A Home-Based Business Plan

Since 1985 more than 400,000 home businesses have been launched. These businesses tailor in custom services and products. Now turning something like this into a successful home business takes tenacity, dedication, ambition and drive. In order to accomplish this you need to make sure you have a clear and separate place in your home to work where you will not be disturbed and where it is legal to own and operate your business.

Here are some ways to create your own home-based business plan:

Writing the Business Plan: Now that your research and plan development are nearing completion, it is time to move into action. If you are still in favor of going ahead, it is time to take several specific steps. The key one is to organize your dream scheme into a business plan.

What Is It?

Is written by the home-based business owner with outside help as needed.

Is accurate and concise as a result of careful study.

Explains how the business will function in the marketplace.

Clearly depicts its operational characteristics.

Details how it will be financed.

Outlines how it will be managed.

Is the management and financial “blueprint” for startup and profitable operation?

Serves as a prospectus for potential investors and lenders.

Why Create It?

The process of putting the business plan together, including the thought that you put in before writing it, forces you to take an objective, critical, unemotional look at your entire business proposal.

The finished written plan is an operational tool which, when properly used, will help you manage your business and work toward its success.

The completed business plan is a means for communicating your ideas to others and provides the basis for financing your business.

Who Should Write It?

The home-based owner to the extent possible

Seek assistance in weak areas such as:

accounting

insurance

capital requirements

operational forecasting

tax and legal requirements

When Should a Business Plan Be Used?

To make crucial startup decisions

To reassure lenders or backers

To measure operational progress

To test planning assumptions

As a basis for adjusting forecasts

To anticipate ongoing capital and cash requirements

As the benchmark for good operational management

Proposed Outline for Home-Based Business Plan

This outline is suggested for a small proprietorship or family business. Shape it to fit your unique needs. For more complex manufacturing or franchise operations see the Resource Section for other options.

Part I. – Business Organization

Cover Page:

Business Name:_____________________
Street Address: _____________________
Mailing Address:____________________
Telephone Number:__________________
Owner(s) Name(s):___________________

Inside Pages:

                    Business Form:______________________
(proprietorship, partnership, corporation)
If incorporated:______________________
(state of corporation)

Include copies of key subsidiary documents in an appendix. Remember even partnerships require written agreements of terms and conditions to avoid later conflicts and to establish legal entities and equities. Corporations require charters, articles of incorporation, and by-laws.

Part II. – Business Purpose and Function

In this section, write an accurate yet concise description of the business. Describe the business you plan to start in narrative form.

What is the principal activity? Be specific. Give

Product or service description(s):

Retail sales?

Manufacturing?

Service?

Other?

How will it be started?

A new startup

The expansion of an existing business

Purchase of an going business

A franchise opportunity

Actual or projected startup date

Why will it succeed? Promote your idea!

How and why this business will be successful

What is unique about your business

What is its market “niche”

What is your experience in this business? If you have a current resume of your career, include it in an appendix and reference it here. Otherwise write a narrative here and include a resume in the finished product. If you lack specific experience, detail how you plan to gain it, such as training, apprenticeship or working with partners who have experience.

The Marketing Plan

The marketing plan is the core of your business rationale. To develop a consistent sales growth, a home-based businessperson must become knowledgeable about the market. To demonstrate your understanding, this section of the home-based business plan should seek to concisely answer several basic questions.

Who Is Your Market?

Describe the profile of your typical customer.

Age____________________________________
Male, female, both_______________________ _
How many in family_____________________ ___
Annual family income_______________________
Location________________________________
Buying patterns___________________________
Reason to buy from you____________________
Other__________________________________

Geographically describe your trading area

(i.e., county, state, national)
________________________________________

Economically describe your trading area

(single family, average earnings, number of children)
________________________________________

How Large is the Market?

Total units or dollars__________________________

Growing______ Steady______ Decreasing_____

If growing, annual growth rate___________________

Who Is Your Competition?

No small business operates in a vacuum. Get to know and respect the competition. Target your marketing plans. Identify direct competitors (both in terms of geography and product lines) and those who are similar or marginally comparative. Begin by listing names, addresses, and products or services. Detail briefly but concisely the following information concerning each of your competitors:

Who are the nearest ones?

How are their businesses similar or competitive to yours?

Do you have a unique “niche”? Describe it.

How will your service or product be better or more saleable than your competitors?

Are their businesses growing? Stable? Declining? Why?

What can be learned from observing their operations or talking to their present or former clients?

Will you have competitive advantages or disadvantages by operating from home? Be honest!

Remember, your business can become more profitable by adopting the good competitive practices and by avoiding their errors.

To help you evaluate how successful your product or service will be, go down the following list of standard characteristics (you may want to add more from your knowledge of your field) and make a candid evaluation of your competitive “edge.” On a scale of “0” (theirs puts mine to shame) to 10 (mine puts theirs to shame) indicate the potential for you and a total score:

FEATURE

Price                                                     ______
Performance                                         ______
Durability                                             ______
Versatility                                             ______
Speed/accuracy                                   ______
Ease of operation or use                      ______
Ease of maintenance or repair              ______
Ease of cost or installation                   ______
Size or weight or color                        ______
Appearance or styling or packaging     ______

Total Points                                         ______

A Total Points score of less than 60 indicates that you might reconsider the viability of your product or service or think about how you can improve it. Over 80 points indicates a clear competitive edge.

