Home Business

Describing What Need Your Business Fulfills

The final question in this section of the business plan asks, “What needs or wants of customers are being met?” (Give a brief overview of who you are serving and why.) The information you add here should flow directly from the information you offer to the previous question in this section. If your unique ability to perform graphics work and provide printing services distinguishes you, for example, your target customers might be people who want “one-stop shopping” and want to save time and money by using you for both services.

Describing What the Home Business Does or Provides

To answer the first question in the Business Overview section, list all the services your business will provide. Be specific. For example, if you are starting a bookkeeping business, you might be providing bookkeeping, tax preparation, audit assistance, and financial records organization services.

Offering more than one service provides your business with an advantage. You will draw more customers, and you can often cross sell services – originally gaining a customer because of one service and selling him others as your relationship grows. However, you will want to refrain from offering too many services. Aim for three to five separate services. Fewer than three, and customers are less likely to come to you. More than five, and prospective customers might not believe that you can do everything you say, or might feel that you do so many things because you do nothing well.

As an example, let’s say that you offer sales consulting. Now, if you also offer computer repair, writing, and graphic design, you will be sending a message to clients that you aren’t focused – these services don’t mesh well together, and there appears to be too many of them. In the preceding example, it would be wise to jettison the computer repair. You could then recast the writing, graphic design, and sales consulting as a “one-stop marketing shop,” or a sales-boosting business. The writing and design continue to be offered, but only for sales-related materials for your clients. This pulls your business in to a cohesive offering. Instead of four disparate, unfocused services, you are now offering one, cohesive, inclusive service – building credibility and attracting more clients.

Your Business Location, Address,Web Presence, and Domain Name

Next in this section, you must describe where your business will be located and whether it has a post office box. Presumably, your business will be located in your home. This might not mean, however, that your business will share your home’s mailing address. Using a post office box is one way to separate your personal mail from your business mail. It also affords you some privacy, as you do not have to provide your home address to as many people. Because most boxes are modestly priced, this is a relatively inexpensive way to help separate your business from your personal life.

Within this section of the business plan, you also must answer the questions, “Will the business have a web presence?” and “What is the domain name(s)?” The answer to the first question, in almost all cases, should most certainly be “yes.” As with business names, domain names should be researched carefully to avoid confusion and possible trademark violations. Check for existing domain names on an Internet registration site, such as Godaddy.com. This website provides information on whether a name is in use, and if so, who owns it and when the registration is set to expire.

Describing the Home Business Proprietor

Within this section, you need to name the proprietor(s) of your business and describe what makes that person (or those people) capable of running the business. Thinking through the answer to this question is an important part of preparing your business plan because it helps you understand your business’ strengths and weaknesses in the marketplace. It is highly unlikely you are beginning a business that is truly unique. If a prospective customer knows 30 plumbers, or 40 graphic artists, why should he choose you? What makes you stand out from the crowd of your competition? Address these issues as you answer the questions in this section of the business plan, and be specific.

This means that

• All partners are willing to disclose their current financial positions and ability to contribute to the partnership financially.

• All partners are willing to fully disclose the skills and experience they bring to the partnership, as well as any potential liability.

• All partners are willing to provide other partners with a credit report, background check, or other documentation supporting their viability to be involved in the business.

• All partners are willing to formalize who does what, when they do it, and why, in a partnership agreement. Why is this so important? Business partners generally all agree to pay the debts of the partnership. So, if one partner runs up debt and disappears, the remaining partner(s) is left repairing the financial situation and the reputation of the business. Having a partner is a great way to split the risk and the work, but it can be a headache if you don’t know the other partner(s) well.

A corporation is an entity that is completely separate from any person. In fact, corporations file their own taxes and have many rights and obligations, just as individuals do. Corporations offer some distance between you (an officer in the corporation) and the entity itself, which might be helpful when dealing with liability. (However, these rules have changed in response to scandal, and vary from state to state, so you will need to talk to an attorney to understand any benefits and limitations.) There are many types of corporations, and an attorney will be needed to advise you on the best corporation type for your business.

Some forms of corporation can be one person, so check the corporation laws in your state to determine if this is the best organization for you. As with partnerships, your city or county might restrict or forbid this type of business from operating from a private residence. There are also some hybrid forms of business, which are not truly and entirely like a typical partnership or standard corporation.

Those include

• A Limited Liability Company (LLC), which mixes the decreased direct liability of a partnership with tax advantages more common to a corporation.

