The Business Plan For Homebased Business - (3) Writing The Business Plan, The Marketing Plan, PLAN YOUR ADVERTISING BUDGET

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The Business Plan For Homebased Business (3)

Writing The Business Plan

Now that your research and plan development is nearing completion, it is time to move into action. If you are still in favor of going ahead, it is time to take several specific steps. The key one is to organize your dream scheme into a business plan.

What is it?

A business plan:

Is the management and financial "blueprint" for startup and profitable operation
Is written by the home based business owner with outside help as needed
Is accurate and concise as a result of careful study
Explains how the business will function in the marketplace
Clearly depicts its operational characteristics
Details how it will be financed
Outlines how it will be managed

Why create it?

The process of putting the business plan together, including the thought that you put in before writing it, forces you to take an objective, critical, unemotional look at your entire business proposal
The finished written plan is an operational tool which, when properly used, will help you manage your business and work toward its success

Who should write it?

The home based owner to the extent possible Seek assistance in weak areas, such as: --accounting --insurance --capital requirements --operational forecasting --tax and legal requirements

When should a Business Plan be used?

To make crucial startup decisions
To reassure lenders or backers
To measure operational progress
To test planning assumptions
As a basis for adjusting forecasts
To anticipate ongoing capital and cash requirements

Proposed Outline For Home Based Business Plan

This outline is suggested for a small proprietorship or family business. Shape it to fit your unique needs. For more complex manufacturing or franchise operations see the Resource Section for other options.

Part I. -- Business Organization

Cover Page:

1.Business Name: Street Address: Mailing Address: Telephone number: Owner(s) Name(s):

Inside Pages:

2.Business Form: (proprietorship, partnership, corporation) If incorporated: (state of incorporation) Include copies of key subsidiary documents in an appendix. Remember even partnerships require written agreements of terms and conditions to avoid later conflicts, and to establish legal entities and equities. Corporations require charters, articles of incorporation and by-laws.

Part II. -- Business Purpose and Function

In this section write an accurate, yet concise description of the business. Describe the business you plan to start in narrative form.

What is the principal activity? Be specific. Give product and/or service description(s):

retail sales?
manufacturing?
service?

How will it be started?

a new startup
the expansion of an existing business
a franchise operation

Why will it succeed? Promote your idea!

* how and why this business will be successful.
* what is unique about your business

What is your experience in this business? If you have a current resume of your career include it in an appendix and reference it here. Otherwise write a narrative here and include a resume in the finished product. If you lack specific experience, detail how you plan to gain it, such as training, apprenticeship or working with partners who have experience.

The Marketing Plan

The marketing plan is the core of your business rationale. To develop a consistent sales growth a home based business person must become knowledgeable about the market. To demonstrate your understanding, this section of the home based business plan should seek to concisely answer several basic questions:

Who is your market?

Describe the profile of your typical customer Age: Male, female, both: How many in family: Annual family income: Location: Buying patterns:

Reason to buy from you: Other:

Geographically describe your trading area: (i.e. county, state, national, etc.)
Economically describe your trading area: (single family, average earnings, number of children, etc.)

How large is the market?

Total units or dollars:
Growing______Steady______Decreasing______

If growing, annual growth rate:

Who is your competition? No small business operates in a vacuum. Get to know and respect the competition. Target your marketing plans. Identify direct competitors (both in terms of geography and product lines), and those who are similar or marginally comparative. Begin by listing names, addresses and products or services. Detail briefly but concisely the following information concerning each of your competitors:

Who are the nearest ones?
How are their businesses similar or competitive to yours?
Do you have a unique "niche"? Describe it.
How will your service or product be better or more saleable than your competitors?
Are their businesses growing? Stable? Declining? Why?
What can be learned from observing their operations and/or talking to their present or former clients?

Be honest! Remember, your business can become more profitable by adopting the good competitive practices and by avoiding their errors.

