Developing A Workable Business Plan

I’m a firm believer of before getting involved in any business venture, you need to create an accurate, written, well thought out evaluation of your business idea. Otherwise a document commonly called A Business Plan.

Business Plans are one of the most useful and necessary tools that a person needs to seriously sit down and create before thinking about starting a business venture. Even a home based business venture. Business Plans are a road map that shows you how you get from point A to Point Z. Business Plans are the blueprint of your home based business venture that shows how your business will be built from the foundation to the finished project. A business plan’s job is to keep you on the straight and narrow and to prevent you from straying off the path you have chosen.

If by chance you are seeking financing from a bank, private investors, venture capitalist or various loan agencies, a Business Plan shows these particular parties that you are both professional, your idea has been well researched and well thought out and that you are someone who is well prepared to run this business venture.

In a nutshell, a business plan is a written document that details the starting, operating, funding, managing and marketing plans for a proposed business venture. Even if you plan to fund your home based business from your own savings or funds, create a business plan anyway. As stated, you need to have every item and aspect of your potential home business in a visual representation to enable that large, spongy organ resting in your cranium to best evaluate the feasibility of your proposed business venture.

The first part of your Business Plan will be your COVER PAGE. Your cover page will have the title of your business venture, your name, address, phone number(contact information)

The second part of your Business Plan will be your EXECUTIVE SUMMARY. Your executive summary will in brief terms describe the nature of your proposed home business venture. When writing your executive summary, please be brief. No need to be William Shakespeare here. Brevity is name of the game here. If this were a movie script, the executive summary would be the hook or the teaser. It should be no more than one page maximum. This is the first page that potential investors, lenders will see and look at. If you don’t hook them with your executive summary, you may lose the game before starting. Even if you aren’t looking for outside funding, just remember--One page for your executive summary.

Your next section of your business Plan will be the BUSINESS DESCRIPTION section. In this section what you will do is give a written detailed description of what makes your home business unique and what makes it something that someone would want to either loan or invest in. You will explain what you plan to sell or what service your plan to provide and how you plan to sell your products or services to paying customers. Who will be your target customers. Will you be operating your home business as a part-time or full-time business? Will your business be something you are starting from your own idea or will you be investing into a franchise business type operation?

What will be your legal formation. Will you select a Sole Proprietorship, Partnership or a Corporation? This is also the section for your resume and resumes of anyone else who will be involved in your home business. You will also include what job or position everyone, besides you, will fill in operating your home based business. People will want to know the skills, background and experience of both you and anyone who will be involved in your home based business venture.

Your third section will be your MARKETING PLAN. And as you guess, this section will lay out in detail how you plan to promote and sell your products or services. Your first paragraph will give the reader an exact vision of your average customer who will be purchasing your products or making use of your services. You will basically itemize your potential customer by his age, sex, income bracket, educational background, marital status, amount of children, their location. With this information you will be able to formulate a plan of how to market to these potential customers and what methods through your research will reach this segment of people and how they might respond to the various marketing methods you plan to implement. You will also put forth what market share you expect to garner and what nice markets you expect to be able to penetrate to market your home business products or services to. You will also write about how you plan to compete with other businesses that offer the same products or services that you yourself are offering and how what advantages your products and services have over your competitors. You will also describe, after evaluating your competitors prices, how your pricing will prove more enticing to potential customers.

Your pricing strategy will be one of the most important aspects of whether your home business is successful or unsuccessful. Being a small home business operation, you may not be able to compete successfully with a much larger competitor who purchases in such large bulk amounts that the discounts they obtain from their suppliers give them a larger profit margin then you are able to work with.

Other factors you will have to consider are how much you will be spending just to get your product or service to market, advertising expense, possible storage expense as well as what the required profit you expect from each individual sale.

Your next section should be your FINANCIAL PLAN. Your financial Plan is the section that details how much money you will need to get your home business off the ground and how much capital you will need to keep it running.

This will entail you creating both a start up budget and an operating budget. Your start up budget will include expenses required for such items such as home office furniture, computer equipment, software programs, supplies, licenses, insurance, professional fees, legal fees, local permits. Your operating budget will include such expense items as utilities, salaries, loan payments, taxes, advertising and all other expenses that involve the operation and running of your home based business.

Below is an overview summary example of both budgets:

START-UP BUDGET

One Time Start Up Cost
Equipment & installation
Office Supplies
Office Decorations
Fixtures & installation
Remodeling
Professional Fees
Utility Deposits
Licenses
Permits
Franchises fees(if applicable)
Total

OPERATING BUDGET

Your Salary
Employee Salaries
Portion of Rent or Mortgage
Utilities
Office Supplies
Advertising fees
Taxes(all taxes)
Maintenance
Loan Payments
Professional Fees
Insurance Fees
Delivery
Postage
Internet Service
Transportation(gas, oil)
Total

The above is only a visual overview. You may wish to create a more detailed budgets depending on additional costs and expenses that your particular home business may require.

The important thing is to show how you plan to pay for the various costs of both budgets. Will you use your savings? Bank loans? SBA Loan? Venture Capitalist? Borrow from friends, relatives, former employers. Loan sharks? Just kidding. Stay very far away from them if you like having all your limbs in working order.

In this section you will incorporate a balance sheet, cash flow projections, profit and loss statement and break-even analysis. These financial statements will enable you or anyone else to determine how much funding you will need to keep your home business in operation until the business can become self sufficient and profit making. Unless you happen to be either an accountant or book keeper or just have a good knowledge of business accounting, you will probably have to obtain the services of a professional accountant to create this financial statements for you or make use of accounting software programs like Quicken or Quickbooks.

And last but certainly not least, you will have to include your SALES PROJECTIONS AND BUSINESS OPERATIONS section. These are basically estimates, based on your market share and your market, of what your sales figures will be over the course of the next three to four years. You might want to toss into the mix a detailed explanation of how you plan to reach this sales projection figures--special advertising promotions, distribution of your products or service, plans to keep up with public demand and how you plan to make use of your business plan to implement your sales. If during the creation of your business plan, any of the factors change due to a changing economy, supplier price increases, overhead increases or decreases, be sure to update your business plan to reflect those changes.