• A Professional Corporation, again, mixing some aspects of a partnership and a corporation. This corporation type is usually available only to certain types of businesses, however, and often limited to high-risk occupations such as doctors, lawyers, and accountants.

• An S Corporation is a corporation that has formed a standard corporation (as described previously) but filed proper forms with the IRS to have the business’ profit taxed as if the business were a sole proprietorship. (Standard corporations are often also referred to as “C” corporations.) For more information on business structures and considerations, visit AllLaw.com. If you are uncertain which business entity is the right type for you and your business, check with an attorney. It is not unusual to start a business as a sole proprietorship and expand it to a partnership or corporation as the business grows, or as liability and other issues become more serious. Incorporating is an additional expense that, as a new business owner, you might not be able to justify until your income from the business can easily cover such costs.

Work At Home Business Form

You also must state whether your business will be a sole proprietorship, partnership, or corporation. A sole proprietorship is you, by yourself, owning and running the business. This is the simplest and most common form of business organization. Your income and

expenses from the business are reported as part of your federal tax return on Schedule C, and you don’t need to file incorporation papers to “form” your business. The simplicity of this form of business is a distinct advantage, but it offers some disadvantages, as well. The chief disadvantage is that liability flows directly to you. This means that a customer can sue you directly for failing to perform the services you agreed to provide. Your home and other assets could be at risk. You can mitigate this risk by purchasing liability insurance (or errors and omissions insurance). If you own few assets (and rent, rather than own, your home), the liability issues might not be as important.

The more assets you have, and the more people who know you have liability insurance, the more likely you are to be sued. The nature of your business is also a key factor. Are you offering services in which safety could be a factor, such as a building contractor who has to be sure that a staircase doesn’t fail? Are you offering services that could greatly impact someone’s life if done incorrectly, such as accounting or legal advice? What happens if you don’t perform as promised? The greater the potential fallout to the client, the more likely someone could be injured or killed, and the more likely someone could be financially ruined, the more likely you are to be sued. A partnership is a formal partnering of you with at least one other person. Forming a partnership generally requires an attorney. As a home business, you might not be allowed to form a partnership unless it is with your spouse or domestic partner (depending on regulations of home businesses in your area). But this could make a partnership the ideal business structure. If you and your significant other are going to share in the work and expenses anyway, this might be a way to formalize that agreement.

Forming a partnership with someone not living with you is a bit trickier. But this is the twenty-first century—the era of the virtual company. If this is someone you know you can trust, and zoning regulations allow it, there’s no reason why two people in different cities – or even different states or countries—can’t use this business form. (With more than one state or country, however, bear in mind that you might have to report income or file forms twice – once in each jurisdiction.) Whether your partner is in the next room or the next country, however, always consider such an arrangement carefully. Ask yourself whether you really know the person you are partnering with for this business. And no matter how well you think you know him or her, treat it as any other professional transaction.

We will tell you what this home based business form means in the next post!

Business Name

As your first task in this section, you need to state the business name. When naming your business, be sure to choose a name that does not conflict with an existing business. If your name is truly unique, consider making it a trademark. Visit the website of the Patent and Trademark Office, www.uspto.gov. A visit to this website will not only provide information about the trademark process, but also help you make a decision whether you need the help of a lawyer.

If you decide to hire a lawyer, contact your local bar association and ask for a referral to an intellectual property (IP) attorney. Whether you choose to trademark your business name or not, check business licenses filed with your local government, Fictitious Business Name statements filed with your local or state clerk’s offices, as well as phone directories and other public sources for existing businesses in your area. Avoid any name that might be confused with another business. In most instances, you will need to file a Fictitious Business Name Statement.

To verify the Fictitious Business Name requirements where you live, check with your city or county planning and development offices. In most cases, your city or county government will provide you with a consolidated checklist of all local requirements for a business. These checklists can be very helpful, and often provide additional information, such as how to do business with the city, county, or state.

Home Business Overview

The Business Overview section of your plan will include answers to these questions, as described in the subsections that follow:

• What does the business do or provide?

• Who or what does the business provide these service(s)/product(s) to? Are there specific industries or geographic locations that services are provided to, or are they offered to the public? Is the entity Business to Business (B2B), Business to Consumer (B2C), or both?