To help you evaluate how successful your product or service will be, go down the following list of standard characteristics (you may want to add more from your knowledge of your field) and make a candid evaluation of your competitive "edge:' On a scale of "0" (theirs puts mine to shame) to 10 (mine puts their to shame) indicate the potential for you and a total score:

FEATURE

Price _______
Performance _______
Durability _______
Versatility _______
Speed/accuracy _______
Ease of operation or use _______
Ease of maintenance or repair _______
Ease or cost of installation _______
Size or weight or color _______
Appearance or styling or packaging _______
Total Points _______

A Total Points score of less than 60 indicates that you might reconsider the viability of your product or service and/or think about how you can improve it. Over 80 points indicates a clear competitive edge.

What percent of the market will you penetrate?

estimate the market in total units or dollars
estimate your planned volume
amount your volume will add to total market
subtract 3 from 2

Line 4 represents the amount of your planned volume that must be taken away from the competition.

What pricing and sales terms are you planning? The primary consideration in pricing a product or service is the value that it represents to the customer. If, on the previous checklist of features, your product is truly ahead of the field, you can command a premium price. On the other hand, if it is a "me too" product, you may have to "buy" a share of the market to get your foothold and then try to move price up later. This is always risky and difficult. One rule will always hold: ultimately, the market will set the price. If your selling price does not exceed your costs and expenses by the margin necessary to keep your business healthy, you will fail. Know your competitors pricing policies. Send a friend to comparison shop. Is there discounting? Special sales? Price leaders? Make some "blind" phone calls.

Detail your pricing policy.

What is your sales plan? Describe how you will sell, distribute and/or service what you sell. Be specific. Below are outlined some common practices:

Direct sales by telephone or in person. The tremendous growth of individual sales representatives who sell by party bookings, door to door, and through distribution of call back promotional campaigns suggests that careful research is required to be profitable.

Mail Order

Specialized markets for leisure time or unique products have grown as more two income families find less time to shop. Be aware of recent mail order legislation and regulation.

Franchising

1.You may decide to either buy into someone else's franchise as a franchisee or
2.Create your own franchise operation that sells rights to specific territories or product lines to others. Each will require further legal, financial, and marketing research. An excellent starting point if you are considering franchise involvement is the SBA Publication #MA 7.007, Evaluating Franchising Opportunities. The International Franchise Association also publishes a number of valuable aids in this field.

Distributors

You may decide to work as a local or regional distributor for several different product lines. Outline your sales plan. What is your advertising plan? Each product or service will need its own advertising strategy as part of the total business marketing plan. Before developing an advertising campaign for your business plan, take time to review a few basic assumptions. By definition, advertising is any form of paid, non-personal promotion that communicates with a large number of potential customers at the same time. The purpose of advertising is to inform, persuade and remind customers about your company's products or services. Every advertising activity should have specific goals. Common examples are:

To bring in sales orders or contracts
To promote special events such as sales, business openings, new products
To bring in requests for estimates or for a sales representative to call
A special goal at the outset may be to use special media to establish yourself even before startup and to get potential customer "feedback."
These might include one or more of the following;
Purchase and distribution of business cards to potential clients
Posting notices on free bulletin boards in area supermarkets or office complexes

To assist in determining what types of advertising are appropriate and within company budget projections, it will be necessary to carefully review your customer profile. From this review, establish a clear statement of advertising goals. Write down what you want your advertising to accomplish.

The next step will be to develop answers to the following crucial questions:

What should be said about the business and how should it be stated? What media should be used?
How much can be afforded?

The basic criteria for selecting specific types of media will include concise answers to the following:

Trading Area -- Do you plan to serve or sell to an industrial market, a national market, a neighborhood or specialized market? Describe yours.

Customer Type -- What does your potential customer read or listen to? Where? How often?

What image does the media you are considering suggest? Does it fit your customer? Describe your customer.

Budget Restrictions -- How will the amount of money you have to spend limit the media you can use? How can you spread your budget out over a year to give a repetitive, continuous message?

