In the final article of the home business series, Noorjehan Arif explains the why and how of a business plan.
Before establishing a home business, it is imperative that you create a sound business plan. A business plan is not just a concept, but it’s a way of life. It defines the why, how, what, where and when of the home business you are going to set up. The idea is to create a path and define the pros and cons of your business, along with the route you should take for developing and expanding your business.
Why Create a Business Plan
A business plan can help in various ways. A business idea is born in the head, while a business plan incubates that idea, inking the advantages, disadvantages, financial requirements, human resource requirements, projections and products and their features, among other things. Thus, your plan helps you pave the road that will help you successfully launch that idea. A business plan is also created for users other than yourself. For example, you may want to obtain funds from any large organization. In that case, the organization would like to know how sensibly you have planned out the usage of their funds. In such a case, a business plan is going to be quite helpful.
Components of a Business Plan
A business plan consists of the following elements:
An executive summary is going to be helpful if you want to present your plan to another person or company. It will define and summarize the very essential elements of your plan and present them in a succinct manner for those who want to glean only the basics of the business.
Description of the Business
This includes such details as what is the business about and why it is going to be undertaken. Analysis of the market and competition; products and services, delivery, placement and pricing; organizational structure and personnel, structure of the business (whether it is a sole proprietorship, partnership etc.); plans for marketing and advertising, financial details and production of the products or distribution of services, all become an essential part of this section.
For financial planning, you would have to make different budgets, incorporating your expenses and revenue. Then, you would have to make cash flow statements to see how much in actual cash you would expect to earn and utilize. At the start of the business, startup costs and maintenance costs along with other financial aspects of business would have to be analyzed. This planning will help you evaluate the difference in the budget and the actual earning and expenses for a particular year.
Plan of Action
Considering the range of items included in the business plan, you would need to assign a timeline to the items in order to get them done. Such time lines need to be realistic, but ambitious to help increase efficiency of the business. Additionally, it will help in streamlining the sequence and phases of the activities that need to be done.
Industry, Market and the Offerings
It is generally helpful and interesting to conduct a small industry research on how receptive the market would be towards the service or product being launched. It may help in avoiding negative surprises later on.
The Final Word
A business plan, be it formal or informal, can be a very essential tool for establishing and running a business successfully, depending on how well it is structured and researched, and how much effort is put in it. If done properly, it can become the ultimate guide to the future of your business.