Introduction/Overview and Goals

Though it appears first in your business plan, the introduction and overview are written last; these elements offer a summary of the rest of the business plan. Return to the introduction and write it only after you have completed the rest of the business plan. A written listing of your goals should be included in the introduction to your plan. Naturally, one of your goals is to make money. But how much per year? $100,000? $500,000? More? Less? Be specific. What other goals do you have? Most people considering a home business want to make money, but they also might want to

• Have more control over scheduling, particularly family or child commitments (for example, attending a child’s soccer game)

• Do something they enjoy

• Minimize commuting

• Build a business to eventually sell at a profit or pass on to their children Be sure that you are specific about your financial goals, but include your non monetary goals as well.

Outlining the Work From Home Basics

In this section, you will outline the basic information regarding your business. The information you add here will answer these questions:

• What is the business name? Is it a sole proprietorship, partnership, or corporation?

• Where will the business be located? (Presumably, you have answered this, and the answer is in your home.) Is there a post office box?

• Will the business have a web presence? What is the domain name(s)?

• Who is the proprietor(s)? What is it about the proprietor(s) that makes him/her/them the right person(s) to run this business?

• What needs or wants of customers are being met? (Give a brief overview of who you are serving and why.) Read on to learn about answering these questions within your business plan.

Creating the Framework of Your Business Plan

Now, you’re ready to begin creating your business plan. From this point forward, your business plan will be one of the most important documents in your life. Your business plan is your road map. As you might have noticed by now, starting a business requires the coordination of hundreds and hundreds of details. Every item has to be thought through and planned for intelligently – or your business will suffer. A logical, written plan ensures that you make the necessary arrangements, while at the same time, preventing or minimizing the feelings of being overwhelmed.

After your business starts, the business plan acts as your company handbook. What are your plans for the future? How will business be maintained? What terms do you offer clients? All of these questions are answered in your business plan, thus showing that your business is well thought out and consistent. Rather than immediately writing your business plan from start to finish, you begin by constructing the framework, and then finish building the plan as you get the information you need to fill in the sections. You might need to rewrite some sections several times, as your plan becomes more precise and your assessment of business more realistic.

In this section, you learn how to begin building your plan by outlining a basic business plan “form” that lists all the necessary information and components of your business plan. Your business plan will be divided into sections; within each section, you will answer a series of questions that provide necessary information about your financial, logistical, and legal plans for your business. The basic format of the plan is shown in Figure 3.2. These are the major headings that make up the framework of your business plan:

• Introduction/Overview
• The Basics
• Business Overview
• Marketing
• Logistics
• Financials
• Assumptions, Expansion, and Exits Within each of these sections, you’ll add information that answers a number of questions.

The following sections detail these questions and discuss how to go about answering them within each of these important areas of your business plan. As you fill in your business plan, create a list of any equipment, supplies, or other items you’ll need to begin and run your business. If you know how much an item will cost, note that directly on your list. Save this list of items for the when you formulate a budget. 50 Start Your Own Home Business In No Time For additional help, check the many free publications available from the Small Business Administration.

Much of the information can be downloaded from the website, sba.gov/library/pubs.html. Booklets and other informational pieces include a home business overview, how to determine if you are ready for business, and a wide variety of general and specific business plans. If you do not have Internet access, look up the nearest Small Business Administration (SBA) office in your phone book under the blue pages/government listings section.

Making Sure That Your Family Is On Board

Unless you are single and childless, you will need to convene one or more family meetings to be sure that everyone is comfortable with your home business. After all, one of the key words in home business is “home” – and you are going to be changing the way that your family’s home operates somewhat. Although you could, technically, start a home business with no input from your household, it is not recommended. Other members of the household will need to honor your requests to work undisturbed, your need to work weekends or evenings, and perhaps give up some space currently used for other things.

Don’t forget that there is a huge difference between telling your spouse or partner, “I’d like to start a business some day,” and saying, “I am starting my own home business. Please look over my business plan.” You are serious now, and setting aside a separate time to discuss the matter is a clear indication that you are no longer merely dreaming. Here is how to talk about your ideas with the most important people in your life:

• First, sit down alone with your spouse or partner and discuss your desire to have a home business. You don’t have specifics right now, but you do have dreams—share those with him or her!

• Be willing to address reasonable concerns. For example, if your partner objects because you have no savings (a very legitimate reason), discuss what an acceptable level of risk might be. If he or she simply says, “It’s too risky,” and clams up, try to discuss the perceived risks. Ask for the specifics.

