Owning your own small business and working from home comes with its share of perks, that’s for sure. But being able to wiggle out of writing a business plan is not one of them. The fact is that any business owner with a prayer of success has to have more than just a sense of how they are going to succeed over time. So, like it or not, this exercise is mandatory.
Now, if you’re thinking about buying into a home-based or other small business opportunity or franchise, then much of your business planning will have already been done for you. Even so, it’s always a good idea to make any business model truly your own. And you can start by creating a plan that takes into account your own individual circumstances. In other words, even if you’re following somebody else’s roadmap, you need a personal compass to guide you.
So what does a small home-based business plan entail?
Business plans can be either formal or informal. Formal plans are usually reserved for instances where you are trying to secure outside funding of some kind and are therefore much more elaborate when it comes to the financials. Informal plans are more loosely crafted and are primarily used to keep you on track internally. They tend to emphasize market analysis and marketing strategies, particularly as they relate to a business’ overall strengths, weaknesses and the opportunities/threats it faces.
Okay, so if the plan’s only for my personal use then I don’t need to do it, you might argue. Nothing could be further from the truth. Study upon study has shown time and again that businesses that have a written plan with clearly stated objectives and goals succeed at much higher rates than those that don’t.
Bottom line: You can’t know your destination if you haven’t stopped long enough to think about how to get there.
Besides, small business planning is not all that complicated. It just takes time. And it’s time well spent.
The basic elements of a small business plan are much like any other and fairly straightforward. According to the U.S. Small Business Administration (SBA), here they are:
1. Executive Summary―Should be written last and short, sweet and to the point.
2. Business Description and Vision―Includes mission statement (business purpose), company vision (statement about company growth), business goals and objectives, brief history of the business and a list of key company principals.
3. Market Definition―Describes your business industry and outlook, defines the critical needs of your perceived or existing market, identifies your target market, provides a general profile of your targeted clients and describes what share of the market you currently have and/or anticipate.
4. Description of Products/Services― Specifically describes your products/services, explains how your products/services are competitive and, if applicable, references a picture or brochure of your products, which you can include at the end.
5. Organization/Management―Provides a description of how your company is organized as well as an organization chart (if available), describes the legal structure of your business (proprietorship, partnership, corporation, etc.), identifies necessary or special licenses and/or permits needs to operate and provides a brief bio description of key managers within the company.
6. Marketing/Sales Strategy―Identifies and describes your market (who your customers are and what the demand is for your products and services), describes your channels of distribution and explains your sales strategy (specifically as it relates to the 4Ps: pricing, promotion, products and place).
7. Financial Management―For a new business, includes an estimate of start-up costs, projected balance sheet (1 year forward), projected income statement (1 year forward) and projected cash-flow statement (12 months forward). For an existing business, includes balance sheets (last 3 years), income statements (last 3 years) and cash flow statement (12 months). If applying for a loan (in addition to the above), includes current personal financial statement on each principal and federal tax return for prior year.