Make Your Work-from-Home Dreams Come True

Week 2: Creating a Realistic Plan

Once you've decided what type of business you want to do, you're ready to start planning. The first step if you're starting your own business is creating a business plan. If you're pursuing a direct-selling opportunity, a full-fledged business plan is probably unnecessary, but you may want to answer a few questions and map out some details, as described below. Then, whether you're direct selling or starting your own business, you must consider the kind of budget you'll need. We'll be covering all of these bases this week.

Writing a Plan
Writing a business plan need not be a complex and difficult process. Essentially your home-business plan is a simple road map for what you intend to do and how you intend to do it. Unless you will be seeking a loan, venture capital or a grant, it's primary use will be to guide you in making day-to-day decisions and setting priorities for your time and money. To write a more advanced business plan, try using some of the software available, such as Business Plan Pro from Palo Alto Software.

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We advise financing your business yourself to the greatest extent possible. Borrowing, even from friends or relatives, puts you under pressure to pay back quickly, and it's often difficult to get bank loans or investors for new endeavors. If you or your spouse has an existing job and good credit but no track record as a business owner, banks and credit unions will sometimes make a personal loan more readily than a business loan. As a working document, your business plan is an evolving statement that you can update and revise as your business gets under way. (See an outline of a sample business plan by the Small Business Administration.)

Create your plan by answering these questions:

  1. Your business concept: What will you offer?
  2. What product or service will you be providing?
  3. What are the mission, purpose and vision you have for your business?
  1. The market: Who will your clients be?
  2. Who specifically needs this product or service? (Avoid using the word "everyone" in answering this question. Be specific.) What evidence do you have that these people need what you'll be offering?
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  1. The competition: To whom will you be compared?
  2. Who else is providing a similar product or service?
  3. How is what you'll offer different? Better? Why should people buy from you?
  1. The finances: How will you make money?
  2. How will you finance the start-up and operating costs until you have enough business to cover these costs?
  3. How will you support yourself while you build your business? How much income will you need?
  4. What can you charge? What are others charging for something similar? What do people pay for it?
  1. Getting business: How will you get under way?
  2. How will you let those who need what you offer know about your product or service?
  3. What tasks will you need to accomplish to get up and running? (Make a list of each of your to-do's and project a date for getting them done.)
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Creating a Workable Budget
To determine how much money you need to have coming in, you'll need to calculate three things:

  • Living expenses: How much do you need to live on? This is the "salary" you must produce to support yourself and your family. Be sure to factor in taxes and the cost of benefits formerly covered by your employer, such as health insurance.
  • Direct costs: How much will it actually cost you to produce your product or deliver your service? This includes all expenditures for travel, telephone, materials and supplies used in serving clients or customers. Don't forget one-time start-up costs for equipment, software, business cards and so on. To get these, talk to people in businesses similar to yours and get estimates from potential manufacturers, suppliers, wholesalers and any other businesses you may work with.
  • Overhead: How much will it cost you to run your business? This includes marketing, utilities, office furniture and equipment.

    For more information about calculating business expenses, visit the SBA's online startup area.

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Transitioning into Your New Business
Once you have your budget, you have several options for actually launching your business. Each allows for a different level of time and financial commitment, according to your situation.

  1. Moonlighting plan: Keep your full-time job and develop your business as a sideline.
  2. Flextime plan: Free your daytime hours by working at a job that gives you the option of a flexible schedule. If you are established with an employer, you may need to make the case for the employer adopting flextime.
  3. Part-time plan: Work at a part-time job to provide a base income while you're building up the business. When your business income equals the base income, drop the part-time job.
  4. Spin-off plan: Turn your previous employer into your first major customer, or when ethically possible, take a major client with you from your previous job.
  5. Cushion plan: Use savings, a severance package, inheritance or divorce settlement to cover your base expenses while you're launching. Plan to have enough money to cover at least six to twelve months of expenses.
  6. Piggyback plan: If you have a working spouse or partner, cut back your expenses so you can live on one salary until your business gets going.
  7. Have-your-clients-finance-you plan: If you have sufficient stature in your field, you might obtain retainer contracts with clients for the first year that provide you with assured revenue in exchange for offering them services at 25 percent less than the billing rate you establish.
  8. Gofer plan: While keeping your existing income, hire someone inexpensive as a gofer to do the legwork needed to lay the groundwork for a successful start-up.
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Figure Out How Much Money You Need to Live
To easily figure out your personal financial needs, break it down. Take a sheet of paper and list the following categories down the left-hand side. Then divide the sheet into three columns labeled Survival, Comfortable and Ideal. Write down how much you need to spend on each item per month at the three different levels. This will give you a solid idea of how much you need to eke by, as well as what income you need to shoot for.

Auto expenses
Clothing
Food
Health insurance
Home/apartment maintenance
Entertainment
Education
Medical and dental care
Personal care
Rent or mortgage
Taxes (federal, state, self-employment)
Utilities
Other living expenses

Add start-up costs to this list and you have your monthly spending budget. Then compare that with your income to decide which transitioning plan works for you.

Now that you've mapped out a plan, put it to the test with this quiz: Will Your Home Business Idea Work?

Need help with your business plan? Struggling with your budget? Get advice and support from other women who are figuring all this out along with you, on the Working from Home: How Do I Start? message board.

Next week, tune in to learn how to set boundaries in your home office to create a good work-life balance.

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© 1999 by Paul and Sarah Edwards. Jeremy P. Tarcher/Penguin Putnam Inc. All rights reserved. Reprinted with permission from the publisher.

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