Writing a business plan isn’t optional just because you consider this simply a home business. You are a small business owner. A written business plan is required to secure finances or investors in your new home business. Starting a home business with your own funds and ideas doesn’t mean you don’t need a business plan.

A written business plan is critical to every home business. The thought process and research involved in writing your business plan will reveal the blue print for your home business.

There are numerous paid and free business plan products that you can use to develop your own home business plan. Unless you are seeking investors in your small business, you can learn how to write a business plan that keeps your business working toward your goals. To have a well written small business plan, you will find your goals easier to reach and keep track of your progress both with building your customer base and sales.

Starting a home business without a writing a well thought out business plan is like building a house without a blue print to guide you every step of the way.

Your home business foundation built on these eight areas will give your business a strong identity and focused sense of direction to help you plan and manage your business effectively.

#1) Business Summary.

Write out a description of your business. What kind of company do you want to build? A well written description or summary of your business often propels you through each step of how to write a business plan. Writing the summary first means you will always have the basic premise of your home business idea at the top of everything you put in your business plan.

#2) Name Your Business.

You may think that your direct sales business already has a company name but that is not the name of YOUR business. Creating a distinct name for your business will help make your plan. Does your business name reflect what you offer? Is it easy to remember? Does it have strong branding potential? Should you reconsider your current business name if it not working with your product? Make sure the name of your business fits not only your product or services but your mission statement.

#3) Itemize Your Products or Services.

Write out descriptions of your products; how do they look, smell, taste, feel or how your services will help others reach their own goals in life. How will your offerings improve the lives of others? Sort through why others aren’t already doing it and if they are offering exactly what you are going to offer then what prevents the competition from doing it better or more cheaply than you are.

#4) Mission Statement.

Your mission statement is a concise clear summary of the goals of your business. In your mission statement, you will define exactly what your business does, the products or services offered and what makes your business unique above the competition. Writing the bottom line of your business goals into your mission statement will guide the rest of your business plan.

#5) Business Assessment.

A major portion of your home business plan is a detailed assessment of four areas: your strengths, your weaknesses or limitations, business and marketing opportunities and threats or barriers to your potential success. At this stage of your business plan, you will be looking at your industry. Your work experience and talents that will add to your business would fall under your list of strengths. Your lack of knowledge or funds could be listed as your weaknesses. Take into account how broad your industry is when you are looking at your strengths and weaknesses. If you have little money for start up then you will need to be creative in your marketing and running your business. Will your weaknesses mean your opportunities for success are limited? Will your talent surpass your lack of funds?

Opportunities for business growth may be dependent on your networking contacts or website design. Every business owner should remain wary of all threats to business success. Planning for problems before they arise will make running a business easier and more successful in the long run. As you can see this aspect of business planning is critical to all of your vision, your mission statement, your goal setting and running your home business.

#6) Goal Setting.

Write your vision for your business. Be specific. You can revise this as your goals and mission changes. How do you envision your business a year from now then five years from now? Write out your goals and objectives. Break down each product or service into their own set of goals. Plan for expansion as your business evolves.

Goals are useless unless you can measure your progress towards them and plan to regularly assess which goals have been met or still need to be fulfilled. Make your goals specific and time sensitive. With each business goal, itemize what needs to be in place to reach each of your goals. Outline what steps you will take to reach the goals for your home business. Mark your calendar when its time to re-evaluate your goals and re-align your vision for your business to match the direction your business is going.

Celebrate when you reach your goals and regroup when you realize you missed the mark. It’s important to decide what you consider to be a major loss and what you will accept as unsuccessful. Knowing what you will accept and absorb as a business loss before it happens will help prepare you for when it actually happens.

#7) Target Market.

Research your desired target market. Identify who you expect to buy your products or services. Write a profile of your average customer. You need to know your target before you are able to aim. Study your potential customer’s behavior. Where do they shop? What do they read? Do they move in specific social circles? Who wants or needs your business? Who will benefit from your product? What type of people will find your business a necessity?

