If you want to go back to a simpler way of living and at the same time reduce your bills and basically eliminate mortgage, then its high time you start thinking of owning a tiny house. Tiny houses may not have an official definition, but they are generally known to be houses that are small enough to be just 600 square feet or even under. While they can be built on foundations, most tiny homes are built on trailers. Tiny houses that are built on trailers are often referred to as a THOW (tiny house on wheels).
There are several advantages to building a tiny house on a trailer. The two most favorable being, mobility and getting around local rules that dictate minimum structure size. Since a house built on a trailer is not on a permanent foundation, it normally is not governed by local building codes. Many municipalities dictate a minimum home size (square footage), which makes building a tiny house on a foundation not legally possible.
The normal American home is around 2,600 square feet, but the typical small or tiny house can be anywhere between 100 and 600 square feet. The tiny house industry is still undergoing a revolution with a whole lot of people joining the movement.
What is perhaps even more important than the financial and economic advantages of owning a tiny home, is the environmental benefits. Living in a tiny house carries a much smaller environmental footprint, reduces the amount of resources human beings consume to live, and encourages people to consume less in general. They move us towards a more simplistic way of life and open up the possibility for a more sustainable future.
Tiny Homes are about living simply, beautifully and yet still having everything you need. It’s about freedom from debt and having the economic freedom to live a bigger life, instead of having a bigger house. This is one of the driving principles behind the tiny house movement.
A tiny house business builds, sells and/or rents tiny houses to those looking for a place to live or stay. The financial benefits of a tiny house are considerable. The most obvious savings are with the initial cost of the home. A tiny house can be built for less than the cost of most cars.
And because they are built to the same quality of conventional homes, they can be expected to have a similar lifespan. Despite their lower cost, a properly built tiny house can provide housing for decades. Often priced at $50,000 or lower, tiny houses could be affordable to millennials burdened with student debt and baby boomers with skimpy retirement savings, thus making a good and viable business to start.
13 Steps to Starting a Business Building Tiny Houses
With tiny houses being the current rave, quite a number of entrepreneurs, especially those already in construction, are planning to get into this business. If you think the tiny house revolution is right for you, then we are going to show you how to start a business building and selling tiny homes.
Table of Content
- Start with making your research
- 2. Prepare a Business Plan
- 3. Name your business
- 4. Sort out your legal entity
- 5. Register for taxes
- 6. Open a business bank account and credit card
- 7. Source for funds
- 8. Get licenses and permits
- 9. Get your Services Contract
- 10. Get Business Insurance
- 11. Hire Qualified Staff
- 12. Prepare Your Marketing Plan
- 13. Prepare for repeat customers
Start with making your research
To start and succeed in any business, research is quite essential. It will help you map out the specifics of your business and discover things about the business you hitherto never knew. When it comes to tiny houses, or houses in general, building materials are the primary expense.
The construction of tiny houses requires an array of materials ranging from wood to nails, bricks, lighting, appliances, flooring and so on. An office for administrative functions will also be necessary. Your office needs computers, printers, desks, chairs and high-speed Internet.
You will also need a team of tiny home builders to construct these cute little houses. Some tiny house builders buy the property upon which tiny houses are built. If you plan on purchasing such property before constructing the tiny houses, be sure to budget for the costly acquisition of land.
The cost of labor is another major tiny house business expense. Your tiny house builders will require a wage of at least $12 to $15 per hour if not more. The construction foreman/manager will require a salary in the range of $45,000 to $100,000.
You will have to hire a receptionist, administrator, marketing professional and accountant as time progresses. A receptionist and administrator will earn between $10 and $15 per hour. Marketing and accounting professionals typically earn between $35,000 and $55,000 per year. You have to all these expenses into account.
A tiny house business has the potential to make six figures right off the bat if the business is planned well. The amount of profit your tiny house business makes hinges on overhead costs, the number of properties your team can build and the state of your local real estate market.
2. Prepare a Business Plan
Running your tiny house business without a business plan would make you go off track along the line and run into problems. Your business plan should be your first priority, as it represents your goals and documents your angle and strategy; it is essentially your road map to achievement.
A workable business plan should include an executive summary, financial aspects of the company, operational procedures and future projections for at least five years. You should also include any applicable investor information, details about products and services you intend to offer and marketing information.
3. Name your business
Choosing the right name for your tiny house business is very important. If you don’t have a name in mind already, you can brainstorm with the things you can see around you, and before long you will come up with a suitable name. Again, you can check business name generators online.
When registering the business name you have chosen, you should check if the business name is available in your state and federally by doing a trademark search, searching the web, and making sure the name you chose is available as a web domain to secure it early so no one else can take it.
4. Sort out your legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your tiny house 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.
5. Register for taxes
You are a business so you ought to pay taxes. You 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. Applying for and getting your EIN is easy and equally free.
6. Open a business bank account and credit card
To run your business properly, you need a business bank account as well as credit cards. 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. 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. It 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.
7. Source for funds
Starting a tiny house construction business costs money. Of course, the actual amount you need to budget will vary by location, products you want to use and individual facility. In any scenario, you’ll need a sufficient amount of financing to bankroll your business plan.
To calculate your individual capital needs, take into account the amount of funds needed to satisfy your inventory, payroll, lease, insurance and equipment. If you do not have the funds needed at hand, you will have to seek some sort of loan or cash advance.
8. Get licenses and permits
You cannot run a business in the United States if you do not have the correct licenses and permits. So you need to make a budget for this and equally get them. Educate yourself on how to become licensed to run a business in your state. Also investigate the rules and regulations for running retail businesses online and offline.
Based on your findings, study what responsibilities you will have for business taxes. Seek guidance from the department of licensing in your state, the Internal Revenue Service and your local Small Business Association office. Knowing and complying with these rules and regulations will help your business open and stay open.
No matter where you plan to operate your business, an Employer Identification Number (EIN) is required by the IRS for you to report your earnings and pay taxes. Check with your state department or city council or county government agencies to see what permits and licensing is required in your area. You’ll also need the appropriate amount of workman’s compensation and business insurance for you to proceed.
9. Get your Services Contract
Tiny house businesses should require clients to sign a services 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. Your service contract should be drawn up by a lawyer and it should include terms and conditions that can keep your business safe in case of any eventualities.
10. 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. 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.
11. Hire Qualified Staff
To efficiently operate a tiny house business, you will need enough hands as you may find it overwhelming to do the construction on your own. But before you go ahead with this, you need to be selective of who you hire. Preference should be given to applicants with extensive backgrounds in building and construction.
12. Prepare Your Marketing Plan
Be selective when deciding on marketing methods for your tiny house business. Tiny home-seekers tend to be young adults in their 20s or 30s. Target the media this age cohort is exposed to and you will maximize your marketing dollars. Of critical importance is your website and social media content.
Millennials and other youngsters will almost certainly surf the web, and can easily move over to your website and Facebook, and Twitter pages. Your web presence should be polished. Regularly update your social media accounts and website blog with helpful, intriguing keyword-laden content. You should also guest blog on other relevant websites to gain exposure.
13. Prepare for repeat customers
It is important to hold frequent open houses if you want more and more customers. Do not lose sight of the fact that investing in a tiny house is quite the difficult decision for the average home-seeker. After all, tiny houses are quite unorthodox. Learn all the nuances of your tiny homes so you can explain how a prospective buyer can live in such a small space with considerable comfort.
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