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Building a Profitable Home Based Business
The challenge with most business plan advice is that it focuses on the trees not the forest. What goes in cell C23, what goes in flowchart Box 11, what is breakeven volume, etc. We’re not going to do that here. There is great software out there that will help you bifurcate and categorize your data once you know what to consider. Business Plan Pro is by far the top tool in the market for slicing and dicing your business data. But you need to plan business direction before you start inputting business plan data. This is where most people fall short. They think that the software will do it for them, but the software does not tell you what to do. It does not tell you how to think, it does not identify primary and ancillary revenue streams, it does not tell you who the competition is. This is out of the box thinking and must be thoroughly examined from all directions before the plan reaches the “input data into the software” stage.
Business Plan v Business Template
A business plan takes all the information that you have fleshed out and arranges it neatly. What we’re talking about on this post is a business template; in other words, from 10,000 feet up what does will your business look like. Let’s begin with the singularly most important question that you should ask yourself.
– How will your business make money –
Your software will undoubtedly have a marketing plan section that requires input, but before you data-dump you need to actually know where the money comes from. Taking an example from my previous post Part Time Home Based Businesses, let’s assume you are a Mobile Pet groomer. Much of your money will come from clipping the fur of your cute little clientele; however, how else could you make money from that same client? What are the ancillary products that you can sell? Believe it or not, this is often where the real money is made. Is it in specialty pet food, pet vitamins or chauffeur service to and from the vet? Dog sitting?
Great cross selling
I bought a salt-water fish tank from the local fish store a few years ago. It wasn’t cheap, the equipment was very specialized and the fish, well don’t even get me started; however, do you know where they make most of their money from me? Servicing, replacement fish, new corals, etc. Car dealerships work the same way. They love it when you don’t buy a new car, because over time they make more on selling you replacement parts and the corresponding labor than they made on the car itself (remember, most of that goes to the car company). So the two fundamental questions are:
- What is the initial or primary source of revenue?
- Where are the opportunities to cross sell related products to make even more money?
-What do you need to know about your competitors –
Can they hurt you or help you? Is there a limited pie that is divided amongst the players or can everyone make more money if they have the right set up? Should you study and replicate your competitors’ actions (see our article on stalking your competitors)? Who are their key customers and how can they become yours?
In some industries collaboration is key, because with it all participants do better: blogging 🙂 is a great example. People don’t pay to go to websites, yet each site does better if others link to it and vice versa. Conversely, if you were a rare coin broker you would be better suited to not share your secrets (sourcing, key clients, etc.) for fear that your competitors would take them away. Take out a piece of paper and let your mind flow freely around these questions.
– What are your start up costs –
Start up costs come in two forms. Actually cash outlay for machines, equipment, electronics, licenses etc. and your cost to live until the business is up and running. The latter cost may be “zero” if you are building a part time business from home, or it may be substantial if you are recently unemployed and need to pay the bills from this business. Many people miss calculate this component when designing their business plan. Here, you have to remember that less is more. You don’t need a Land Rover LR4 to go to your pet-grooming client’s houses. You can get that later. Get the business off life support first and then add the higher quality expense items.
– What are your ongoing expenses –
The best advice I ever received was from my close friend Jeff. When we were talking about the business costs for the 101MoneyTalk.com business plan he said “There’s going to be stuff.” Well Shakespeare he’s not, but a consummate businessman he is. List them all, and then add 20 percent just in case, because there is going to be stuff that you did not count on.
– What licenses do you need –
Many businesses are required to have additional licenses. You need to make sure you are in compliance with all town, county, city, state and Federal licensing requirements or you will very likely get into trouble later. If you are a distributor of blasting supplies to mining companies, its pretty obvious that you’d need a license, but do you know that in many states a staffing consultant such as an executive recruiter also needs a license? Generally licensing is not expensive, but the penalty if you don’t have one very well could be. Don’t skimp on this important step.
Additional Resources for Your Business Plan
Now that you have a good sense of what you’re doing, you can go out and acquire Business Plan Pro and start your planning and can now do it with complete clarity. I also recommend several business sites to keep your neurons firing. The SBA has a wonderful page called How to Write a Business Plan; Inc.com has a great article called How to Write a Great Business Plan; Entrepreneur has an excellent post called Your Business Plan Guide; Forbes has an interesting article called 10 Essential Business Plan Components; and my favorite is the YouTube video simply called, The Business Plan (This one, filmed at Stanford University is 53 minutes long, so you will want to budget a little time.
In our next post, we’ll explore how to select the right business for your circumstances. We’ll explore the interplay of the three key variables of any new business: time, money and competition and how to use these to your advantage.
Until Next Time,