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Starting a home business: do I really need a business plan?
If you are thinking of starting a home business, you may have heard or read that one of the first things you will need to do is create a business plan, or a detailed written summary of how a business will be organized and run.
Many people balk at business plans or think they are only needed when applying for a loan. But there are a number of reasons why you really do need a business plan:
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Financing
If you plan on using a small business loan to fund your business, most banks or investors will require a business plan. These are often required so the investor knows the business owner has thought the business through carefully and has planned for all manner of situations. An investor is more likely to invest money into a business that has been carefully researched and documented.
Feasibility
Starting a business requires a great deal of effort, money, and time. Having a documented, well thought-out plan will help you to see if your plan is actually feasible or not. In addition, it will help you map out the steps you need to take in order to set up a profitable business.
Organization
There are many steps to starting and operating a business. Writing a business plan will also allow you to cover points you may not have though of. For example, some entrepreneurs might overlook the need to develop employee contracts. Or perhaps they neglected to factor certain things into the budget, like office supplies or insurance. Following a business plan will ensure that you cover all necessary items that could affect the success for your business.
Reduced risk
Having your business and all potential risks laid out in front of you can help reduce the amount of risks you may run into down the road by being prepared.
Creating your business plan
Our business plan should include the following:
- Executive Summary. This is designed for those reading your business plan. It should explain the basic business model and the reasoning behind why this strategy will result in an effective business.
- Mission . This section contains the purpose and mission statement of your company. It will also help you determine what you want to accomplish with your business.
- Keys to Success. This section will include the tools your company will use to set itself apart from the competition and succeed in the industry.
- Company Summary. For a brand-new company, the company summary should include expected number of employees, projected location, etc.
- Services Provided. This is a basic run-down of what services your company will be providing to its customers.
- Market Analysis Summary. This section should include the industry, product and pricing strategy, promotion and distribution strategy, and production information.
- Management Summary. The management summary will contain the background information of key personnel, their business achievements, and experience in the industry.
- Financial Plan. A detailed financial plan is crucial. Included in this section is source of funds, existing loans and liabilities, a monthly cash-flow analysis, and projected sales and costs. This will help you see the real costs associated with your business and how much you can really expect to earn.
A well-planned, concise business plan can reduce the risks associated with starting a business and help you to receive funding.
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