Determine the Likely Profit
To start a successful home-based business, you need to consider its potential profitability. You may have a great talent for something and the skills that enable you to express it, but if people aren’t willing to pay you for the product or service, it won’t work as a business.
For each home-based business idea, you need to know:
How much are people willing to pay me for this product or service?
Can I make a sufficient income from that?
For instance, suppose that you want to start a creative business using your sewing skills to make homemade quilts. Because of the time involved, you’re only able to make two quilts per month. You discover that people are willing to pay $300 for each quilt you produce. That produces revenue of $600 per month, minus the cost of expenses related to quilt production and advertising.
If you are looking for a little extra income each month doing something you enjoy, this may be sufficient. However, if you want to make a living from your business, less than $600 per month will likely not be enough.
Most businesses need time to start generating a profit. Take this into consideration, and give yourself a window of time when you don’t expect your business to be profitable. However, you eventually need to be reliably meeting your income targets in order for your business to be successful.4
Determine what your minimum income requirements are per month and only consider business ideas that have a real chance of generating that level of profit.
Create a Business Plan
Business plans aren’t just necessary for startups seeking a business loan. The primary reason to create a business plan is to find out if your idea has a chance of becoming successful.
Once you’ve chosen a home-based business idea you’re passionate about, write a business plan, including:
An executive summary of your business idea
Research into your target market and competition5
A description of your ideal customer
Your marketing strategy
Your operating plan
The research and thinking that you do as you work through the business plan will help you refine your business idea and plan for how you will successfully launch yourself into your market without costly real-world trial and error. If your business plan shows you that your idea isn’t viable, don’t be afraid to shelve it, choose another