Home Business' Business Plan Mark Newell c. 1993 Mark Newell If you are hot on the trail of an idea for a home business chances are that you have been daydreaming about all the things that you can do, how nice it would be to have the freedom, the independence, the .... STOP! Reality check! Developing a business plan will help you get a clear idea of just what kind of project you are getting into. We will get you started by looking at each of the foundation pieces of a home business: your product, market research, start-up expenses and local, state and federal permits and licenses. Your Idea You know what you your product is, right? Can you write it in twenty words? How about ten? The point is to see if you can you write down exactly what you want to do. Now is the time to be specific as possible. Trying to take on too many things at one time, especially in the beginning, can cause you to go in too many directions at once. Next, think about why people are going to want your product and then describe why your idea is a good one. Market Research A key element of your business plan is your market research This cold, commercial term is really just a means of helping you "look before you leap". It is kind of like listening to the weather report before before going sailing, instead of just assuming that the weather is perfect. Getting out there and doing your homework is really critical. The rest of the plan is just nuts and bolts. Start with your market, your customers. How will you find customers and keep them? Do you expect to find them through advertising, and if so where? Name specific places. Are there enough people who want your product for you to making a living. You need hard, money spending customers, not just interested, supportive friends. The next step is to analyze the competition within your market. First of all, who is your competition? Consider talking to them. Developing a positive relationship with your competition can be helpful. Are they doing well? Why or why not? Why should customers come to you over an established business? This is a good time to think about what will make you different, your way of standing out. Some reasons could be a different product, better service or faster response. Start-up Capital Capital is a business term for all money invested in a business. Included are all equipment, inventory and cash. Start-up capital is the amount of money needed just to get started. Started, however, is a general term. When figuring you start- up costs, plan on enough money to keep the business running six months to a year of before seeing a profit and more before it support you. The amount of start-up money needed will vary tremendously with the type of business. As you plan your budget think about tools, office supplies, and initial inventory. Do not forget to figure in your living expenses as you look at your budget. As a home business, you don't have rent as an expense that kill many start-ups. Keeping this budget as low as possible is to your benefit and over extending yourself early on can be disastrous. There are some universal costs of starting a business that you have to plan for. These include permits, licenses and insurance. You maybe have to hire a lawyer to help you wade through all the regulations (especially to set up a corporation). Before we get to specifics on these start-up fees we need to take a quick aside into the world of legal structure. Legal Structure There are two basic business structures, incorporated and unincorporated. There are several types of corporations and two variations on the unincorporated theme, sole proprietorship and partnerships. The most common choice for small businesses is a sole proprietorship. This is because it is the simplest to set up and the most regulation free. All that follows applies specifically to a sole proprietorship, though some may apply to incorporated businesses. Regulations and Fees Regulations and fees vary from state to state and county to county so you need to make some calls to get the specifics on what will apply to you. You may call anonymously if you like. Start with your city or county. There almost certainly will be a local business license. If you live within city limits check with the city hall, otherwise count on one from your county. You will, as a sole proprietorship, have to file a Fictitious Name Statement, or DBA, with the county unless you use your name as the business name. There will be a filing fee and you will have to refile every five years or so. Watch for this. If you miss the date somebody else can slip in and legally take your business name. You will also have to publish the Fictitious Name Statement, at your expense, in an accepted publication. The county clerks office, found in the phone book's county listings, will be able to give you all the particulars. Check also with the city or county for other permits or licenses that might apply to your particular business. On to the state. For some business people, such as CPAs, contractors, insurance people, counselors and lawyers, a state licenses is required to do business. This is changing and more businesses are falling under state regulation. The state agency on consumer affairs can help here. The state also administers resales permits. If you live in a state that has sales tax, you will have to collect taxes on all taxable items sold within your state. Every state has it's own way of insuring that you collect and remit these taxes Some require you to purchase a bond, or put down a security deposit.. You will have to prepare quarterly or annual sales tax returns, depending on the amount you collect. The state tax office will give you the specifics when you obtain a resale permit. If you are going to be dealing with hazardous chemicals, have employees, or charge interest to your credit customers you should contact the Attorney General office or the Secretary of State office of your state to find out how your state handles these things. All of these offices can be found in the state listings section in the phone book, usually in the front. Finally, there are the federal requirements. Fortunately there are not that many that apply to small businesses on start-up. They get you on taxes. As a sole proprietorship, you are identified by your Social Security number until you hire employees or deal with excise taxes. In either of these cases, you need a Federal Employer Identifications Number. There is no fee for the Federal Employer Identification Number, but don't get one unless you need it because you will have to fill out tax forms that you would not otherwise have to deal with. You won't need a federal business license unless you are making drugs, building radio or television towers, selling meat or investment information. If so then contact the Federal Trade Commission. Exporters of goods worth more than $2,500 will need to contact the Department of Commerce. The Federal Trade Commission has regulations on the following areas which you might want to know more about: product guarantees, mail order business, textiles, fabrics, wool furs and clothing, packaging and labeling and advertising of credit terms. One last expense that hasn't been covered is insurance. It's hard for a young business to consider the expense of insurance. But when you consider the cost or potential losses associated with any disaster, insurance is cheap. Some businesses are required to carry insurance by the state, and if you get a loan the bank will require some insurance too. My suggestion is to talk to a company or two and then decide. The purpose this simple business plan is to make yourself aware of what rules you have to follow, how much money you have to have, and what you need to know in order to get off the ground. Remember, starting a home business doesn't mean that you have to quit what you are doing. The business will have to grow and it grows slowly, so expect it. Hopefully you'll have fun with it because it is going to take a lot of your time. Access Mark Newell, c/o Home Power, POB 520, Ashland, OR 97520 ù 916-475-3179 Federal Trade Commission, Washington, D.C. 20580 Department of Commerce, Washington, D.C. 20233 Small-time Operator, by Bernard Kamoroff, is a true nuts and bolts kind of book, great for those ready to act! $16.95 from Bell Spring Publishing, POB 640, Laytonville, CA 95454 ù 707- 984-6746