If you dream of running your own business from home, it’s probably because you want to be your boss. But starting a business isn’t cheap or risk-free. You’ll need money, time, and patience to get your venture off the ground.
There are costs involved in operating a business from home that you may not have considered. From equipment and supplies to utilities, taxes, and insurance, maintaining an independent business is costly.
In addition to these expenses, you need money set aside for incidental costs like internet access, snacks, and cleaning supplies, as well as initial start-up expenses such as licensing fees and security deposits on office space or storage units.
While these costs can seem overwhelming at first, knowing about them, upfront will make things much easier once you launch your business from home.
Know the costs of starting a business from home
There are no two ways around it: Starting a business is expensive. Depending on the nature of your business, you could face start-up costs of thousands of dollars or even hundreds of thousands of dollars.
Businesses that require a lot of upfront investment, such as restaurants and real estate, are generally less suited to being run from home. However, many business owners have successfully managed to run their ventures from home with a minimum of overhead and expenses.
Equipment and supplies
If you’re planning to run a business from your home office, there are some key items you’ll need. These include a desk, desk chair, computer, and internet/phone connection.
You may also need a printer, scanner, fax machine, and software. If you do any sort of professional photography, you’ll probably need additional equipment and supplies. Many industries require additional supplies or equipment, so check with your state or local regulatory authority to make sure you’re compliant with any applicable regulations.
These are the costs you need to consider when starting a business from home:
- Computer: New computers aren’t cheap, but you can find gently used ones at thrift stores. Make sure you have a computer that’s compatible with the programs you’ll be using for your business. If you need software, you can find some for free online.
- Internet: You’ll need internet access to run your business, so factor this into your start-up costs. If you are working from home, you can use your current internet connection, but keep in mind that internet service at home is usually slower than at a commercial office building.
- Printer: A printer is a must-have for any business, but it’s especially important if you’re in a field that requires printing and copying of documents, such as real estate or insurance sales. You can purchase a printer, new or used, or you can sign up for a subscription service that delivers ink or toner cartridges directly to your door regularly.
- Computer/phone/internet security: You’ll also need to protect your computer with anti-virus software and make sure your internet connection is secure from intruders. You’ll also need a phone line to use a landline-based secure internet connection, known as an ISDN line, for $20 a month.
Once you’re in business for yourself, you’ll have to pay taxes on your income. These taxes will depend on your business structure and what industry you work in.
As a sole proprietor, the most common business structure for operating a business from home, you report your income and debts on your tax return. Most business owners deduct their operating expenses, such as home office expenses, supplies, and travel costs, from their taxable income.
If you’re a sole proprietor, you can also set up a retirement plan to save for retirement or save for your children’s education. There are a few options, including a SEP IRA and a Simplified Employee Pension (SEP) plan. You’ll need to talk to a financial advisor to determine what type of retirement plan is best for you.
Depending on your business model, operating costs such as electricity, phone, and internet access may be negligible. However, if you work from home, you’ll also need to cover the cost of gas for your car, parking, and public transportation costs.
If you’re self-employed, you may be able to deduct the costs of running your car for business purposes. Along with expenses such as toll fees, car washes, and parking fees, the cost of fuel can add up quickly.
If you work from your home office, there are a few supplies you’ll need to keep your workspace organized and professional-looking.
These include pens, paper, folders, a filing cabinet, and a calendar or wall calendar. You may also want to purchase a printer or scanner, a desk lamp, and a coffee maker if you don’t already own one.
If you work in a creative field, such as graphic design or writing, you may want to purchase basic art supplies, such as pencils and markers, as well as a computer or digital sketchpad and art software. Alternatively, you can find many of these supplies at a thrift store or yard sale.
If you work from home, there are a few security measures you should take to protect yourself and your property. First, you may want to invest in a home security system, particularly if you work from home during the day or with small children at home.
You may also want to consider buying a handgun and taking a course to learn how to use it safely. When starting a business from home, you can save money by eating more often, washing your clothes at low temperatures, turning off lights when you’re not using them, and keeping track of your utility bills to avoid getting charged for overages.
Starting a business from home isn’t easy, but it offers several benefits over working out of an office, including reduced costs and increased flexibility. Before you jump into business, make sure you’re prepared for both the start-up costs and the long hours that go into running a business.