All businesses must start somewhere. While many startups seemingly pop up out of nowhere – fueled by venture capital and angel investors – others have more humble origins.
Many people operate small businesses out of their homes. Commonly referred to as cottage industry, modern home-based businesses function thanks to digital services and other technology.
But what happens when your so-called cottage industry outgrows your cottage? It’s time to turn your home-based business into something more established. What that entails will ultimately depend on the product or service you’re selling. However, virtually all cottage industries will need the following in order to graduate to small business:
Many home-based businesses operate without the proper licensing and other legal requirements. While you can probably get away with making candles in your garage, things get more complicated when the business grows into something more official. Consult the Small Business Administration’s guide to starting a business to learn what you need to do to make sure everything is nice and legal. From permits to zoning, the last thing you want is to have your expanded business shut down due to violations. With this in mind, make legal requirements the first thing you figure out when taking your cottage industry to the next level.
The majority of home-based businesses rely on e-commerce solutions to connect with customers. When these ventures expand into full-fledged small businesses, owners must scale their e-commerce tools accordingly. For instance, third-party order fulfillment services help keep logistics streamlined, letting small business owners focus on running their company rather than monitoring shipments. These solutions also help to keep costs low.
Chances are your cottage industry enterprise has some sort of online presence. While a basic website works for the side-hustle stage of your business, expansion means enhancing that presence to match your growth. You need a business website with functional design and a practical interface. Visitors shouldn’t be confused about where to go to make a purchase. Consider hiring a web designer to help build a website worthy of your newly established small business. Doing so will cost more than doing it yourself, but having a solid business website is too important to leave to chance.
The shift from a basic home-based work environment to a dedicated building is the most major and obvious transformation from a cottage industry to a small enterprise. Don’t hurry; it will take time to find the ideal workstation. Local industrial courts are recommended since they often include the most cost-effective and useful possibilities for business space. However, if foot traffic is a concern, an unmarked facility hidden behind dozens of other buildings may not be the ideal choice. To discover the ideal workplace for your small company, think about consulting with a commercial real estate specialist.
Another scalability issue is the gear and equipment required to create goods at the pace necessary to satisfy additional clients. For instance, creating labels with a small inkjet printer won’t be feasible anymore. An industrial-grade label maker is required. The good news is that scaling will be simple for most commercial equipment; you only need to switch out tiny versions for larger ones. To save money, think about purchasing equipment that has been certified used.
If your cottage enterprise employed anybody, it was probably family members assisting. But now is the moment to bring on reliable workers. Although the recruiting process may seem challenging initially, practice will make it simpler. Getting individuals to apply for positions at a firm they’ve never heard of will be challenging. Consider working with recruiters with this in mind.
Purchase of insurance
Every small company has to get business insurance. You should already have some kind of supplemental insurance coverage for your cottage industry firm, as most homeowner’s insurance plans don’t cover business-related activities. Your insurance coverage will also need to grow as well as you transition into a fully-fledged firm. The good news is that most commercial insurance plans are reasonably priced.
The publicity your business receives from its current clientele won’t be enough to generate significant brand recognition. To reach the intended audience, startup marketing investment is unavoidable. Fortunately, digital marketing options provide low-cost ways for small companies to raise brand recognition and enhance sales. Given the chance that your company will have a significant online presence, digital marketing will be not only economical but also useful.
Are you preparing your side company or cottage industry to become a respectable small business? If so, a lot of work has to be done. The good news is that there’s a high possibility your freshly launched small company will get off to a strong start after phase one is over.
Julie Steinbeck is a freelance writer from Florida. She enjoys covering topics related to business, finance, and travel.