While you may have to spend more at the start, a good ongoing guideline is that advertising should not exceed one or two percent of sales. Set forth how much you are willing to invest in advertising in the first year: $_______

Break it down into months or quarters:

$______ $______ $______ $______ $______ $______

Continuity of Message -- How will the type of product or service, customer profile and seasonal buying patterns affect your choice of media and the frequency with which you advertise?

Explain your message.

Past Performance -- What is the track record for use of the medium you are considering for your type of business? What do your competitors use? What does your trade association suggest? Note appropriate comments.

For more on media selection and creating your advertising plan, see SBA publication #MA4.018

PLAN YOUR ADVERTISING BUDGET

Management Plan

Who will do what? Be sure to include four basic sets of information:

State a personal history of principals and related work, hobby or volunteer experience (include formal resumes in Appendix)
List and describe specific duties and responsibilities of each
List benefits and other forms of compensation for each

Describe the relationship of each to business: Example: "accountant available on part time hourly basis, as needed, initial agreement calls for services not to exceed x hours per month at $ xx.xx per hour."

To make this section graphically clear, start with a simple organizational chart that lists specific tasks and shows who (type of person is more important than individual name other than for principals) will do what indicated by arrows, work flow and lines of responsibility and/or communications. Consider the following examples:

Company President 
(owner-manager) 
---------------------------------------- 
Shop Manager Sales Manager Office 
(owner-manager) (owner-manager) 
Company President 
(owner-manager) 
---------------------------------------- 
Sales Manager Shop Manager Office 
(owner-manager) (owner-manager)

As the service business grows, its organization chart could look like this:

Company President 
(owner-manager) 
---------------------------------------- 
Shop Manager Sales Manager Office 
  (owner-manager) 
---------------------------------------- 
Foreman Parts 
Manager
----------------------------------------

Concisely answer the following questions:

What are your personnel needs now?

What skills must each key person have? Are the people needed available? Name them and indicate full or part time and salary rates:

Detail a proposed work schedule by week and month for at least the first year. Calculate total salaries, wages, fringe benefits and payroll taxes for each month of the first year:

         Compen- Fringe  Payroll
         sation  Benefits Taxes
1st Mo   $______ $______ $______
2nd Mo.  $______ $______ $______
3rd Mo.  $______ $______ $______
4th Mo.  $______ $______ $______
5th Mo.  $______ $______ $______
6th Mo.  $______ $______ $______
7th Mo.  $______ $______ $______
8th Mo.  $______ $______ $______
9th Mo.  $______ $______ $______
10th Mo. $______ $______ $______
11th Mo. $______ $______ $______
12th Mo. $______ $______ $______
Full Yr. $______ $______ $______

If you have identified any gaps in personnel skills, state how these will be overcome by training, purchase of outside services, or subcontracting. Check with the nearest state employment service office for assistance. Write your plan.

What is your banking plan?

What will be the location and type of bank accounts opened for the business. A word of caution, keep business accounts separate from personal or family accounts. These vital records will be necessary for future tax and accounting purposes. Describe your banking plan.

How is Your Credit Rating?

There may be several partial answers to this question. All will be of importance to the future of the business. First, what is your personal history of paying debts? Just to be safe, purchase a copy of your personal credit record from the local credit bureau for a small fee and make sure that it is accurate.

Look in the classified telephone directory under "Credit Reporting Agencies." To establish a credit rating, it is necessary to secure credit with a number of businesses and to use it.

Your rating will be based upon your record for paying for goods and services based upon the agreed terms. If your prior credit rating is poor, discuss with your lawyer accountant and banker options for improvement before seeking and being refused business credit.

Operational Plans Summary

The purpose of this section is to summarize from previous sections the various operations of your business and link them to the finance section of your business plan. In addition, you will want to summarize the advantages and disadvantages of a home based business operation. Refer to your earlier checklist, and write your summary.