Also known as a smart home business, a home automation business uses technologies like sensors, Internet and automation control to create a centralized, digital system for homes. Normally, this system helps homeowners control the lighting, home security and HVAC services. It can also power the dryer, dishwasher and entertainment electronics.
A home automation business can also offer consultations and services to homeowners, helping them pick the best automation system for their home. Often, the business installs the system for them.
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Learn how to start your own Home Automation Business and whether it is the right fit for you.
Start a home automation business by following these 10 steps:
- Plan your Home Automation Business
- Form your Home Automation Business into a Legal Entity
- Register your Home Automation Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Home Automation Business
- Get the Necessary Permits & Licenses for your Home Automation Business
- Get Home Automation Business Insurance
- Define your Home Automation Business Brand
- Create your Home Automation Business Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your home automation business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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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 much can you charge customers?
- 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 home automation business?
Expect to pay as much as $25,000 for startup expenses, which includes a beginning product line, insurance and a workshop. As you enter distributor networks, expect to pay less on materials and pre-made products to sell.
What are the ongoing expenses for a home automation business?
Ongoing costs include your shop’s rent, which can be about $3,000 per month for a high-traffic storefront. Variable sourcing costs range wildly as entire systems can be purchased and resold for profit. If you’re going to sell entire systems, however, you’ll save more money by purchasing system components rather than entire systems.
Who is the target market?
Your target market will be homeowners in the upper-middle to upper class. Larger homes are more profitable, as home automation needs are higher. You can market to commercial entities, but you won’t be nearly as profitable.
How does a home automation business make money?
Primarily, a home automation business makes money by selling home automation systems. Whether it’s selling entertainment suites or smart security alarms, the vast majority of a home automation business’ revenue comes from the sale of similar products.
They can, however, make more money by offering direct installations. In these cases, homeowners can be charged by the hour. Or, they can be charged a flat rate. Some home automation businesses offer updates and repairs—for a fee, of course. Other home automation businesses may expand their product line, servicing businesses and apartment complexes.
How much can you charge customers?
Clients can be charged between $466 and $2,014 for a home automation system. The gap is large, as is a regular home automation product line. Small components can be sold for as little as $65, whereas high-tech, all-in-one home solutions can be charged at $4,500.
How much profit can a home automation business make?
A successful home automation business can make upwards of $150,000 in profit, annually. The business will need to expand gradually, however, keeping costs low while managing new clients and distribution networks. By handling new customers effectively, taking input to heart and controlling expenses, a home automation business owner can become incredibly profitable.
How can you make your business more profitable?
Source high-quality, reliable smart home products. Once you’ve decided on your core product line, you’ll need to make sure your brand is trusted and prioritized. Write a business plan early, and establish your brand’s sales figure goals. Design and build a website early, too, and consider tapping into the e-commerce market if your business doesn’t need the additional profits from direct installations.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Home Automation Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your home automation business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
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?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
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.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
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 home automation 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 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.
Certificate of Occupancy
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 home automation business 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 home automation 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 home automation business 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 home automation business will be in compliance and able to obtain a CO.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
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.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a home automation business
Create a social media campaign, and promote your unique products on Facebook, Twitter, and Instagram. Make a landing page, and utilize your source network to gain partnerships. By creating an Internet marketing circle, you can approach clients from multiple directions.
How to keep customers coming back
Attract customers through home improvement stores, home technology stores and online marketing. Home automation systems are luxury purchases for some, so customer attraction will require a high degree of emotional connection. As for retention, consider implementing an electrical maintenance program. Reach out to previous customers, and notify them of home automation updates. This works rather well if you’re selling automated security systems.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Home Automation Business in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
The home automation business is great for any tech-minded individual who wants to create ongoing relationships with homeowners. A great job for computer gurus, smart-technology-lovers and even HVAC workers, the home automation business is a high-tech job for those who understand the ins and outs of home operation.
Having a background in electrical engineering, programming, design or mechanical engineering helps. Management skills, too, are important. A home automation business owner will need to be a good people person, so as to help clients pick the best system.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a home automation business?
A home automation business must source the many electronics they hope to sell to homeowners. This can include smart fire and flood detectors, smart window dressing controls, smart thermostats, and smart security alarms.
Once they obtain a client, the home automation business delivers the product to the household. Then, they install it. A lot of installations are quick, though some may require an in-depth understanding of household cooling and heating systems. A lot of home automation businesses spend a lot of time on pre-installation planning.
Other day-to-day actions include making financial projections, creating executive summaries, marketing, conducting marketing analysis, and focusing on new services.
What are some skills and experiences that will help you build a successful home automation business?
Before starting, you should know what your business’s core products will be. It’s also a good idea to build relationships with different control system companies, like AMX, Crestron, Home Logic, and Elan Home Systems. In the home automation business you’ll need to constantly source parts and system components, so your network matters a lot.
Understanding programming is definitely important, too. Learn C and C++, and learn how different electrical companies manage their distribution channels with different electronics. Similarly, understand how different pricing schemes work. Take a technical training class, and learn how to integrate your skills in a professional environment.
What is the growth potential for a home automation business?
If a home automation business’s planning is effective, it’ll be in store for a lot of growth. Home automation has become incredibly popular, and a lot of home automation businesses are expanding to national levels.
A home automation business owner must be an effective market analyzer, however. If they branch into the e-commerce world, they may need to balance profits from delivered goods while losing money from direct installation services. In general, however, a home automation business can grow quite a bit.
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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 home automation business?
Establish a pre-launch advertising campaign. Because the home automation business is booming, a solid introduction matters. Even if you’re using a light marketing campaign, it should feature your brand’s very best product line.
How and when to build a team
Consider hiring two to three professionals before launching your business. A home automation business requires a high degree of knowledge about programming, electrical installation and home utility networks. The extra minds will certainly help while problem-solving, and they’ll boost much-needed startup sales.
- Custom Electronic Design & Installation Association
- International Society of Automation
- Continental Automated Building Association