You cannot expect to fill a need or desire of a customer if you do not know what makes your offer unique and necessary. Look at those that offer similar products with success. Write out how you can rise above and differentiate yourself from the competition. At this stage of your business plan, describe how you can stand out from the crowd. Write down how and why your company is better than the competition. Study the competitions latest marketing strategies then outline here how you plan to counteract their business moves to give you the edge you need to stay unique and effective.

While studying your customers and competition, take the extra time to identify complementary products or services that may fit your current business plan that may give the edge you need to compete in the future.

#8) Sales and Marketing Strategies.

How will anyone know your business exists? What steps will you take to make your business known? How will your customers find you? What can you do to ensure that you attract the customers you seek? How will you track your efforts? How much money do you have to put these strategies in place?

List your strategies – press release, printed catalogs, business cards, open house, craft fairs, business, conventions, virtual expos, sales letters, etc.

Determine whether you will market exclusively online, locally to your warm market or a combination of both. If online marketing is part of your business plan then include an internet marketing plan to include your domain name and host, whether you will hire a professional website designer or do it yourself, your business logo and e-commerce set up.

#9) Business Start Up.

Determine what equipment and services you will need to run your business to include setting up your home office, equipment, supplies, product inventory, customer record keeping, and book keeping. Create a checklist of professionals you need to secure for legal and financial advice, advertising expertise, office assistance or tax expertise.

Starting a home business can be exciting and scary because it is Your dream that you are working towards with each work day. To write a business plan, means a great deal of commitment to the process. The process of writing a business plan will bring you closer to understanding yourself, your business goals, your company identity and reaching your potential customers.

Although these areas are critical to writing a business plan, there is much more that will be added to your plan over time. Each time you reach a goal or discover a barrier to making the sale ~ you will return to your business plan and revise your goals, strategies and techniques.

Business success is in the plan and implementation but also in the ability to adjust and redefine your business goals to meet your customers need or desire while letting you design your home business your way!

Creating a professional business plan for your service business is just as important as the business itself. It is a sales tool as well as a possible means for getting financing. If you are a novice, there are many free templates on the internet. Search for “free business plan service business. Microsoft also has free templates on their website.

When you finish writing, carefully read and spell check your plan, look for and add keywords to make your plan easy to read and remember. Include all of the sections below then add some of your own.

Get help from Better Business Bureau
Get to know your local Better Business Bureau. Apply for Accreditation. Being accredited with the BBB shows you meet specific standards of truth and honesty, and automatically instills a trust for your customers. Be sure to include the BBB logo in all of your advertisements.

Small Business Association
The Small Business Administration has many free resources including “Free Online Courses”.

Mission Statement
The mission statement should be a very specific description of the reason you are doing this business. The mission statement should be a very specific description of the reason you are doing this business. For example:

“Our services are designed to help the elderly, disabled or anyone who needs a little assistance to stay in their home, be more independent of family and friends.”

Services Offered
List and describe the types of services and the cost of services you will provide. Include current and new services that will be offered in the future and the projected dates. This section should start with a summary of services followed by a very detailed list including: description, your cost to perform service, fees, and profit.

The People
This is a list and a short description of the each person who will be part of the business. Include a list of accomplishments if any of each person. Also include an organizational chart and detailed job descriptions.

Competition
Know who your competition is! Detail the advantages your business will have over theirs. What services do they offer? How much do they charge? This should be a detailed list of all the competition.

Market Research & Plan
Is there a market for your service? What will your costs be to get started? How has the industry changed in the last ten years? What are the new ideas and trends? What type of marketing will you do now, in one year?

Goals & Objectives
List short term and longer term goals. Where should the service business be in one year, in five years? Make a list of objectives and how they will be measured. These should include: finances, customer base, equipment and so on.

