE can help. Find a mentor today.
Denise Lynch, SCORE Volunteer, and owner of Customized Tech Solutions, shares:
“While I was still working as an elementary school technology teacher, I would spend my summers supporting local small businesses with their office IT needs. I used those experiences to define my target audience and services before working with a SCORE mentor on a business plan.”
Let’s look at the other necessary steps recommended by Frank Farmer, SCORE Volunteer and local attorney whose practice has concentrated on small business since 1980…
- Consider business organizational structure (sole proprietor, partnership, limited liability company, or corporation)
- Choose a business name (sole proprietorships don’t have to use a business name)
- File a fictitious name form, if necessary
- Establish a commercial bank account
- Apply for appropriate tax numbers (Federal EIN, Sales Tax, etc.)
- Contact appropriate borough/ township/county /state offices/websites to determine what licenses/permits are necessary and to determine zoning rules and regulations
- Contact an accountant, lawyer, banker, and insurance agent to set up appointments for initial consultations
- Protect yourself with all the necessary legal and insurance coverage
- Don’t be afraid to ask for help from those sources willing to assist you in getting your business launched and functioning successfully
Special Considerations for Home-Based Businesses
While all the same startup steps are required no matter where you operate, there are some specific recommendations if you plan to run your company from home:
- Separate your assets to avoid jeopardizing your home or retirement
- Ensure your home is zoned to allow regular deliveries and foot traffic
- Review rental agreements or homeowner association rules about running a business from home
- Organize a dedicated internet line separate from your family connection
- Upgrade insurance policies to cover business risks and losses
There are plenty of advantages for a home-based business such as rent savings, lower overhead, more convenience, and flexibility. But there are some significant drawbacks.
Surprisingly, what’s most at risk is work/life balance. Home-based business owners face time management challenges waking up in the office without time to properly transition to work. Reading emails, sending invoices, addressing customer issues, and posting on social media in pj’s are common practices for many. Starting up a home business is not for everyone.
Personal vs. business space is another potential concern. Living rooms, kitchens, and porches have now become inventory locations or storage spaces. Finding a spot for family dinner or to entertain friends is often sacrificed for many growing home-based businesses.
Enjoy the process of uncovering your unique talents. Despite the current economic conditions, there are many opportunities out there for startups.
Remember to contact a SCORE mentor to work with an expert and get that dream business up and running in 2021.