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Home Based Businesses: Create a Colorful Business Plan! Part II

A good business plan is one that works for your business. It doesn't necessarily mean it must be the typical "formal" style. Perhaps the reason that so few businesses have written plans is because they don't know how to do them, and they assume they must be complicated documents. Not necessarily so.

A business plan should create a true picture of what your business is, plus what it can and should do. It's a road map to your destination (a profitable business). Depending on who will see your written plan, it will be a formal one, or perhaps a shorter, more loosely constructed document. It becomes the infrastructure of your business, and you will be holding a magnifying glass to it while you are in this process. Once in place, everything else runs more smoothly.

Do you know your "why"? Why are you in business? In the business that you chose? . Are you only looking to work for a couple of years to pay school expenses for your children, earn enough for a new car, or retirement savings account? Or are you creating an empire? Perhaps somewhere in-between. Your answers to these questions will determine how you set up your business and go about the daily activities. Anyone can go through the mechanics of writing a business plan. Knowing the "why" will drive you forward with that plan, even when you experience challenges.

What's the purpose of your business? Every business should have as a purpose to be profitable. The purpose of your specific business is the description of why it exists and what it intends to accomplish. Without clarity here, everything else will remain fuzzy as well.

Start with the end in mind. What will your business look like when it's finished? Most small business owners have never thought about this! Therefore, they have no idea what this means. Assume that the goal of your business is to create a profit center that you can someday sell. It is an asset. Beginning with the end in mind allows you to then plan backwards.

Perhaps you decide that your "finished" business will generate XX in sales annually. What will be required to accomplish that? What will you net as income? Or perhaps you are looking at earning a certain amount per year income. What gross revenue do you need to generate? How will you do that? Does this mean that you are the only person doing the work that generates the income? Could you hire or train someone else to do the same work?

Ask yourself some "what-if" questions. What if you became ill, and couldn't do the work yourself. Or a family member needed your full time attention for awhile. Would your business still be there in 90 days? What if you needed additional income for a period of time? What if business was really great and you could expand - - would you be able to take advantage of the boom, or to sustain it? Do you have a system for running, maintaining, and growing your business?

Properly setting up your business means you are creating a prototype for others just like it. That doesn't mean there ever will be another business just like yours (like a franchise), but it does mean that you aren't creating a business that will have you tied to it even more than if you were working for someone else. You don't want your dream business to turn into a nightmare!

With that said, here are the basic elements of a business plan:

Introductory elements

Business description

Information about your Market

Development and Production

Sales and Marketing

Management

Financials

A formal plan will contain all of these elements. If your business purpose will never require such a formal plan, start with what is needed. But you will need to go through each element, one at a time, to determine what is pertinent for the written plan. The process is critical. The written result could be a complex description or one sentence addressing the topic.

The Introduction will include the cover page, executive summary and table of contents. A less formal plan may exclude these items. The executive summary should probably be written last, after you have established the other information. The business description should include an overview of the industry, discussion of your company, description of products/services, your position in the market, and your pricing strategy. Your company description should begin with your business's mission statement and to whom your product or service is targeted.

Information about your market could expound on the industry, its future, your competition, and how you fit into the picture. Be factual and realistic, not basing your plans on conjecture! But you also want to be optimistic. If there are roadblocks, how can you overcome them? If this is realized and calculated in the process of doing your business plan, then you are well on the road to success. If you don't do this in the planning stages, you may be blindsided unnecessarily.

The business description and information about your market could be brief or very detailed, depending on what you need for your plan. It might include the story behind the company's beginning, why you feel it will be a profitable business, the experience of the principals of the company, and what systems are in place. Also where you are located and what facilities you have.

Development and production includes development status, production process, cost of development, labor requirements, expenses and capital requirements. Depending on your business, this could be a brief, or a very detailed, part of your plan. You do need to address these issues in your planning, but how detailed they are in the written plan will depend on the purpose of the written plan (such as whether or not it will be used to obtain working capital).

Sales and marketing includes the strategy, method of sales and advertising and promotion. How will your product or service get to the end user? How can you consistently generate the numbers you need to get the results you want? Do you know your "ratios" - the number of people who must see, or know about, your product or service to generate the sales you need to make a profit? Are you doing this yourself, do you have a staff, or are you out-sourcing? Do you have a budget for advertising and marketing? Have you done test marketing to know what will/won't work? Use examples whenever possible. Every business has a sales and marketing function that needs to be handled. Many small businesses just don't realize this, so no-one is doing it.

Management can make the difference between success, mediocre results, or business failure. You must demonstrate that you have in place, or are assembling, a good management team with complimentary skills to move your company forward as planned. This section of your business plan will describe the management, the ownership, the Board of Directors or Advisors, and support services, as applicable. This is a very important section if you are seeking funding of any sort.

Financials will document, justify and convince those reading your plan that it is, indeed, feasible and likely that you will have a profitable business. It should discuss risks, include a cash flow statement, balance sheet, income statement, and funding requests and expected return on investment. Future income projections should be as realistic as possible.

If you are preparing a business plan as an internal document only, you have more flexibility to create one according to your own personality style. Don't overlook any of the areas, and answer the questions inherent in each. But when you write out the results, you may have a brief overview, a very conversational one, a creative document or a very detailed, fact-filled one. It could start out as simply as:

SusieDesigns Company will provide the most outstanding webpages for entrepreneurs on the Internet. Susie Smith owns this sole propriety business located in (city).... She's been involved in the computer industry for ... years, watching it evolve to its present status of ....

She currently has ..... programming and is constantly learning whatever new information is available, so that she can be a leading edge webdesigner. The market is growing at a rate of...., with web designers appearing every day. The company positioning as.... and its ability to ...., together with .... marketing plans, will propel it to the top ... % of the market.

SD Co. has produced pages for .... individuals or companies since ..., and has generated .... income. It also helps its clients gain exposure by ..... which provides a unique service they generally do not get with another webdesigner. Business is marketed by....

SD Co. Intends to produce .... pages per year, generating .... gross business income. There is currently a staff of ... other designers who handle .... functions. This is their experience:

Financial statements are attached.

Remember that the purpose of the business plan is to focus on your business - what it is, what you must do to create a profit, overcome obstacles and create an action plan. The process of creating the plan will bring to light any potential potholes in your road ahead, and give you an opportunity to think through them, creating a way to overcome the risks. It is your laying out in writing what you hope to accomplish. It can be shared with others to draw them into your support circle, and it becomes the benchmark for charting your progress.

Sometimes you don't know the numbers you are asked to write down. Guess! Make up something. Then track your business activities for a month and adjust. The business plan is a living document that does need to be fed and changed regularly. Most importantly, any plan in writing has a much greater likelihood of coming to pass. The process is far more important than the appearance.

(Marian Hays mentors others to improve working and personal relationships, combining multiple life skills for getting the right results. She created a home based business ten years ago so she could be available for her son. One of her business plans netted her a $50,000 lease for specialized computer equipment. She also markets books, audios and videos of internationally known top trainers in business and life skills. Visit her website at: http://www.sohos.net/lifeskills Like a business plan, it's a work in progress! Have questions about your business plan? Email her at marian@sohos.net)