Successful tips for starting a home business

Looking to set up a business from your humble abode? We asked the MoneyHub community for their tips to help you get started.

From dog grooming to dropshipping, beauty technician to copywriting to being a freelance developer, there’s no shortage of businesses you can run from your 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. Here are some tips on effectively starting and managing your home business, including the administrative and operational aspects you must consider.

1. Define Your Business Idea

Defining your business idea is the first step towards turning your entrepreneurial dreams into reality. Identify your passions and skills and consider how they can meet market needs. 

Ask yourself: 

“What problem do I want to solve?” 

“What products or services can I offer?” 

“Who is my target audience?” and 

“How will I differentiate myself from competitors?” 

Take your time brainstorming and refining your idea. Don’t be afraid to seek feedback from friends, family, or potential customers. This process will help you create a unique value proposition that sets your business apart.

2. Set Clear Goals and Objectives

Setting clear goals and objectives is crucial for any business, including freelancers. It helps to focus efforts, prioritise tasks, and measure progress. To set clear goals and objectives, consider the following steps:

• Identify your strengths and weaknesses: Take a moment to reflect on what you excel at and where you need improvement. This self-awareness will help you leverage your strengths and address any gaps.
• Determine your target market and ideal clients: Understanding who your services are for will help you tailor your offerings and marketing efforts. Think about the demographics, needs, and preferences of your ideal clients.
• Set SMART goals: Ensure your goals are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of saying “I want more clients,” aim for “I want to acquire five new clients within the next three months.”
• Break down significant goals into smaller tasks: Large goals can be overwhelming. Divide them into smaller, manageable tasks to tackle one step at a time.
• Create a vision board or mind map: Visualising your goals can make them feel more tangible and keep you motivated. Use a vision board or mind map to outline your objectives and the steps needed.

3. 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, check your tenancy agreement or mortgage T&Cs before you set up shop.

Start by identifying your passions and skills, and consider how they can meet the market needs of individuals seeking unique solutions.

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.

4. Define your Unique Selling Point (USP)

Once you’ve received the go-ahead from all the right people, it’s time to consider 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.

5. Choose a business structure

There are many different business structures, each with tax obligations and legal requirements. Navigating them all can be a minefield. But these are the three keys to know if you’re setting up a business for the first time.

It is important to understand the legal and regulatory aspects of these structures, including the formation requirements and specific regulations that govern their operations. 

Limited companies have what’s called ‘limited liability’. So if your business is sued or loses money, you can only lose the money you put in, and individual partners bear personal financial responsibility. Understanding the scope of liabilities and the legal frameworks surrounding these entities is crucial for their establishment and operation.

However, setting up a limited company requires a bit more work than starting another kind of business. You must register an official business name and address and comply with all relevant regulations. This information is publicly available, but it is essential to adhere to specific rules when creating or managing a business.

It is vital to understand shareholders’ responsibilities and the formation process of such companies, emphasising the terms of share capital and the legal implications of ownership, including how to comply with local regulations.

This makes it a less risky option, but you’ll need to register an official business name and address and outline the responsibilities and rights associated with ownership and shares. Understanding the characteristics and regulations surrounding an osaühing, including the management, ownership structure, and duties of the company and its shareholders, is crucial for its successful operation.

So, if you’re running your business from home, you’ll need to consider whether you want it to be made public and comply with all relevant regulations. It is essential to understand the steps required to establish an osaühing, including the need for specific documentation and regulations outlining its management and operational responsibilities.

This information is publicly available, so if you’re running your business from home, you’ll need to consider whether you want it to be made public või comply with all relevant regulations. Understanding the potential scenarios, such as who can be a company founder, how shares can be distributed, or the conditions under which certain decisions can be made regarding ownership and management structure, is crucial for the successful operation of an osaühing.

Understanding the conditions under which shares might be issued, such as the minimum nominal value being one euro or that the shares may vary in their nominal worth depending on shareholder decisions, is crucial for the successful operation of an osaühing võivad.

Company Types

Sole Proprietor (Füüsilisest isikust ettevõtjale)

A Sole Proprietor (FIE) in Estonia is a natural person engaged in economic activities in their own name. The liability of an FIE is unlimited, meaning the owner is personally responsible for all obligations and debts. 

There is no minimum capital requirement, making it a simple and cost-effective option for freelancers, small business owners, and individual entrepreneurs. An FIE is easy to register and operate but does not have a separate legal personality from its owner. This structure is suitable for self-employed professionals, artisans, and small-scale traders. 

The founder must be a natural person.

