How to start a home service business: the complete guide

Say you are good with your hands, and for the past year neighbors, friends and friends of friends have been asking you to do jobs on weekends. At some point the question changes from "can you help me out?" to "what do you charge?", and you realize you already have the start of a business. What you do not have yet is the paperwork, the insurance, a price that works and a plan for when the weekends are not enough.

This guide covers those steps in the order that makes sense for a home service business: cleaning, handyman work, painting, pressure washing, lawn care and similar trades. Rules change from state to state and from city to city, so wherever a step depends on where you live, the guide tells you where to look instead of guessing.

Step 1: start with one service you can do well

The fastest way to get going is to sell one thing you already do well, to one type of customer, in an area you can drive around quickly. It keeps your equipment list short, makes your advertising clear and lets you price accurately because you learn exactly how long each job takes.

Each trade starts a little differently. There are dedicated guides for the most common ones:

• Starting a cleaning business, and a commercial cleaning business if you want offices rather than homes
• Starting a pressure washing business
• Starting a painting business
• Starting a handyman business
• Starting a lawn care business

You can add services later. Adding them before you have steady customers usually means buying equipment that sits in the garage.

Step 2: find out which licenses and permits you need

This is the step people skip, and the one that can cost the most later. There is no single national license for home services. The U.S. Small Business Administration explains that the licenses and permits you need from the state, county or city depend on your business activities and your location, and that states regulate a broader range of activities than the federal government, including construction and plumbing.

In practice that means three places to check: your state (often the Secretary of State and a contractor licensing board), your county and your city. Two examples show how much the answer depends on the trade and the place:

• California requires a license from the Contractors State License Board for work valued at $1,000 or more in combined labor and materials, for any project that needs a building permit, and for anyone who uses employees. A one-person handyman doing small jobs can work under that limit; a painter quoting a full exterior repaint is likely to be above it.
• Painting or repairs in older homes: the EPA requires any firm paid to do work that disturbs painted surfaces in homes, childcare facilities and preschools built before 1978 to be certified, with workers trained as certified renovators or trained on the job by one. That applies to painters, handymen and anyone sanding, scraping or cutting into old paint.

Trades that use chemicals have their own rules too. Lawn care businesses that apply restricted use pesticides need a state applicator certification, which the lawn care guide covers.

Step 3: choose a business structure

The structure decides how you pay tax and how much of your personal property is at risk if the business is sued or cannot pay its debts. The SBA's summary is a good starting point:

A sole proprietorship is the simplest to start, but in a trade where a single accident on a customer's property can turn into a claim, many owners move to an LLC early. This is general information, not legal advice. An accountant or attorney in your state can tell you what fits your situation.

Step 4: register the name and get an EIN

If you work under a name that is not your own legal name, you will probably need to register it. The SBA explains that most states require you to register a DBA ("doing business as", also called a trade name or assumed name) if you use one, and that the requirements vary by state, county and city.

Next, get an Employer Identification Number from the IRS. You need it to hire employees and it keeps your Social Security number off invoices and forms. The IRS lets you apply online and get the number in minutes, and it warns that you never have to pay a fee for an EIN. If a website asks you to pay for one, you are on the wrong website.

Step 5: get insured before the first paid job

A home service business works inside other people's homes, on ladders and with tools, so insurance is not a detail. The SBA lists the insurance every business with employees must carry: workers' compensation, unemployment and disability insurance, with some states requiring more.

Even if you work alone, general liability insurance is the policy most customers and property managers will ask about. In the SBA's words, it covers financial loss from bodily injury, property damage, medical expenses, libel, slander, defending lawsuits and settlements or judgments. Get quotes from more than one insurer, read what is excluded, and keep a copy of your certificate of insurance on your phone, because commercial customers will ask for it before you start.

Step 6: separate the money and plan for taxes

Open a separate bank account for the business from the first dollar. It makes bookkeeping simple, keeps a clean record for taxes and shows lenders a real history later.

Plan for tax from the start, not in April. As a self-employed owner you pay self-employment tax on top of income tax. The IRS sets it at 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare), and you have to file Schedule SE once your net earnings from self-employment reach $400 in a year. A simple habit that works: move a fixed percentage of every payment into a separate tax account the day it arrives.

