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Planning Your Home Business
A good business plan will clearly outline your
business objectives and how you plan to reach
them. Although a business plan is helpful when
pitching to investors, it primarily serves as a
personal roadmap for launching and operating your
home business. Your business plan should include:
a summary and overview/history of your company;
market analysis; sales and marketing plan;
revenue, expense and profit projections; and your
financing plan. Keep your business plan flexible
and straightforward so that you can quickly make
changes as necessary.
Quality Pricing
Pricing is a subjective process that requires
continual trial and error. Factors influencing
price include: your competitive advantages, what
the competition is charging for the same product
or service, level of demand, and what customers
are willing to pay for your type of offering. To
get a general idea of what you should charge,
start off by establishing a baseline price
(Baseline Price=Direct Costs+Overhead+Profit). You
can then perform a break-even analysis to find out
the number of sales you need to make to cover all
of your costs. This will let you know exactly how
much of the product or service you must sell.
Record Keeping
Being a home business owner requires one to keep
accurate and up-to-the-minute records of virtually
every aspect of a business, including inventory,
expenses, payroll, profits, cash flow, sales tax,
and accounts receivable. Try doing your record
keeping on the computer so you can easily update
your information and generate reports. It’s also
important to stick with just one accounting
method: “cash” or “accrual.” With cash basis
accounting, you report sales when you receive
payment and report expenses when you pay a bill.
Alternatively, with accrual basis accounting, you
report sales and expenses when they actually
occurred, not when money has been exchanged.
Sales & Marketing
It’s easy to get caught up in the day-to-day grind
of running your home business and lose focus on
what should be your two main priorities: Sales and
Marketing. Here’s what they entail:
Advertising.Build brand recognition and generate
sales by advertising in magazines, newspapers,
Yellow Pages, on the Internet, and on the radio.
Networking. Through successful networking, you can
easily convert existing contacts i nto customers.
Potential customers include family, friends,
business associates, and fellow members of the
community and political organizations you are
involved in. Public Relations. There are several
ways to generate free publicity for your home
business. Examples include sending out press
releases to members of the media, teaching a
seminar, and being a guest on a radio talk show.
Direct Marketing (DM). DM involves using targeted
mailing lists to send mail pieces, sales
brochures, flyers, newsletters and product samples
to prospective customers.
Tax Deductions
One of the understated perks of being a home-based
entrepreneur is being eligible for a myriad of tax
deductions. These deductions apply to fuel and
auto expenses, office furniture and equipment,
office supplies, professional membership dues, and
telephone expenses. You may also be eligible to
deduct a percentage of your mortgage interest,
rent, real estate taxes, insurance, utilities, and
household repair costs. To qualify for these
deductions, your office must be in an area of your
home that is designated for business purposes
only. Be sure to keep good records of your
expenses and consult with your accountant.
Utilizing Employees and Contractors
In addition to assuming the responsibilities of
CEO, home-based entrepreneurs must often juggle
the roles of receptionist, accountant, marketing
director, and head salesperson. This is a reality
for many home business owners who lack the budget
to hire a large staff. One day, you may find that
your home business generates more work than you
can physically handle. At this point, it is wise
to bring in back-up support. You have several
options, including: hiring a full- or part-time
employee, outsourcing tasks to another company,
partnering with another company on a
project-by-project basis, or linking up with an
independent contractor.
Verify Where You Stand Financially
Keeping track of your financial well being is a
challenge for many home-based entrepreneurs.
Fortunately, there are many financial management
software programs on the market that help you do
just that. Programs, such as Quicken®, make it
easy for you to track your accounts payable and
accounts receivable, as well as prepare for tax
time. You will be able to better manage your cash
flow and accurately measure your business’
profitability. Although setting up a financial
management system takes some time initially, the
long-term benefits are worth the investment.
Web Presence
In today’s competitive market, it’s mandatory for
home businesses to take up occupancy on the Web.
Failing to create a web presence transmits the
negative message that you are not willing to
accommodate those who prefer to conduct business
online. It also implies that your company is not
well established. In this respect, not having a
web address is akin to not having a Yellow Pages
listing in the ‘90s. Demonstrate to your customers
that your business is on solid ground and that you
are able to compete with the big guys. Build a web
site (or hire someone to build a web site) that
informs customers what your business is all about,
and give them the opportunity to make secure
purchases online. Make it easy for customers to
get a hold of you and give them a chance to
“opt-in” for weekly or monthly newsletters.
Xtra Profits
Once your home business is running smoothly,
consider the different ways you can augment your
revenue stream. For instance, if you have
accumulated a large list of qualified leads, you
might choose to sell the names and addresses to
others targeting the same group. By doing so, you
will effectively generate “ancillary profits,” or
revenue above and beyond what you have already
created by performing your core business
operations. The best part is that generating this
extra income requires you to make only a small
additional investment.
Your Professional Image
Establishing credibility starts with projecting
the right image. Unless new customers have
received a referral from a trusted source, they do
not have much to judge you on. Knowing nothing
about your work ethic or the quality of your
products, new customers must rely on other
indicators, like how you answer the phone or how
quickly you respond to incoming e-mails.
Projecting a professional image is not about
showing up for a lunch date in an Italian sports
car; it’s about paying close attention to the
details. For instance, put extra effort into
designing your letterhead and business cards, or
hire a qualified individual to do the job. Create
a professional-looking cover letter for all
outgoing faxes. Proofread every piece of business
correspondence that goes in the mailbox. When you
pay close attention to these kinds of details, you
will build not only a professional image, but also
credibility.
Zoning
Investigate the neighborhood, city, and state laws
that impact your future home business. These
restrictions are in place to control the type of
businesses conducted out of the home, as well as
the volume and frequency of visitors. In general,
they are designed to protect the interests of your
neighbors, who do not want cars parked all over
their street or potential problems with noise or
pollution. If you encounter an unreasonable
municipal restriction, try applying for a variance
or petitioning for an amendment to the zoning
ordinance. Your local planning commissioner or
city council member will be able to help you in
this area. If it’s your homeowners’ association
that’s placing the restriction, voice your
concerns at a board meeting. Read the bylaws
carefully, and be prepared to deliver a compelling
argument for overturning the restriction.
Ultimately, make sure you have the appropriate
licenses to operate your business, and stay
abreast of the latest restrictions placed on home
businesses in your area. For more details, contact
your City Clerk.
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