Limited Partnership (Usaldusühing)

A limited partnership (UÜ) is a company with partly limited and partly unlimited liability. In a limited partnership at least two partners are operating under a mutual business name and at least one of the partners – the general partner – is liable for the limited partnership’s commitments in the extent of all one’s assets and at least one of the partners – a limited partner – has a liability limited to one´s deposit. 

The limited partnership has no minimum capital; thus, no mandatory capital must be invested into the company to start a business. A partner in a limited partnership can be a legal person or a natural person.

General Partnership (Täisühing)

A general partnership (TÜ) is a company with unlimited liability, i.e., the owners of the general partnership are liable for all of their assets. At least two partners operate under a mutual business name in a general partnership. 

A general partnership does not have a minimum share capital, so no mandatory capital needs to be invested in the company. A partner can be a natural or legal person.

Private Limited Liability Company (Osaühing)

The liability of shareholders for a private limited company’s (OÜ) obligations is limited to the amount of the share capital. The minimum share capital of a private limited liability company is €1, which can be paid as a monetary or non-monetary contribution. 

This structure suits small and medium-sized companies, one-time project companies (SPV), and property management. A management board heads the company with at least one member. The founder can be a legal or a natural person.

Public Limited Liability Company (Aktsiaselts)

The liability of shareholders for AS’s obligations is limited to the amount of the share capital. The minimum share capital of a public limited liability company is €25,000.00; it can be paid as a monetary or non-monetary contribution. 

The managing body of a public limited liability company is a supervisory board, which is a supervisory organ of the management board. This board includes the representatives of owners (at least three members) and the executive board (management board), which manages the company’s everyday commercial affairs. Shares must be registered in the Estonian Central Register of Securities. 

A public limited liability company is suitable for large-scale business projects involving many shareholders/investors. It arises from the need to issue different types of shares. Preferred shares can be issued that give the right to dividends. The annual report of the public limited liability company must be audited.

Non-Profit Association (Mittetulundusühing)

Although not a business structure, a non-profit association (MTÜ) is a voluntary association of persons whose aim or main activity is not profiting through commercial activity. A non-profit organisation’s income can only be used to achieve the objectives specified in the articles of association. A non-profit organisation may not distribute its profit among its members.

Foundation (Sihtasutus)

A foundation (SA) is a legal person in private law with no members. It was created to govern assets and achieve the objectives specified in the articles of association.

6. Register Your Business

Registering your business is critical to establishing your company’s identity and legitimacy. Start by choosing a unique and memorable business name. Then, register your business with the relevant authorities. In Estonia, you can do this through the e-Business Register. Ensure all necessary licenses and permits are obtained to comply with local regulations. This process legitimises your business, protects your brand, and helps you avoid legal issues.

7. Define your own workspace

If you’re storing plenty of stock or providing a service that involves a lot of equipment, think about where it will all go and your security around this. You might need to clear out your garage or invest in extra storage to keep everything organised, safe and uncluttered, especially if you have a lot of equipment.

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.

8. Set Up Essential Systems

Setting up essential systems is vital for any business to operate efficiently and effectively. Establish accounting (Merit Aktiva) and bookkeeping systems to manage your finances. Consider using cloud-based tools and software to streamline your operations and reduce costs. Implement a customer relationship management (CRM) system to track client interactions. Additionally, set up a website, social media accounts, and email marketing systems to build your online presence. Don’t forget to establish a backup system to ensure business continuity during disruptions. These systems will help you stay organised and focused on growing your business.

9. Develop a Marketing Strategy

Developing a marketing strategy is crucial for any business to reach its target audience and achieve its goals. Identify your unique selling proposition (USP) and understand your target market. 

Create a marketing mix that includes product, price, promotion, and place. Consider using digital marketing channels such as social media, email marketing, and search engine optimisation (SEO) to reach your audience effectively. Track your marketing metrics to see what’s working and what’s not, and adjust your strategy accordingly. 

A well-thought-out marketing plan will help you attract and retain customers, driving your business towards success.

Build a Sales Funnel

A sales funnel is a marketing strategy that guides potential clients through steps, from initial awareness to conversion. Building a sales funnel can help you attract and retain clients as a freelancer. Here’s how to build a sales funnel:

• Identify your target audience and their pain points: Understand who your potential clients are and what challenges they face. This knowledge will help you create content and offers that resonate with them.
• Create a lead magnet: To attract potential clients, offer something valuable for free, such as an e-book, webinar, or consultation. This lead magnet should address a specific problem your target audience faces.
• Develop a series of nurturing emails or messages: Once you have their contact information, send emails or messages that provide value, build trust, and keep you top of mind.
• Offer a free consultation or discovery call: This step lets you connect personally with potential clients, understand their needs, and demonstrate how to help them.
• Create a proposal or contract: When a lead is ready to convert, provide a clear and professional proposal or contract that outlines your services, terms, and pricing.

