If you are just starting a home-based business, one of the questions that you may be asking yourself is “Do I really need a business plan?” Â It’s just a home-based business and not a big conglomerate with huge revenues and a large customer base.
Well, the answer is a BIG YES!!
A business plan should never be taken for granted even if you are just running a home-based business. The planÂ is necessary even if you’re the only reading it.
It is a big misconception by many that the only people who need a business plan are the ones who need loans from banks or funding from potential investors or the ones who have been in existence for quite some time. In fact, it is best to write one while you are just starting out. This is because writing one forces you to think objectively about your business and enables you to see a clear picture of how much resources you’ll need in order to operate your business and whether this is something that you really want to pursue.
Your business plan is your roadmap to assist you on where your business is headed. Â This should help you understand the various aspects of your business operations such as:
- Understanding the things you’ll need to do to get started Â such as funding, resources, products, time, etc
- Having a better understanding of the financial picture of the business such as when you’re going to make a profit or how fast you’ll recover your initial investment.
- How will you market your business to potential customers and how you’ll sell the products or service
- Your business strategy, mission and vision
It should always be a work in progress, meaning that it should always be open for changes depending on how your business progresses.
Key Sections of the Business Plan
The following are the key sections that you need to have on your business plan. This is not all inclusive and feel free to add sections that fit your business.
- Executive Summary – This section is probably the most important Â in your plan becauseÂ this provides a quick overview of the whole plan. It should provide a history of your business, the current status, and your future plans for the business. In addition, a good executive summary should be able to tell the reader on why you think your business idea will be successful and should be able to attract reader’s attention right away.
- Market Analysis – this section involves understanding the specific industry for your business,Â Â who your target market is, understanding your competition, and various regulatory restrictions.
- Organization & Management – includes the profiles of owners and management of the company, the type of business entity you want your business to be, Â organization chart of all the management or potential leaders of the business, the list of board of directors if applicable, etc.
- Marketing & Sales Strategy – this involves defining your marketing strategy, advertising methods, channels of distribution, taking care of your customers, building your brand, strategies to reach your customer, etc.
- Service or Product – this section discusses what you’re selling: a service or a product. What are the description of your products and the various benefits to your customers. How is it different from your competitors? Are there any copyright issues that you have to deal with? Patents?
- Financing Â Your Business – this section should indicate the amount of funding you need to operate your business, Â how much you will need to start or expand, and the current or future funding requirement of your business. It should also include your financing strategies on where you are planning to get your funds such as from your personal savings, loans from banks, or funding from investors by selling shares of stocks of your business.
- Financial Reporting – The financials reporting section involves the use of various financial statements such as the balance sheet, income statement (profit and loss), statement of cash flows, dividends, etc. It involves Â keeping track of your revenues and expenditures, how you allocate your resources (budgeting), trend analysis, financial forecast in the next year, 5 years, or even 10 years. Lastly, you should be able to analyze the financial health of your business using various financial ratios such as debt-to-income, current ratio, net capital ratio, return on equity, etc.
A home based business is no different than any other business. You need a Business Plan, if you want to succeed. Then you need to keep yourself accountable and monitor your performance.