How to start a business from home: Step-by-step guide

Published Tuesday 20 January 2026

Table of contents

• Popular home business ideas
• Legal considerations for home businesses
• How to start your own business from home: a step-by-step guide
• Overcoming possible barriers to setting up a home business
• Resources and tips for running a successful home business
• Streamline your home business finances with Xero
• FAQs on starting a home business

Key takeaways

• Validate your business idea by assessing your existing skills, researching market demand, and confirming your business can legally operate from home under local zoning regulations.
• Create comprehensive business and financial plans that outline your strategy, target market, startup costs, and cash flow projections to guide decision-making and secure funding if needed.
• Establish proper legal foundations by obtaining an ABN, registering for GST if required, securing necessary permits and licenses, and setting up dedicated business banking and accounting systems.
• Design a professional home office workspace with reliable internet, essential equipment, and clear boundaries between business and personal life to maintain productivity and credibility.

Popular home business ideas

Home-based businesses are any enterprises where your home serves as the principal place of business. These businesses let you work flexibly while reducing overhead costs.

Popular home business categories include:

• Creative services: Copywriting, content writing, graphic design
• Technology services: Web design, app development, software consulting
• E-commerce businesses: Handmade products, drop shipping, marketplace selling (Etsy, Amazon)
• Professional services: Consulting, coaching, bookkeeping
• Health and wellness: Personal training, massage therapy, nutrition coaching

Before starting, check your local zoning regulations. Some areas restrict home businesses, especially those with regular visitors or deliveries.

Legal considerations for home businesses

Before you get started, check the rules for running a business from your home. This helps you avoid any surprises later on.

You may need to get approvals from your local council, especially if you plan to have customers visit your home or if you're making products like food. If you rent your property, check your tenancy agreement to make sure you're allowed to operate a business from there.

You'll also need to consider business registrations, such as getting an Australian Business Number (ABN), and whether you need to register for GST.

How to start your own business from home: a step-by-step guide

Follow these eight steps to get your own home business started.

1. Develop your business idea

Business idea development involves matching your skills with market opportunities to create a profitable venture. Follow these steps to identify your ideal home business:

Step 1: Assess your skills and experience

List your professional qualifications, talents, and interests. For example, baking skills could lead to a home bakery specialising in custom cakes or cookies.

Step 2: Validate market demand

Research if people will pay for your product or service. Check competitors, pricing, and customer reviews to understand market viability.

Step 3: Confirm home-based feasibility

Verify your business complies with local zoning laws. Home bakeries (cottage industries) can make low-risk foods, while catering requires commercial facilities due to high-risk food handling regulations.

Step 4: Test your passion level

Choose ideas that genuinely excite you. High enthusiasm translates to better focus, persistence, and business success.

2. Write a business plan

A business plan is a written document that outlines your business strategy, target market, and financial projections. It helps clarify your ideas and secure funding while keeping you focused on profitable growth.

Business plans provide these key benefits:

• Clarity: Transform vague ideas into concrete strategies
• Funding access: Banks and investors require written plans
• Goal tracking: Monitor progress against specific targets
• Problem identification: Spot potential issues before they occur

Start with a one-page plan that covers:

• Product description: What you're selling and why customers need it
• Target market: Who will buy from you and how you'll reach them
• Revenue model: How you'll make money and achieve profitability
• Funding requirements: Startup costs and ongoing expenses
• Success metrics: Sales goals and key milestones

Download a one-page business plan template.

3. Create a financial plan

Financial planning involves projecting your business income, expenses, and profitability timeline. Most home businesses take 6-12 months to become profitable, so plan for initial losses.

In your financial plan, focus on four key areas:

Budgeting and cash flow

Estimate monthly income and expenses to identify when you'll break even. Include startup costs, ongoing expenses, and emergency funds for unexpected costs.

Learn about small business budgeting.

Pricing strategy

Set prices that cover costs while remaining competitive. Research competitor pricing and calculate your minimum viable price based on expenses plus desired profit margin.

Get the scoop on common pricing strategies.

Startup financing

Determine if you need external funding through loans, investors, or personal savings. Most home businesses require $5,000–$15,000 in initial investment.