• Although you will be in charge of how the business is run, your family should have a say in how the business affects home life. Will you need to alter the quantity or quality of your time together? Your partner might be fine with that, but will insist that Sundays are “family day,” and no work will be done on that day of the week. One or two of these commitments should be okay, but if you are presented with a long list, explain that much of the business is unknown; then, ask for the one or two commitments that are most important.

• Starting and running a business is a 40-hour–plus endeavor for most people. Your spouse or partner needs to understand the time involved and respect your decision enough to work with you on issues such as who does the housework, who chauffeurs the kids, and so on. If you are currently a stay-at-home mom or dad, be sure that your spouse or partner clearly understands that housework and children are no longer your sole priorities and that you expect them to pitch in regularly, without being asked.

• Work through the rest of the information in this website with your spouse or partner. Most people who are starting a home business find that their spouse or partner can be a valuable built-in sounding board. Your partner is usually close enough to be concerned with your business success, yet far enough removed from daily business activities to offer an objective opinion.

• If the discussion becomes heated, don’t be afraid to seek couples counseling. As difficult as starting a business can be, it will be almost impossible if you are going through a breakup at the same time. Your children need to be prepared for changes resulting from your home business, too. If you are a single parent, sit down and talk with your child(ren) about what you are planning to do, and what it means to them. (If you have a spouse or partner, do this together.)

Just be as honest as you can, and don’t be afraid to say, “I don’t know.” If you approach the upcoming changes as a wonderful adventure, chances are your children will be more at ease than if you talk about how scary it is going to be. At the same time, be realistic in your discussion. Although you will want to let your children know about the positive aspects (such as a more flexible schedule), be sure that they know not to volunteer you for a class field trip right away! Provide them with examples of what this venture will mean in terms of your time, your availability, and any additional chores they might need to do.

Will the Business Fit Your Physical Home?

Perform a thorough, visual walk-through of your home. No matter how crazy, briefly consider the possibility of each room in your home being used as your home office or workshop. List your top three possibilities. Of the top three options, which room is best suited for this purpose? Will you need to repaint or switch bedrooms or other uses? Is the wiring “iffy”? Is your home prone to leaks? They can damage costly equipment, so address the problem before you move in costly furniture and computers. Is the area out of the traffic flow of your home? Will it be sufficiently quiet, so you can work? Is it separate enough, so you can avoid entering the work area when you are on personal time, such as evenings and weekends?

If you don’t have a separate room, don’t worry. Can you divide a larger room with panels or room dividers? Or mark an area by the use of a different carpet and/or creation of “walls” using bookcases? Not only does this break up the space and encourage a better work-life balance, but it also helps meet the IRS provisions of having a separate space dedicated to business activity. Unless you provide day care, you will have to be sure that the space is set aside solely for business purposes, and not used for any other reason, if you want to deduct related expenses. For more information, see the IRS website: irs.gov/taxtopics/tc509.html.

Stay tuned as we will continue to talk about making sure your family is behind you and supports your work at home business ideas!

Whether you rent or own your home, you must comply with your city or county’s zoning laws. Finding out the laws in your area should be fairly simple. If you have a computer, look up your city’s web page on the Internet. Go to the section of the planning department, and look for information on running a home business. If you cannot find the information that way, stop by your city’s planning department and ask for regulations governing home businesses. As with landlords and homeowner associations, most planning departments will be concerned about noise, traffic, and eyesores.

They don’t want a big sign reading, “Al’s Junkyard” in a quiet, residential neighborhood, and they don’t want traffic rivaling Macy’s on a busy Saturday. If your planning department hits you with regulations that might be problematic, ask if there is a workaround or if you can receive a variance. Don’t hesitate to ask the planning department how many home businesses it has licensed. Chances are, the more it has allowed, the more routine your visit will be, and the less hassle involved. If your planning department has not experienced very many home businesses, set up a second meeting.

Bring as much research as you can find about your type of home business, and educate your planning department. Don’t let all those scary stories about the planning department put you off – yes, planning departments can give big developers a hard time, and often for very good reasons. But you’re a very, very small and very quiet fish. Many planning departments will be relieved that someone like you is waiting to see them. With a check and a completed form in my hand, I was in the Planning Department offices for 30 seconds! The planner on duty said something along the lines of, “Writer—can’t get less controversial than that,” signed off on my home permit, and shooed me out of the planning office.