8 Essential Home Business Plan Preparation Tips
A business plan is the document that makes the case for the soundness of your home business.
iHubbub guest writer Bob Richards lays out some good reasons why you may need to prepare a business plan - and you definitely want to ensure you do so before you invest any money in finding online business samples or pdf downloads!
Know Your Audience
For whom are you preparing your business plan? Is it for yourself to keep your start-up thinking straight and get your ideas organized on paper? Or is it for investors, who will ask you for your business plan when you approach them for funding or finance? Or for a bank to secure a loan - they will aslo be asking to see a formal business plan?
The audience is important because certain items will be stressed more depending on the recipient. For example, if your prepared business plan is for investors, then you want to make sure and stress the return on investment to entice investors.
If your business plan is for a bank or some kind of financial lender, then you want to stress the adequacy of cash flow that shows the bank your payments will be covered.
You can use the outline below or there are many business plan software packages that guide and coach you to complete each section of your business plan.
However, these software packages or pdf download samples are typically overkill for a small or one-person home business but you may enjoy the structure they provide. You will be able to skip much of the data the business planning software calls for such as "description of your management team" when it's just you at the helm.
Planning Sections Of Your Business Plan
You need the following sections for a home-based or freelance business.
1. The Executive Summary
This will be one page and not more than two. This describes the nature of the business (the product or service being sold), how it gets delivered, why there is an opportunity and for whom the plan is written and the purpose of the plan (e.g. to show investors a significant ROI). This is a quick read so that the recipient can make a decision whether to read further and to frame their focus for the remainder of the plan. State the purpose of the plan—is it to get funding or get investors and how much money do you seek to borrow or raise?
2. Business Description
The business description section should not be more than a page and includes the address of the business, if it is a home business, the entity type, basic statistics about the size of the market and your desired outcome.
For example, if your business is to supply outsourced secretarial services to small businesses within 50 miles, you want to state how many small businesses exist in that geography with less than five employees (your target market) and estimate their dollar volume need for such services.
3. Business Description
Describe your business products and services. If your product is physical, include photos. If you supply a service then describe it clearly assuming that the reader is not familiar with that service.
Explain why the buyers need your product or service and how much of it they already consume. If they don’t consume your service now, why will they?
4. Describe Business Competitors
Describe your competition. Who else supplies this product or service and how much of a threat are they to your pricing or to put you out of business? If there are others who supply the same items, why will a customer choose you vs. the competition? How do your prices and quality compare to competitors?
You may find in this section that you don’t have the advantage you need and must rethink your edge. This is good place to be clear about your unique selling proposition – what makes you different?
5. Explain About You
Since you are likely a sole operator, this section is maybe the most important. Include your resume here if it shows what you have accomplished that is pertinent but more importantly, you need to sell yourself and how your education, experience or special insight makes you the perfect candidate to succeed in this business. If you were a potential investor, would you hand this individual a check?
6. Prepare Financial Projections
If numbers are not your thing, you need to get someone on your team who is a numbers person. Every home business is dependent on its finances so if you cannot prepare a spreadsheet of monthly estimated cash flow (your business income and expenses backed up by details), then you need to get that help right now.
These figures need to be realistic and conservative and need to be shown in your business plan. If you overestimate, you will blow your credibility with the plan recipient. Show the payments to investors or lenders. State clearly how the funds, whether your own or from the business plan recipient, will be used in detail.
7. Business Plan Action
Give your call to action. What do you want the reader to do? Advance £50,000 to be paid back over 5 years at 5% interest? Invest $20,000 and get 20% ownership? Include your email address for questions or clarification, the due date by when you need action and your name and address if they need to send you a cheque.
8. See Your Business Plan With Their Eyes
Now read your plan as if you were a stranger. Is it clear? Is it logical? Would you invest? What concerns or uncertainties do you have? Go back and modify your business plan so that when you review it from the eye of the reader, you're impressed.
The greatest value of preparing a business plan is often unforeseen. You may realize that aspects of your business are not well thought out and you need to return to the drawing board before investing your own funds.
For more help making your home business tip-top, take a look at our Business Plan features which are crammed full of useful advice.