Find out how small business finance really works.

Owner compensation

Plan modest initial pay to preserve cash flow. Many business owners take minimal salaries for the first year, reinvesting profits into business growth.

Figure out how to pay yourself.

4. Decide on a name, business entity and legal structure

Business naming and structure decisions determine your legal identity, tax obligations, and personal liability. Make these choices before registering your business.

Choosing your business name

Select a name that's memorable and clearly describes your services. Follow this process:

1. Brainstorm options: Create 5-10 potential names
2. Check availability: Search Google and the official trademark database
3. Verify domain availability: Ensure you can secure matching website domains
4. Register officially: Complete registration through business.gov.au

There are several different ways to make your business name official. You can read more in our guide to registering a business name in Australia.

Selecting your business structure

Your structure affects taxation and personal liability, with the common business structures in Australia being:

• Sole trader: Simplest option, you're personally liable for debts, taxed at personal rates
• Partnership: Shared ownership and liability, profits split according to agreement
• Company: Separate legal entity, limited personal liability, corporate tax rates apply

By default, the government treats you as a sole trader unless you register a different structure. Talk to an accountant to choose the best option for your situation.

Learn more in these articles on Types of business structure explained and Registering a business.

5. Register and licence your business

Business registration and licensing involves obtaining required permits and tax registrations before you can legally operate. Complete these steps in order:

Step 1: Get your ABN (Australian Business Number)

Apply through business.gov.au within 28 days of starting your business. Your ABN is a unique 11-digit identifier that identifies your business for tax and legal purposes, making it easier for businesses and government to interact.

You can find out more about how to apply for one in our guide How to apply for an ABN.

Step 2: Register for GST (if required)

Register for GST if you expect to earn over $75,000 annually. According to the ATO, once you meet the threshold, you must complete your registration within 21 days. You can register simultaneously with your ABN application.

You can get your ABN and register for GST with the Business Registration Service. You can also register for GST through the ATO business portal.

Step 3: Obtain required permits and licences

Different types of home businesses have different requirements for permits and licences:

• Food businesses: Food handling permits and council approvals for home-based food preparation
• Zoning permits: Council approval to operate a business from your residential property
• Professional licenses: Trade-specific permits (electrician, plumber, financial advisor)
• Health and safety permits: Required for businesses with employees or public access

Step 4: Arrange business insurance

Essential coverage includes public liability, property insurance, and professional indemnity, which is vital for coverage under schemes that can cap your liability in the event of a claim. Add WorkCover insurance if you hire employees.

Check permit requirements with your local council and state government, because the rules vary depending on where you live and the type of business you run.

It's a good idea to review your home-based business insurance needs. Typical insurance includes property, vehicle, public and professional liability and business continuity. And if you have employees you’ll need to have WorkCover insurance.

For more information, check out these related articles on Registering a business and GST and BAS guide.

6. Set up your home office

Home office setup involves creating a dedicated, productive workspace that separates business from personal life. A well-designed office increases focus and professional credibility.

Phase 1: Choose your location

Select a quiet, well-lit area with minimal distractions. Avoid high-traffic areas like kitchens or living rooms. Consider storage needs for inventory, supplies, or equipment.

Phase 2: Essential equipment

Make sure that you have:

• Reliable internet connection: High-speed broadband for video calls and file sharing
• Professional workspace: Desk and ergonomic chair for comfort during long work sessions
• Technology basics: Computer, phone, printer, and backup power supply
• Storage solutions: Filing cabinets, shelving, or storage boxes for business documents

Phase 3: Professional touches

Add good lighting, noise control, and a professional background for video calls. These improvements enhance productivity and client perception of your business.

Learn more practical tips for a mobile office.

7. Set up small business accounting

Business accounting setup involves separating business and personal finances while maintaining accurate records for tax compliance. Proper accounting provides clear insights into profitability and cash flow.

Step 1: Open a dedicated business bank account

Separate business and personal transactions to simplify bookkeeping and tax preparation. Most banks offer business accounts with features like expense tracking and integration with accounting software.