Financial Plan
Estimate the cost of doing business and how much income will be needed for the first, second and third years. This should be a detailed estimate that includes all income and expenses. You should have at least one year’s worth of cash in the bank before you get started if you plan to hire several employees. They expect to be paid no matter how much money the business makes or does not make.

Resource
List the required equipment both computerized and other equipment needed to provide the services. Include any equipment that you may need to rent or purchase. Also include personnel and financial needs.

Risks
Be sure to check into business insurance for you and any employees. Property, liability, workers compensation, and auto insurance are good places to start. Do a Google search on “Business Insurance” or check with the company who insures your home or car to get some referrals.

Key Issues
Are there any short or long term problems that will need to be resolved? Issues may be funding, business location, marketing or changes in the industry.

Business plans are vitally important documents, both for raising investment and for generating common understanding about proposals for the future. Most of these plans take weeks to produce, and many are written with the help of corporate finance advisors and other professionals. We have the pain and privilege of being a paid reviewer of plans, and the frightening reality of our experience is that most of them sit somewhere in the range of poor to terrible. However, most of the problems can be fixed with some simple disciplines.

In this article, we list the most common errors we see, and some recommendations for writing a more effective plan.

Common errors

The plan is too long

No one will invest straight off the back of a plan. If they are intrigued by it, they will want to meet you and find out more. The plan needs to be sensible, but if they invest, they are investing in you. They will be backing your ability to achieve the plan or, more likely, something just as good when life inevitably turns out differently. So your objective is simply to say enough that the reader can decide that they either want to meet you or that they are not interested, and no one’s time is wasted as a result.

Whoever your target reader may be, they need to read the plan in one sitting and retain what they read. This means you have 10-20 pages to get your plan across. You cannot possibly detail every idea, initiative and piece of evidence in a ten-page document. So your challenge for the plan is to summarise the important points, just enough to whet a reader’s appetite and either entice them to want to meet you or decide quickly that it’s not for them.

The plan is overtly optimistic, ignoring the risks and negatives

Plan writers naturally try to put their idea across as positively and attractively as possible. This is natural, and it is important to be positive and put across your passion; but most plans end up as blatantly optimistic sales documents, with little thought to risks and downsides. Unfortunately, this propensity increases with the use of poorly qualified advisers.

Readers want to see their concerns being pre-empted and addressed rigorously in the plan, not dismissed or ignored. Your plan is an opportunity for you to put yourself across as a passionate but practical business person, and build your credibility before meeting potential investors. If the plan dwells only on the upside, you come across as unrealistic.

It looks like a filled-in template

Some sections of plans really are necessary most of the time. It’s rare that you don’t need a section discussing the relevant market trends, the distinctive differences of your service or the projected financials. However, crow-barring in a SWOT analysis or a Porter’s Five Forces puts you in serious danger of looking like an amateur business plan writer, rather than a smart professional with a convincing investment proposal. If a section adds to the reader’s understanding in a neat, focused manner, then go ahead with it, but blind application of template business tools will make your plan much worse.

It contains too many broad generalisations

Most plans focus on a specific opportunity in a specific market, but descriptions of the market and the opportunity are often so generalised as to be meaningless. If your plan is for home pet-sitting in London, showing how many millions of cats are bought every year in the UK is almost irrelevant.

Describe your service, your market and the reasons people will buy as precisely as possible. You will need to make assumptions, but as long as you state what they are and why they are credible or conservative, then you have a context that is meaningful to all involved.

It is written in language that impairs the readers’ judgment of the business

It is amazing how many people have a writing style that detracts from the quality of their thinking and business ideas. A business plan is a serious document that needs snappy, simple writing to get the point across: one idea per paragraph, one point per sentence. No sales-speak, no rhetorical questions, no use of complex technical language. Furthermore, too much business-speak is common in many plans but gives an impression of vague thinking and lack of real world practicality, it can be annoying and a turn-off for the reader. Language may not improve the appeal of your business but it allows the reader to clearly understand your thinking without distractions.

