Start a data entry business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your data entry business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a data entry business?
The cost involved in starting a data entry company is minimal. That’s because they can be run from home, or operated out of an office on a larger scale. Today’s data entry businesses operate mostly or entirely online.
All that’s needed is a computer and an Internet connection. These costs can range from a few hundred dollars to a few thousand, depending on the computer purchased.
What are the ongoing expenses for a data entry business?
Ongoing expenses for this type of business are low and limited to utility costs for running the business, computer maintenance, repair, and replacement, rent, and insurance. These ongoing costs can be as little as a few hundred dollars per month to several thousand dollars, depending on the size of the business.
Who is the target market?
Preferred customers are larger corporate clients or those with ongoing data entry needs. The worst types of clients for this business are smaller accounts or businesses that have sporadic cash flows and cannot afford to pay for ongoing data entry services.
How does a data entry business make money?
A data entry company makes money by charging clients for data entry services.
How much can you charge customers?
Data entry companies typically charge customers an hourly rate or a “Full-Time Equivalent” (FTE) rate. FTE rates are usually a flat fee per month for services.
Rates for services can also vary depending on specific services. For example, catalog management, data entry, scanning, and data mining services may fit on one “tier” of services, which the business can charge $7-$10 per hour for.
A company may also decide to offer FTE rates of between $1,000 and $2,000 per month for ongoing services.
More advanced data manipulation and management services may warrant higher charges of between $10 and $20 per hour, or $3,000 to $6,000 per month.
How much profit can a data entry business make?
A data entry business can have a high profit margin. However, it all depends on how quickly your employees can finish jobs. Profit margins of 5% or less may be typical for a startup with little experience. However, those margins can grow to over 20% if processes are streamlined.
How can you make your business more profitable?
Making a data entry business more profitable usually means either specializing in one sector or niche or offering more value for the money. For example, a data entry business that specializes in the healthcare industry may be able to charge its clients more money because the company needs specialized knowledge of its customers’ industry — knowledge that isn’t widely available in the general data entry market.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your data entry business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a data entry business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Data entry businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your data entry business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Certificate of Occupancy
A data entry business may be run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a data entry business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your data entry business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a data entry business
Promoting your data entry business will involve a combination of strategies and tactics. Most data entry companies can start out using direct mail or online pay-per-click advertising. As word of mouth grows, companies don’t need to rely as much on paid traffic to websites and can instead leverage organic reach and referral marketing, including email marketing.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Differentiating your services from others in your space is difficult. This is an industry known for its sameness across competitors. Stand out by offering more value rather than lowering price.
Another way to differentiate yourself is by specializing your company and services. Some firms choose to specialize in certain industries. This allows them to charge more for certain services, create a customized menu of services for clients in a specific industry, and offer value that general data entry companies cannot.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Data Entry Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is best suited to business owners with strong managerial skills. If you plan on owning a one-person business, you should also be comfortable using a variety of popular spreadsheet and word processing programs. Running a data entry business is typically a “9-to-5 job,” but may also include weekends and nights based on the project.
What happens during a typical day at a data entry business?
Day-to-day activities of a data entry company include processing requests from customers and, of course, data entry. Most of an employee’s time is spent working at his or her desk organizing, sorting, entering, and manipulating data.
The owner of the company may be involved in marketing, so most of his or her time would be spent managing client relationships and attracting new clients.
What are some skills and experiences that will help you build a successful data entry business?
Data entry companies require specialists who are skilled in typing and data entry, scanning, manipulating documents and data, organizing, and other office-related skills. Proficiency in a variety of spreadsheet and word processing applications is usually a must. Good communications skills are necessary as is the ability to meet tight and changing deadlines.
What is the growth potential for a data entry business?
A data entry company can remain small, with just one or two people operating the business. These kinds of businesses typically take on a handful of clients and establish a relationship with them that lasts for years. A lot of businesses stay small like this forever.
As the client base grows, however, some companies decide to hire staff to assist with the workload. These companies can scale easily as long as they continue hiring data entry specialists, HR support, and management that is sufficient to handle the growth of the company.
An example of a large data entry company would be ARDEM Incorporated or Invensis. These companies are global, working with international corporations. So, the theoretical upper limit is huge.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a data entry business?
Jump starting a data entry business is difficult. Because it has almost no startup costs, competition for jobs is fierce in this field. Because this business is entirely online, there is also a sizable risk of scams.
Convincing the marketplace that you’re a legitimate company will make it a lot easier. Realize you are operating in an industry that is seen as untrustworthy simply because of the number of scam artists operating amongst legitimate businesses.
Start small. Get reviews from reputable and well-known companies or companies whose contact details are very easy for potential customers to check.
How and when to build a team
Building a team is never necessary. However, if you want to become a large data entry company, you should consider starting with a small staff of at least 3 to 5 people and expand as your budget allows. The most important personnel are the data entry specialists, followed by HR staff.