The Business Plan For Home Based Business

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By Carol Eliason
Research Management Corporation
Falls Church, Virginia

Introduction

Homework has taken on new meaning for more than 10 million Americans. The
drive for economic self-sufficiency has motivated large numbers of persons
to market their skills and talents for profit from home. More than 400,000
persons launched home enterprises in 1985. Our increasingly service
oriented economy offers a widening spectrum of opportunities for customized
and personalized small business growth.

Though untrained entrepreneurs have traditionally had a high rate of
failure, small businesses can be profitable. Success in small home based
business is not an accident. It requires both skills in a service or
product area and acquisition of management and attitudinal competencies.

The purpose of this SBA Management Aid is to help you take stock of your
interests, aptitudes and skills. Many people have good business ideas but
not everyone has what it takes to succeed. If you are convinced that a
profitable home business is attainable, this Management Aid will provide
step by step guidance in development of the basic written business plan.

Information Gathering

A helpful tool for use in determining if you are ready to take the risks of
a home based business operation is the SBA Publication #MA 2.016, Checklist
for Going Into Business. It will help you focus on the basic steps in
information gathering and business planning.

While the reasons for the rapid growth of home based business operations
may vary from the need to supplement family income with a few hundred
dollars all the way to a sophisticated technical consulting service billing
hundreds of thousands of dollars, there are many common characteristics and
challenges to be considered in launching most home based businesses,
regardless of size. Some tasks are universal to all small business
startups, while others are unique to a home base.

The experience of the author and interviews with dozens of home based
operators over the past decade indicate that special planning is required
to research legal and tax issues, proper space utilization and to establish
time management discipline. Inadequate or careless attention to development
of a detailed business plan can be costly for you and your family in terms
of lost time, wasted talent and disappearing dollars.

The Entrepreneurial Personality

A variety of experts have documented research that indicates that
successful small business entrepreneurs, whether male or female, have some
common characteristics. How do you measure up? On this checklist, write a
"Y" if you believe the statement describes you; an "N" if it doesn't; and a
"U" if you can't decide:

While not every successful home based business owner starts with a "Y"
answer to all of these questions, three or four "N"'s and "U"'s should be
sufficient reason for you to stop and give second thought to going it
alone. Many proprietors who sense entrepreneurial deficiencies seek extra
training and support their limitations with help from a skilled team of
business advisors such as accountants, bankers and attorneys.

Selecting A Business

Perhaps you have already decided what your home based business will be. You
know how you will serve your market and with what. If not, but you are
determined to establish a home based source of income, then you need to
decide exactly what business you will enter. A logical first step for the
undecided is to list potential areas of personal background, special
training, educational and job experience, and special interests that could
be developed into a business. Review the following list of activities which
have proven marketable for others.

Time Management

For both the novice and the experienced business person planning a small
home based enterprise, an early concern requiring self-evaluation is Time
Management.

It is very difficult for some people to make and keep work schedules even
in the disciplined setting of an employer's office. At home, as your own
boss, the problem can be much greater. To determine how much time you can
devote to your business, begin by drafting a weekly task timetable listing
all current and potential responsibilities and the blocks of time required
for each. When and how can business responsibilities be added without undue
physical or mental stress on you and your family? Potential conflicts must
be faced and resolved at the outset and as they occur. Otherwise, your
business can become a nightmare. During the first year of operation,
continue to chart, post and checkoff tasks on a daily, weekly, monthly
basis.

Distractions and excuses for procrastination abound. It is important to
keep both a planning and an operating log. These tools will help avoid
oversights and provide vital information when memory fails. To improve the
quality of home work time, consider installation of a separate telephone
line for the business and attach an answering machine to take messages when
you do not wish to be distracted or are away from home. A business line has
the added advantage of allowing you to have a business listing in the phone
book and, if you wish to buy it, an ad in the classified directory.

Is A Home Based Business Site Workable?

* Where in the home will the business be located?
* What adjustments to living arrangements will be required?
* What will be the cost of changes?
* How will your family react?
* What will the neighbors think?

It will be important to set aside a specific work area. For example, more
than one fledgling business ledger has gone up in smoke, been chewed by the
family dog, or thrown out with the trash when business records were not
kept separate from family papers. Ready access to business records during
work hours is essential, but they must be protected.

Check the reasons below for and against working at home that apply to you.
List any additional drawbacks or obstacles to operating this business at
home.

Pros Cons

Lower startup costs Isolation
Lower fixed costs Space limitations
Tax benefits Zoning
Lifestyle flexibility Security concerns
No commuting Household interference

Note that changes in personal habits will be required. Examples:

* Self discipline to keep TV off while working.
* Limiting personal telephone calls in length and number
* Diligence in meeting work deadlines when no one is checking

Ask family members to comment on pros and cons. Their concerns may require
reconsideration of some specifics.

Is A Home Based Business Site Allowable?

Now you will want to investigate potential legal and community problems
associated with operating the business from home. You should gather, read
and digest specialized information concerning federal, state, county and
municipal laws and regulations concerning home based business operations.

Check first! Get the facts in writing. Keep a topical file for future
reference. Some facts and forms will be needed for your business plan.
There may be limitations enforced that can make your planned business
impossible or require expensive modifications to your property.