Step 7: work out what it costs to start

The SBA suggests splitting startup costs into one-time expenses, like major equipment, permits, licenses and fees, and monthly expenses, like salaries, rent and utilities, and counting at least one year of monthly expenses. For a home service business, the monthly side is usually the bigger surprise: insurance, fuel, phone, software and advertising add up long before the business is busy.

The startup costs guide walks through that budget line by line for a cleaning business, and the same worksheet works for other trades.

Step 8: set your prices before you advertise

If you advertise first and work out prices later, the first customers set your prices for you, and they will set them low. Before the first ad, know three numbers: what an hour of your time really costs, how much overhead each hour has to carry, and the minimum you accept for any visit.

The complete pricing guide explains how to get those numbers, and the job price calculator turns them into a quote.

Step 9: find the first customers

Picture your first month. You do not need a hundred leads; you need ten good jobs that turn into reviews and referrals. The channels that usually get a new home service business moving are close to home:

• people who already asked you for help, and the people they know
• a complete Google Business Profile with your service area, hours and real photos of your work
• a simple one-page website that says what you do, where, and how to reach you
• neighborhood groups and local community boards, used to answer questions rather than to spam
• asking every happy customer for a review, the same day the job is done

Answer calls and messages fast. For a small business, replying first is often worth more than being the cheapest.

Step 10: work safely from day one

Two federal rules come up in almost every home service trade:

• Heights. OSHA's construction standard requires protection for workers on a surface with an unprotected side or edge 6 feet or more above a lower level, using guardrails, safety nets or personal fall arrest systems. A fall from a ladder, roof or scaffold can cause serious injury, so plan for it before the first job at height.
• Chemicals. OSHA's Hazard Communication Standard requires every employer with hazardous chemicals in the workplace to have labels and safety data sheets for exposed workers and to train them to handle the chemicals appropriately. Cleaning and pressure washing products count.

Part-time first, or all in?

Many home service businesses start on evenings and weekends while the owner keeps a job. That has real advantages: you learn how long jobs take, you find out which customers you like working for, and you build reviews before you depend on the income. The risk is that a part-time business gets priced like a hobby. Charge from day one as if the business had to pay your full wage, or the prices will be too low to live on when you go full-time.

Signs that it may be time to go full-time:

• your calendar is booked two or more weeks ahead for several months in a row
• you are turning down work you would like to do
• your prices already include your overhead and a margin, and customers still say yes
• you have savings to cover at least a few months of personal and business costs

If the only sign is that you are tired of your job, wait. A business started out of frustration tends to underprice to win work quickly.

Mistakes that cost new owners the most

Most of the expensive mistakes in the first year are predictable:

1. Working without the right license because a friend said it was fine. Fines and unpaid invoices cost more than the license.
2. Skipping insurance on the first jobs, which are exactly when inexperience makes accidents more likely.
3. Pricing to match the cheapest competitor without knowing your own costs.
4. Mixing personal and business money, which turns tax season into a week of detective work.
5. Buying equipment for the business you hope to have instead of the one you have now.
6. Saying yes to every job and every customer. A customer who haggles over the quote usually haggles over the invoice too.

A launch checklist

What to do next

Pick your trade guide from Step 1 and go through its specific requirements. Then build your first price with the pricing guide before you tell anyone what you charge.

Frequently asked questions

Do I need a license to start a home service business?

It depends on the trade, the state, the county and the city. The SBA recommends checking all three levels. Some trades, like work on painted surfaces in pre-1978 homes or pesticide application, also have federal or state certification rules.

Should I start as a sole proprietor or an LLC?

A sole proprietorship is the simplest to set up, but the SBA notes that you can be held personally liable for the business's debts. An LLC protects personal assets in most instances. An accountant or attorney in your state can tell you which fits.

Does an EIN cost money?

No. The IRS issues EINs for free online and warns that you never have to pay a fee for one.

What insurance does a new home service business need?

If you have employees, the SBA lists workers' compensation, unemployment and disability insurance as required, and some states require more. Most customers will also expect general liability insurance, even for a one-person business.