How to Start a Data Entry Business

Last Updated on

Quick Reference

How to Start a Data Entry Business

Data entry is a service used by many businesses to record data for information tracking and other purposes.  If you are an excellent typist and writer with good grammar skills, starting your own data entry business could be an opportunity for you to make a good living and be your boss.

Business Overview

Data entry jobs involve entering data into various formats for companies, data cleansing, or even light software development. Data could be from handwritten documents or data that will be consolidated into databases or spreadsheets for record-keeping or analysis.

Data entry can be a great home job, especially as more businesses are outsourcing data entry tasks. Be careful as common sense and caution when searching for data entry work. There are a number of scams for work-at-home data entry opportunities. If the pay is high and low work or you are asked for payment to get jobs, it is probably a scam.

Industry Summary

According to Technavio, the data entry outsourcing services market will grow by $351.8 million from 2019-2023.  According to Ardem, the global data entry market size was $4.3 billion in 2019.

Industry Trends

More and more companies are outsourcing their data entry projects to independent contractors to save payroll expenses and reduce the need for office space.  Companies are using data more and more to gain customer insights and make business decisions, which will drive the demand for data entry services into the foreseeable future.

Target Market

Your target market will be companies that need to have documented data and records.

Skills, Experience, and Education Useful in Running a Data Entry Business

There are several specific skills that you will need to open a data entry business.

  • Experience.  Experience doing data entry is valuable.   You also need to have excellent writing and grammar skills and be able to type quickly.
  • Business knowledge and experience.  You will need to have a basic understanding of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to build rapport with your clients so that you retain them as customers and keep them coming back.

Checklist for Starting a Data Entry Business

If you’re thinking about starting your own data entry business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your data entry service should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related: How to write a business plan

Step 2: Name the Business

Finding the perfect data entry business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Structure

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a data entry service, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: 3 steps to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Apply for Business Licenses and Permits

There are no business licenses specifically for a data entry service, however, there are general business licenses that may be needed, such as a local business license, Employer Identification Number (EIN), and more.

Related: What licenses does a data entry business need?

Step 5: Open a Business Bank Account

Keeping your business and personal finances in separate bank accounts makes it easier to track the income and expenses of the business.

Most banks allow free business checking, which is great for keeping costs low.

Step 6: Get your Marketing Plan in Place

Many data entry companies can find work on freelancer platforms like Upwork and Fiverr. While these services are convenient in finding companies looking for this type of work, the platforms take a small percentage of every job.

Competition in this industry is fierce. You will have data entry professionals in other countries who will work for low pay, so speed, accuracy, and completing work by the client’s deadlines are critical.

Once you gain some experience, word of mouth will spread. Additionally, sending direct mail and making calls to local companies, networking at Chamber of Commerce events, online advertising on social media platforms like LinkedIn, Facebook, and paid online advertising are all ways to spread the word about your business.

Related: Low-cost ideas to market a new business

One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 7: Get Business Insurance

There are a few types of insurance for a data entry business to consider:

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

The cost of insurance for a data entry business will vary based on a number of factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 8: Hire Employees

You may need additional staff members to help you run your data entry business.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 9: Set up an Accounting System

Setting up an accounting system for your data entry business is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a data entry business?

The cost to start a data entry business is very low, and you may already have what you need to accept work. A few items include:

– Good computer or laptop – $1,000-$2,000
– High-speed internet connection – $30-$50/month
– Webcam – $25-$100
– Data entry software such as Microsoft Excel, Word, Access, and others depending on the client’s needs – $10/month

How profitable is a data entry business?

Generally, companies will pay you by the hour.  Your rate will depend on what type of data entry you are doing. Prices range from $10-$20 per hour.  If you can get enough data entry work (or want) to be full-time and charge an average rate of $15 per hour, you would make $31,200 per year.

Higher rates can be charged to clients in the healthcare industry, but be sure to research the data security requirements to avoid HIPPA violations later.

Are there grants to start a data entry business?

It’s extremely rare to find a grant to start a data entry business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a data entry business?

The NAICS code for a data entry business is 518210, which is categorized under Data Processing, Hosting, and Related Services. Other businesses in this NAICS code include; media streaming services, scanning services, web hosting, and more.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!