OK, that’s what not to do.  Now we cover the key aspects of an effective plan.

Writing an effective plan

Be clear about who and what the plan is for

You need to think about this to determine what is in the plan and how much you need to explain. The plan is confined to information and context relevant to the target audience to achieve this end. For example, a plan used to attract an external investor will need a market section explaining the fundamentals; one used to generate Board agreement about a new course of action may only need a commentary on recent changes or trends.

Convince yourself first

A good plan needs to convey both passion and credibility. Credibility is the factor that is almost always lacking. The harder the plan writer challenges his own thinking and his own assumptions, the more credible and higher quality the plan. Your own concerns and lack of clarity will come out at some stage during the process, so you need to be the one that takes control – test and pre-empt them before someone else does.

Realise that the plan is step one of many

The most successful, well-written plan will not be the single killer step that by itself secures investment, agreement to proceed, or whatever the ultimate objective may be. It is only step one, to be followed by meetings, questions and challenges.

The role of the plan is to help clarify the opportunity for all involved and build your credibility, so that subsequent discussions are productive and focused on how things are going to get done.

Be brief and clear

The plan needs to contain enough to describe the opportunity, why it is attractive, how you are going to exploit it, and no more. If you are enthusiastic about the opportunity, you will be able to write at-length, most likely well beyond the tolerance level of most readers. You will need to be deliberate in your efforts to bring out the most important points, reduce redundancy, and be clear and specific about anything that is open to interpretation. Use the document to intrigue the reader, not cover every angle.

That covers the key characteristics of the most effective plans we review. Now we outline typical sections that we expect to see in some form in the plans we review:

Plan contents

The bullets below show a typical framework for a plan. This framework is a start point and no more than that. It needs to be cut and changed to tell the story you want to tell in the clearest, most relevant way. With the right mindset and style for the plan, you can adapt the sections below to get your idea across, and generate credibility and interest from your target audience.

Business Plan Template

Executive summary (1 page)

Summary description of the business containing enough for a person to understand it in 5 minutes. One paragraph each on:

– Business background (description of the business)

– Vision and strategy

– Relevant market background and trends

– Revenue and cost expectations (short summary table)

– Key next steps in implementation plan

Business description (1-2 pages)

Background

– Description of the products or services the business will provide, and why they are better or different than what already exists

– Description of the customer groups

– Any other relevant background needed to understand the business

– Any relevant history

Vision

– Description of your vision for the business that will get people excited. Include any tangible targets in terms of sales, customers, product performance, market share, etc.

Strategy

– Summary description of how the business will achieve the vision described above. Include relevant descriptions of how your product or service will developed and marketed, and any other important issues to get right, e.g. technology, sourcing products, etc

Market (1-2 pages)

– Description of the market including estimates of overall size and the opportunity for your product/service

– Description of any market trends that are relevant to demand for your product/service

Competition (1 page)

– Description of direct competitors and alternative products or services customers have to buying your products/services

– Explanation of why your product/service is better or different than the competition

Revenue streams (1 page)

– Description and quantification of all major revenue streams for a three year period, being clear about all assumptions

Costs (1 page)

– Description and quantification of all major costs for a three year period

Implementation plan (1-2 pages)

– Explanation of all major steps required to get business up and running, and performing in the first year. This is best done as a table describing with all major actions with deadlines and responsibilities

Financial projections (1 page)

– 3 year summary profit and loss account

– Description of all major investments

Team background and credentials (1 page)

– One paragraph on each of the team members

So there you have it. At its heart, a great plan will describe a great idea, supported by a great team, but will do so in a brief, clear way, that gets to the point and intrigues the potential backer.

The last plan we wrote was for a start-up sports team and it raised a £40m investment, from the first backer the team approached, within two months. The plan was short and simple with not a SWOT analysis in sight, but it was a great idea and had a great team. The plan was just step one.