Step 2: Implement record-keeping systems

Track all business income and expenses, and remember that you need to keep their records for at least five years after lodging a tax return. You can track them using:

• Digital receipts: Photograph or scan all business purchase receipts
• Sales records: Document all customer payments and invoices
• Expense categories: Organise spending by type (office supplies, marketing, travel)
• Monthly summaries: Review income versus expenses to monitor profitability

Step 3: Engage professional support

Hire an accountant or bookkeeper to ensure compliance and maximise tax deductions. They'll help with quarterly tax estimates, annual returns, and strategic financial planning.

Benefits: Accurate records enable better business decisions, ensure tax compliance, and simplify loan applications or business sales.

Read more in this intro to small business accounting.

8. Create a marketing plan

Writing a marketing plan can help you define your marketing strategy and identify the best channels to market your products or services.

To create your marketing plan, you should:

Analyse the market

Do a SWOT (strengths, weaknesses, opportunities, threats) analysis to determine where your business fits in the market.

Set your goals and objectives

Make them SMART (specific, measurable, achievable, relevant, time-bound).

Outline your marketing strategies

Choose marketing activities to suit your target audience. For example, will you reach them online?

Set your marketing budget

Knowing how much you have to spend is critical to the success of any marketing campaign.

Keep your marketing plan up to date

Analyse your campaigns and tweak or change your plan as needed. Track how much business you get in return for each dollar spent. When you see something isn't working, invest your money and energy in other ideas.

Set up social media accounts and a simple website to market your home-based business.

Overcoming possible barriers to setting up a home business

Common home business challenges are easier to manage when you plan for them early. Address these barriers proactively to maintain productivity and motivation.

Financial constraints

• Challenge: Limited startup capital and cash flow gaps
• Solutions: Create detailed budgets, explore small business loans, consider partnerships, or start part-time while maintaining other income

Regulatory compliance

• Challenge: Complex permits, licenses, and zoning requirements
• Solutions: Research requirements early, consult local council offices, hire professionals for complex applications, join business associations for guidance

Work-life boundaries

• Challenge: Family interruptions and inability to "switch off" from work
• Solutions: Set specific work hours, create physical workspace separation, communicate boundaries clearly to family, establish end-of-day routines

Professional isolation

• Challenge: Loneliness and lack of professional networking
• Solutions: Join industry associations, attend networking events, work from co-working spaces occasionally, participate in online professional communities

Resources and tips for running a successful home business

Essential business resources provide templates, tools, and insights to streamline your home business setup and ongoing operations. These resources address common planning and operational challenges.

Planning and strategy resources:

• Business plan template: Free downloadable template with step-by-step guide to structure your business strategy and secure funding
• Cash flow forecast template: Track projected income and expenses to identify funding needs and avoid cash flow problems

Market intelligence:

• Small business trends report: Data-driven insights on challenges and opportunities affecting small businesses globally, helping you make informed decisions

Download these templates before writing your business plan. Use the cash flow template to determine your funding requirements and the trends report to understand your competitive landscape.

These resources complement professional advice from accountants, lawyers, and business mentors who can provide personalised guidance for your specific situation.

Streamline your home business finances with Xero

Running your business efficiently is key to success. The right technology can save you time on admin, so you can focus on what you do best. Cloud accounting software helps you track income and expenses, send invoices, and see your financial position in real time.

Try Xero for free so you can run your business, not your books.

FAQs on starting a home business

Here are answers to some common questions about starting a home business.

What is the easiest business to start from home?

The easiest business to start is usually one that uses your existing skills and requires minimal startup costs. Service-based businesses like freelance writing, virtual assistance, or consulting are often simple to set up because you don't need to manage physical products.

How much money do you need to start a home business?

The amount you need can vary greatly. A service-based business might only require a few hundred dollars for a website and software, while a business that sells products could require thousands for inventory and equipment. Creating a simple budget will help you estimate your startup costs.

Do I need to register a home business in Australia?

Yes, if you're carrying on a business in Australia, you'll need an Australian Business Number (ABN). Depending on your business structure and revenue, you may also need to register a business name and register for GST. It's best to check the requirements on the Australian Business Register website.