One of the first things budding home business owners are encouraged to do is write a business plan. They pull out a business plan book filled with details on SWOT analysis (strengths, weaknesses, opportunities, and threats) and financial reports, and quickly become overwhelmed. But unless you plan to ask a bank for money to start your venture, a business plan doesn’t need to be a tome filled with statistics and graphs.
A business plan is basically a road map for success. You start where you are, determine where you want to go, and then fill in the tasks that need to be done to get there.
Here’s how to create a simple, short plan for your home business.
About You and Your Home Business
Your business plan should provide an overview of your business, including the following information:
What Do You Offer?
Describe in a few sentences what you’re selling. Is it a product or a service? Is it tangible or digital?
What Is Special or Different About What You Offer?
Competition is good because it means money is being made in the business you want to start. However, in order to compete, you need to set yourself apart. How will your product or service be different? Will you deliver it faster or cheaper? Will you offer more personal service or allow self-service?
How Will Your Product or Service Help People?
Answering this will help you craft effective marketing messages. Many home businesses focus on what they offer in their marketing, but really what consumers want is to know how your product or service will help them. List your features and then correlate a benefit for each feature. Define what your feature means to the consumer. Fast delivery is a feature—immediate use is a benefit.
Who Will Benefit From What You Offer?
People buy stuff to solve a problem. If they have a hole in the wall, they need spackle. If they’re bored, they want to be entertained. If they’re sick, they want health solutions. Based on what’s special about you, what people are most likely to benefit from what you offer? For example, if you offer a vegan weight loss program, which people are most likely to want and need that?
Sell Benefits Over Features
People buy solutions, so always think about selling your product and services in terms of how it will solve your market's problems.
How Will Money Be Made
Next, look at the financial areas of your home business, especially what and how you'll get paid.
How Much Will You Charge for Your Product or Service?
Pricing goes to the center of what your business will be worth, so take time to develop pricing for your products and services. If you’re selling one widget, you might have one price. But many products and services can have multiple pricing structures. For example, if you’re starting a virtual assistant business, you can have one price for hourly clients and a different price for retainer (ongoing monthly) clients.
How Will You Be Paid?
It may be obvious, but getting paid is an important part of the home business equation. The truth is, depending on your home business, you could be chasing down payments from clients or customers. When you consider that one of the top reasons all businesses, not just home businesses, fail is a lack of money, you can see that making sure you get paid is important.
The easier you make it for customers and clients to pay and get what they want, the more likely they will do business with you. Will you accept a variety of payment options, such as check, cash and credit card? Will you accept PayPal?
Multiple Payment Options
Offering more than one payment option increases the chances you'll be able to make a sale.
When Will You Be Paid?
If you’re selling a product, you’ll be paid at the time of the sale, but if you’re selling a service, you might not get paid until it is completed or delivered. Or you can charge half the cost upfront and bill the remaining when the service is provided.
Decide if you’ll bill monthly, bi-weekly or weekly, and when you expect payment. For example, will clients have seven to 10 days to pay, or will payment be due upon receipt?
Getting Clients and Customers
The marketing plan is almost a whole other document and is crucial, along with pricing, to your home business' success. The marketing portion of your business plan outlines who you'll be selling to and how you'll let people know about your products and services.
Who Is Your Ideal Customer?
You’ve already started to define this when you determined who’d best benefit from what you offer. Now it’s time to learn about them in detail. This is where market research comes in to help you define the best buyers for what you offer. Conduct primary research, such as polling people directly about products you sell, as well as secondary research from resources that gather data on consumer habits. Some things to learn about your target market include their gender, financial status, interests, and other demographics.
Where Can Your Ideal Customer Be Found?
You’ll save a lot of money by researching the best places to find your customers. For example, if you offer virtual support services to Realtors, you can advertise in the local paper, but you’ll get better results by advertising in your local Realtor association’s newsletter. Why? Because that’s what Realtors read. Sure, some will read the newspaper, but they won’t be thinking about real estate when they do. Whereas when they read the association newsletter, they’re focused on real estate.
How Can You Entice Your Ideal Customer?
You’ve started figuring how to talk to your market when you translated your features into benefits. Now it’s time to craft marketing materials that speak your target market’s language. Putting a message that speaks directly to your market where your market hangs out is the best way to get clients and customers. Just remember, all your advertising needs to be truthful to avoid violating marketing laws .
Truth in Advertising
The Federal Trade Commission Act says that advertising must:
- Be truthful and non-deceptive
- Have proof to back up claims
- Be fair
Assessing Your Start Up Needs
Before you open for business, you should determine what you need in terms of assets to get started.
What Are Your Assets to Get Started?
This can be money, but it can also include your computer, other equipment, and tools you have to help you get started.
How Much Do You Need to Get Started and Where Are You Going to Get It?
Many home businesses can be started for nearly nothing. Even so, most businesses underestimate the amount of money they need to start a business, which can put the success of the business at risk. Start by making a list of projected expenses for startup and ongoing expenses, such as website hosting. If you need money to get started, decide where you're going to get it and how will you pay it back, if necessary?
How Much Do You Want to Make?
In the road map analogy, this is the destination. When you come up with your number, be sure to include overhead and costs related to running your home business along with your profit goal. Consider any extra expense you may have by working from home such as an increase in your utility bills. While part of this is tax deductible as a home office expense, and working at home can offset other expenses incurred working outside the home, such as commuting, you need to have a good command of your finances when running a home business.
What Do You Need to Do to Reach Your Financial Goal?
Using the price(s) you set up earlier, determine how many sales or billable hours you need to meet your goal. If you want to gross $30,000 a year and charge $25 per hour for your service, you need to sell 1,200 hours of service per year. That equates to 24 hours a week, with a two-week vacation or 4.8 hours day, with weekends off. Note, that while you might bill for five hours a day, you’ll likely work more because of administrative and marketing tasks you need to do daily as well. Once you’ve done this action step, you'll know exactly how much you need to sell to meet your goal.
It's a good idea to note or anticipate any challenges you have in starting your home business.
What’s Stopping You?
What challenges or obstacles do you have now that are making it difficult to run your home business? This will vary from person to person. Common obstacles to starting a business are a lack of knowledge, no time, and not enough resources. You should also consider how supportive your family is about your working from home.
How Can You Overcome What’s Stopping You?
Many would-be home business owners don’t do this step. They use the obstacle as an excuse to give up on the dream of owning a home business. But obstacles are just annoyances that, if dealt with, can be overcome. Doing this requires you taking the time to analyze the situation and brainstorm solutions. How can you learn more? You can gain knowledge through reading and attending conferences. How can you get more time? Ask for help or delegate tasks.
Each of these questions requires just a few words or sentences to help you focus and build a foundation for a successful business. This exercise will guide you to defining what you’ve got and who you’ve got it for, the numbers you need to achieve to reach your financial goal, and areas you need to deal with or overcome.
And don't forget, the Small Business Administration (SBA) has some great tips as well as samples of different business plans to get you started. Also, SCORE offers business plan templates and other great tips and tools.
As you build your home business, refer to your business plan for reminders or guidance, and tweak it as needed to help you reach your goals.