10. Set up your business banking

Limited companies and some partnerships need to have a business bank account, and even if you run your business as a sole trader, you may want to get separate accounts for your personal and business transactions. This makes keeping track of your spending easier, looks more professional when billing a customer, and will make tax returns much less stressful, especially if you have separate accounts for personal and business transactions.

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.

What is an entrepreneur account?

An entrepreneur account is meant to allow a private person to operate as an entrepreneur in a bureaucracy-free and affordable manner. Without worrying about financial statements, monthly tax declarations and tax payments, all of this occurs automatically under the entrepreneur account entries.

An entrepreneur account is the best choice when one private person pays another for services or goods they have provided. The entrepreneur account holder may sell services and goods to private individuals and businesses.

The tax liability incurred is fulfilled automatically for income received in the entrepreneur account.

Starting on 1 January 2025, the business income tax rate is 20% of the amount received from the entrepreneur’s account. If the entrepreneur account user has joined a second pension pillar, in addition to the 20%, 2% (or 4% or 6%, depending on the selected option) will be deducted from the account for payments to the second pillar.

An individual who has opened an entrepreneur account is not obligated to register as an entrepreneur or keep a statement of revenue and expenditure.

When using an entrepreneur account, you may not be liable to value-added tax or operating as a self-employed person (FIE) in the same or similar activity area.

11. Keep track of your expenses

You can claim allowable expenses if you are a sole trader. In short, permissible expenses are essential costs that keep your business running, especially when 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 can claim for things like energy bills, internet, 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.

If unsure, you’ll need to speak to a qualified accountant.

It’s common for new business owners to miss out by forgetting to claim their expenses, so finding a system that accurately tracks and divides up your costs is imperative.

12. Create a budget and financial Plan

As a freelancer, creating a budget and financial plan is essential to manage your finances effectively. Here are some steps to follow:

• Track your income and expenses: Record all your financial transactions using a spreadsheet or accounting software. This will help you understand your cash flow and make informed decisions.
• Categorise your expenses: Separate your business expenses from personal ones. This will make managing your finances more manageable and help you prepare for tax season.
• Set financial goals: Determine what you want to achieve financially, whether saving for taxes, retirement, or a significant purchase. Having clear goals will help you stay focused and motivated.
• Create a budget: Allocate funds for business, savings, and personal expenses. Make sure your budget is realistic and flexible enough to accommodate unexpected costs.
• Review and adjust your budget regularly: Your financial situation may change over time, so it’s important to review your budget periodically and modify it as needed.

12. 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, especially if you don’t inform your home insurers about running a business from home.

For every new business, it’s worth looking into equipment cover. This can pay for repairs or replacements if something happens to your kit (like a laptop or specialist tools). Cyber insurance is also good if you use a website or store sensitive data, such as your customers’ names and addresses.

Depending on the type of business you set up, you might also want to consider covering professional indemnity, stock, product liability, public liability, and employers’ liability.

13. Establish routines

Establishing a routine can help you stay organised and focused as a freelancer. Here are some tips to develop a routine:

• Create a schedule: Set dedicated work hours and stick to them. Include breaks to rest and recharge, which will help you maintain productivity throughout the day.
• Incorporate self-care activities: Make time for exercise, meditation, or other activities that help you relax and stay healthy. A balanced routine supports both your physical and mental well-being.
• Prioritise tasks: Focus on the most critical tasks first. Use tools like to-do lists or project management software to keep track of your priorities.
• Use time-tracking software: Monitor your time usage to identify areas for improvement. This can help you make better use of your work hours.
• Review and adjust your routine: Regularly assess it to ensure it works. Make changes as needed to stay productive and maintain a healthy work-life balance.

You got this!

Remember, becoming a successful freelancer is a continuous process. Regularly reviewing and adjusting your strategies is essential to ensure you’re on track. Here are some final tips:

• Regularly review your goals and objectives: Ensure you’re progressing and adjust your goals to align with your vision.
• Adjust your strategies: Stay competitive by adapting to changes in the market and continuously improving your approach.
• Invest in your professional development to stay ahead, continuously learn and improve your skills.
• Stay organised and focused: Maintain productivity by keeping your workspace and schedule in order.
• Celebrate your successes and learn from your failures: Acknowledge your achievements and use any setbacks as learning opportunities to grow and improve.