Smart homes automate mundane tasks, freeing up time and energy for more appealing pursuits. They also empower people to control fixtures and appliances remotely. For example, this technology can automatically turn on the lights at dusk or let you unlock doors with a smartphone. If you find this concept intriguing, you might become interested in opening a smart-home business. You could sell and install home-automation equipment, such as light fixtures, security alarms, and thermostats.
Ready to form your LLC? Check out the Top LLC Formation Services.
Learn how to start your own Smart-Home Business and whether it is the right fit for you.
Start a Smart-Home Business by following these 10 steps:
- Plan your Smart-Home Business
- Form your Smart-Home Business into a Legal Entity
- Register your Smart-Home Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Smart-Home Business
- Get the Necessary Permits & Licenses for your Smart-Home Business
- Get Smart-Home Business Insurance
- Define your Smart-Home Business Brand
- Create your Smart-Home 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 Smart-Home Business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
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 Smart-Home Business?
You may incur some educational expenses at first. Loxone provides training for installers who use its equipment; the company charges about $225 to $300. Competitors like Savant also offer classes. You'll have to spend money on the initial inventory, tools, office equipment, and any licenses required in your area. A reliable vehicle with cargo space proves necessary as well. You probably won't need a large truck since most automation businesses don't sell or deliver major appliances.
What are the ongoing expenses for a Smart-Home Business?
Marketing, office supplies, wages, fuel, rent, and utilities represent recurring costs. If you serve a sizable geographic area, consider adding a toll-free phone number for about $15 per month. This occupation also calls for liability insurance, and you'll need commercial vehicle coverage when using an automobile for any business purpose. On average, these two policies cost around $2,100 annually.
Who is the target market?
Smart-home products remain most popular among men under 50, but seniors desire professional installation more frequently. Older Americans tend to prefer subscriptions; young customers want one-time fees. Most buyers have relatively high incomes. The wealthiest clients thoroughly automate their homes while middle-income customers focus on certain devices.
How does a Smart-Home Business make money?
Many companies bill customers for products and installation. The total price should cover the cost of wholesale equipment while providing adequate compensation for setup labor and technical assistance. An alternative is to charge a flat monthly fee. Some memberships include long-term support, repairs, battery replacement, and security monitoring.
How much can you charge customers?
HomeAdvisor indicates that clients spend anywhere from $2,000 to $150,000 on custom installation. The average setup costs nearly $28,000, according to CE Pro. Pricing depends on how comprehensively you automate the home. For example, a low-end service call may only involve setting up a single device. Major projects entail automation of all appliances, electronics, fixtures, and HVAC equipment in a large house. You might boost sales by providing discounts when customers choose to automate multiple systems or devices simultaneously. Subscription-based services fetch about $83 per month on average.
How much profit can a Smart-Home Business make?
Home-automation installers achieve profit margins of 33% on average, according to CE Pro. The merchandise can yield comparatively high margins even if you sell it without installation.
How can you make your business more profitable?
Provide all of the desired products and services in one place to create more profit. People often pay extra for convenience. Seek customers with large dwellings. Greater per-project earnings will cut marketing and travel expenses. Offer detailed instructions, FAQ lists, and tutorial videos. These reduce the need for technical support and product returns.
- Promote your business economically by offering a small reward to clients who refer their friends or relatives to you.
- Consider outsourcing security monitoring services instead of investing in costly equipment, licensing, and training.
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.
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 Smart-Home 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 smart-home 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.
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 Smart-Home Business
Smart-home equipment installation still has somewhat limited appeal for a general audience. For this reason, newspaper and broadcast TV advertising may not work well. Try to target likely customers with online ads or direct mail. A big part of your job is to make the process simple for customers who aren't willing to complete major DIY projects. Your advertising should reflect this goal by avoiding jargon and confusing concepts.
Instead, promote specific benefits like safety, security, or peace of mind. Mention that the system can save money by conserving energy and qualifying homeowners for insurance discounts. At the same time, don't make unrealistic promises or guarantees. You could offer discounts on certain products from time to time. Encourage people to join an email list to learn about the latest deals.
How to keep customers coming back
Trust, relevant qualifications, and product selection hold great importance when you seek new buyers. You can reassure potential clients by including local technical support for a specific time period. To retain customers, give precise quotes and avoid charging more. Provide excellent after-sale support — don't just tell people to call the manufacturer. Occasionally suggest additional products as you answer questions and maintain the existing system.
If marketing isn't your best skill, consider setting up an affiliate program. Other people will promote your business and receive compensation for doing so. Several smart-home businesses pay commissions of 3% to 20% when affiliates send new customers to them.
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 Smart-Home 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?
This occupation suits individuals who understand technological concepts with ease. You should excel at complex projects and quickly adapt to changes. Smart-home experts also need the ability to patiently explain complicated systems to people with limited technical knowledge.
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 Smart-Home Business?
You can plan on regularly communicating with clients in person and by phone. The first step in selling a home automation system is to help the customer choose products. Next, you'll need to provide an estimate, deliver the equipment, and install it. After-sale support is also important. Clients will have questions about using and maintaining the system. Smart-home entrepreneurs must promote their businesses, order merchandise, and keep records as well.
What are some skills and experiences that will help you build a successful Smart-Home Business?
You can start learning by installing and using an automation system in your home. Professionals also profit from previous work experience with computers, networking, electrical wiring, security cameras, or HVAC equipment. The setup has gradually become less complicated, so you don't necessarily need computer programming skills. A training course could help you prepare while enhancing your credibility. Lowe's offers useful facts regarding certification programs.
What is the growth potential for a Smart-Home Business?
A minority of homes currently benefit from thorough automation, so this industry still has great growth potential. Some companies stay local while others expand into chains. For example, Vivint has locations in 49 states and 12 Canadian provinces. Multiple smart-home franchises exist as well. Another common path to growth involves providing related home services, such as heating, cooling, or electrical upgrades.
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 Smart-Home Business?
Clients might hold you partially or fully responsible for any problems they experience. Warn customers about hacking-related risks, and give advice on how to maximize security. Discuss safety precautions and the possible dangers associated with things like preheating an oven remotely.
Remember that security concerns represent one of the biggest obstacles to selling this equipment. Always be ready to reassure customers with specific details about privacy protections and reliability. If a prospective client hesitates because of the expense, point out the potential increase in property value. Smart locks, smoke alarms, surveillance cameras, and thermostats help homes sell quickly or fetch high prices, according to Consumer Reports.
Select a brand of smart-home products carefully. Consider the cost, features, quality, ease of use, and level of integration. Every system has its pros and cons. For instance, some installers favor Nexia because clients can control all of their equipment from the same smartphone app. You should also know how to help people who buy their own automation hardware. Some individuals order these products only to discover that they don't have the time and expertise needed to install them.
Think about partnering with an appliance dealer or the hardware store where you purchase tools. The retailer could refer shoppers to you for expert installation when they buy its smart-home devices. Consider supplying the store with business cards and exclusive coupons.
How and when to build a team
It makes sense to hire at least one part-time employee as soon as you gain multiple customers. This person could answer questions and accept orders while you install equipment in clients' homes. Additional staff can help you set up devices more swiftly. After all, faster service increases customer satisfaction and allows you to serve more people. ZipRecruiter reports that most smart-home technicians earn $20 to $46 per hour. Remember to ensure safety by performing background checks.