What Percent of the Market Will You Penetrate?

Estimate the market in total units or dollars. ______

Estimate your planned volume. ______

Amount your volume will add to total market. ______

Subtract 3 from 2. ______

Line 4 represents the amount of your planned volume that must be taken away from the competition.

What Pricing and Sales Terms Are You Planning?

The primary consideration in pricing a product or service is the value that it represents to the customer. If, on the previous checklist of features, your product is truly ahead of the field, you can command a premium price. On the other hand, if it is a “me too” product, you may have to “buy” a share of the market to get your foothold and then try to move price up later. This is always risky and difficult. One rule will always hold: ultimately, the market will set the price. If your selling price does not exceed your costs and expenses by the margin necessary to keep your business healthy, you will fail. Know your competitors pricing policies. Send a friend to comparison shop. Is there discounting? Special sales? Price leaders? Make some “blind” phone calls.

What Is Your Sales Plan?

Describe how you will sell, distribute or service what you sell. Be specific. Below are outline some common practices:

Direct Sales: Direct sales by telephone or in person. The tremendous growth of individual sales representatives who sell by party bookings, door-to-door, and trough distribution of call back promotional campaigns suggests that careful research is required to be profitable.

Mail Order: Specialized markets for leisure time or unique products have grown as more two-income families find less time to shop. Be aware of recent mail order legislation and regulation.

Franchising:

               a.   You may decide to either buy into someone else's franchise as a franchise or

               b.   Create your own franchise operation that sells rights to specific territories or
product lines to others. Each will require further legal, financial, and marketing
research.

An excellent starting point if you are considering franchise involvement is the SBA Publication #MA7.007, Evaluating Franchising Opportunities. The International Franchise Association also publishes a number of valuable aids in this field.
Distributors

You may decide to work as a local or regional distributor for several different product lines.
Outline your sales plan below:

What Is Your Advertising Plan?

Each product or service will need its own advertising strategy as part of the total business marketing plan. Before developing an advertising campaign for your business plan, take time to review a few basic assumptions. By definition, advertising is any form of paid, non-personal promotion that communicates with a large number of potential customers at the same time. The purpose of advertising is to inform, persuade, and remind customers about your company's products or services. Every advertising activity should have specific goals. Common examples are:

To bring in sales orders or contracts

To promote special events such as sales, business openings, new products

To bring in requests for estimates or for a sales representative to call

A special goal at the outset may be to use special media to establish yourself even before startup and to get potential customer “feedback”

These might include one or more of the following:

Purchase and distribution of business cards to potential clients

Posting notices on free bulletin boards in area supermarkets or office complexes

A telephone survey of potential clients to alert them to startup plans

To assist in determining what types of advertising are appropriate and within company budget projections, it will be necessary to carefully review your customer profile. From this review, establish a clear statement of advertising goals. Write down what you want your advertising to accomplish:

The next step will be to develop answers to the following crucial questions:

Q. What should be said about the business and how should it be sated?
A.   ____________________________________________________________________

What media should be used?
A.__________________________________________________________________

Q. How much can be afforded?
A. _____________________________________________________________________

Q. How can the advertising program be implemented?
A. ______________________________________________________________________

Q. How can its effectiveness be measured?
A.____________________________________________________________________

The basic criteria for selecting specific types of media will include concise answers to the following:

Trading Area – Do you plan to serve or sell to an industrial market, a national market, a neighborhood or specialized market? Describe yours:__________________________________________________________     ________________________________________________________________

Customer Type – What does your potential customer read or listen to? Where? How often? What image does the media you are considering suggest? Does it fit your customer? Describe your customer: _________________________________________________________
_________________________________________________________

Budget Restrictions – how will the amount of money you have to spend limit the media you can use? How can you spread your budget out over a year to give a repetitive, continuous message? While you may have to spend more at the start, a good ongoing guideline is that advertising should not exceed 1 or 2 percent of sales. Set forth how much you are willing to invest in advertising in the first year: $_____ Break into months or quarters:

$_____ $_____ $_____ $_____
$_____ $_____ $_____ $_____
$_____ $_____ $_____ $_____

Continuity of Message – how will the type of product or service, customer profile, and seasonal buying patterns affect your choice of media and the frequency with which you advertise? Explain your message here:_____________________________________________________

Past Performance – What is the track record for use of the medium you are considering for your type of business? What do your competitors use? What does your trade association     suggest? Enter appropriate comments here:______________________________________

____________________________________________________________

Making sure you have a banking/financial plan is very important as well as having your business structure and management plan into place. These are things that should be figured out when structuring the business to begin with.

What else should a basic home-based business plan cover when first being structured?

Article Source: ASBTDC

Image Source: Kansas Sebastian on Flickr