Start a home automation 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 guide to starting your home automation 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 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 very important. Read our detailed guide on how to name your business. 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 home automation business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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 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.
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.
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 Home Automation 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?
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.
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.
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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 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.