Why Home Based Business Ideas Are The Best Starter Businesses

by J.Crawford on February 14, 2012

I’ve written extensively on why I think home based business ideas are the best starter businesses for beginners here on this small business website over the last several years but I see it’s been a while.  I also wanted to mention something new that a friend of mine pointed out to me yesterday on the phone.  I think it will be relevant to a lot of the visitors here.  As always feel free to ask questions and leave comments below in the comments section.

While I was talking to my friend the other day he mentioned he really wanted to start a business.  We had been talking about a business I started a couple years ago in the agriculture industry and fresh produce niche.  He had mentioned it before but this time it seemed almost urgent and so I asked why.  Turns out he pays a lot in taxes which is a common problem with people who have jobs especially if they are single with no dependants.  He is a special education teacher in a well funded school district and also coaches.  He makes around 85k per year and says he paid in over $18,000 dollars and will need to pay more when he does his taxes.

Let’s face it, you can’t avoid taxes, they have to be paid, but you can drastically reduce the amount you have to pay.  I’ve never paid close to $20,000 in taxes as an entrepreneur and the most I ever made at a job was $35,000 when I was 20 years old and I haven’t had a real job since.  I wanted to talk about choosing the best starter businesses the first time because many entrepreneur just starting out are in the same boat he is in, they need more tax deductions.  Home based business ideas allow for some tax benefits though I never really thought they amounted to much.  I did some research over the last couple days and they can actually add up.  In order to better realize tax saving you can talk to your accountant about strategies to do that.  Having home based business expenses helps but you can still only use deductions to the extent of revenue.  Like I said, look into strategies with your accountant and learn more about using a home based business idea to reduce your tax exposure.

Home Based Business Tax Advantages

The first advantage that makes a home based business idea one of the best starter businesses is the home office deduction.  Like it sounds it lets you write of a portion of the expenses of your home used for your business.  Here is an excerpt that explains it in more detail.

To qualify for this deduction, your home office must be the principal place where your business is done. Secondly, the office space must be used exclusively for business use to qualify. For example, if you use your kitchen as your primary workspace, it is likely that you cannot take the home office deduction, assuming that you use it for personal use as well. To be on the safe side, set aside a room as your home office where possible. This will keep you on the safe side should the home office use ever come into question.

Remember to talk to your tax professional about your plans and see what the actual saving will be for your business, if any.   I’ll list off a few more tax advantages of a home based business that help to make it a top business for a beginner to start.  I’m sure this list isn’t complete but here are a few of the deductions I’ve found that could help you with tax reduction:

  • Building related expenses.
  • Security systems and installation.
  • Insurance.
  • Utilities.
  • Transportation.
  • Moving Expenses.
  • Telephone expenses.
  • Computer expenses.
  • Internet.
  • Meals and entertainment.
  • Educational expense.
  • Tax preparation.
  • Bookkeeping expense.

That is a lot of items you could deduct from any profits and not have to pay taxes on and I’m sure there are more deductions you could take when you own a home based business.  Personally I feel starting a business with the right small business idea is more about long term financial planning and security than saving on your tax bill.  It’s true, in my experience, that small business owner pay less in taxes but there are better reasons to start a business.  For people like my friend who have never started a business it can be scary and it might seem risky, most are very cautious.  The best starter businesses are ones that acknowledge this and by nature hedge risk and cater to beginners.

The Best Starter Businesses

Like I said I think the best starter businesses are home based business ideas or businesses you can do entirely online.  At minimum I’d recommend staying away from business ideas that require you to purchase real estate, equipment, hire employees and go into debt, debt, debt.  I started my Internet business with $0 money and 6 years later my fixed costs are probably less than $300.00 per YEAR.  Yes, per year, isn’t that crazy?

When I started my new business idea I was running a commercial construction company that I had started about 7 years prior and I couldn’t even tell you what my fixed expense were, definitely upward of $5,000 per month and payroll alone (variable expense) was over $40,000 per month.  In 2006 I paid over $86,000 dollars in workers compensation premiums!  I’m still amazed at the low cost of a home based business or an Internet business.

Best Starter Businesses “Must Have’s”

Listen, if you’ve never been an entrepreneur before you’ll probably be nervous.  I don’t know what it is about us humans be we always seem to resist change and get nervous at the first hint of trying something different.  Here is my advice, sit down and figure out your concerns and remember they are all valid.  Write them out one by one, you can start by writing, “I am afraid that….”

Once you’ve done this take a look at what you have and ask yourself what you can do to alleviate these fears before you even start your business.  From my own experience what really makes me nervous is risking a bunch of cash especially if it is someone else’s.  I still stay away from businesses that require a lot of start up capital.  Start up capital is not as big a barrier to entry as most people think.  I did $2.8 million dollars in revenue in my commercial construction company I mentioned I started that business with $300 dollars initially.  I did borrow money from time to time later on for payroll and such but I didn’t start it with a big wad of cash. Here are some of what I call the “must have’s” for the best starter businesses. (I’ll give an example of one below)

  • Simple and safe exit strategy.
  • Low/No cost start up requirement.
  • No employees needed to start.
  • Leverage skills and talents already present to reduce learning curve.
  • Have flexible schedule.
  • Part time or side business ideas.
  • Be in demand and relevant.

These are pretty basic pillars you can assess a good starter business by.  Take small steps and don’t try to go fortune 500 in the first 90 days, chill out and have fun doing something new.  There are lots of new business ideas that meet those criteria and some may be more profitable than you think.  Some of the business models I’ve used that are good starter business and are home based business ideas include:  Blogging, affiliate, farming, web design, SEO, and consulting. Another good business idea for a starter business that comes to mind is a home based bookkeeping business.

Home Based Business Ideas (Example)

When I first started my construction company I met a lady who did bookkeeping as a side business.  Her rates were reasonable and she did good work.  I don’t remember her name but bookkeeping is a great example of a starter business that wouldn’t cost much at all if any.  In fact maybe I can get in touch with her and write a tutorial on how to start a home based bookkeeping business with little or no money.  If you want to learn how to start a home based bookkeeping business you can learn how from this woman who teaches people how to do it.

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