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How to start a business plan for the first 5 years of a new home based business. First of all, some broad financial aims will help you set realistic annual targets which you can aim for one at a time.

Your 5 Year Plan for Your Small Online Business

 

Please notice that I have put the word "your" in italics. This is to emphasize that this 5 year business plan is about you. It is your business. You are are the boss. You decide what you want to do, where you want to go and how you will get there. I presume if you have got this far you have probably decided on following through one small business opportunity, or have an idea of your own to pursue.

So, now you are probably about ready to come up with an outline financial plan. It will be a skeleton on which you can add the flesh later; or you can view it as the peak of a pyramid, and you will add all the necessary detail to reach that peak later.

Your small business plan can be very simple, and very short. If you prefer, it can be comprehensive and detailed. The important thing is, you have thought about it. And, it will probably set you some targets. This is not a plan to take to the bank manager to get a loan; it is to get you to think about what you are aiming to achieve in 5 years.

The key thing to remember about setting targets is that they should be realistic. In the past I have had to assess and comment on 5 year and 1 year marketing plans, in which I knew the sales targets were totally unrealistic. They become worthless. Sales people have to be optimistic, as do you, but target setting is no use whatsoever if the hurdle is set too high. They can be counterproductive: month after month, year after year, of failing to reach targets. That's not what they are about.

If you are just in the early planning stage for your own small business, then you probably have little detail you can add in the way of flesh. That's fine. A plan is a plan is a plan. I am sure the financial side will be uppermost in your mind, so that's a reasonable place to start.

Outline Financial Plan for Your Small Business

The figures I am going to use for illustration are purely that, for illustration. They mean nothing. You will be thinking about your own circumstances, ambition, situation. I don't even know what country you are in. $30,000 a year may not be much in the US or Europe, but in some countries it's an enormous amount

It's natural to have a desired level of income to aim for, but keep it modest and achievable. At this stage, you probably have no real idea how profitable your small business could be. A year or two of real experience with a live business, and you will be better placed to make forecasts and set targets. That does not mean an initial target is worthless. It gives you something to aim for, a sequence of signposts to follow. And it's a good discipline to apply to your new business. If your small business  turns into a multi million dollar empire, you'll need that discipline more than ever, so why not get into good habits now?

Let's say you've done all you're initial thinking about what you want and expect to achieve with your business. On balancing things out, you have decided you'd feel satisfied if you can reach $30,000 a year profit in 5 years. Maybe in your circumstances, that's something of a quantum leap, or maybe a small amount in relation to your salary in your present job. It does not matter, that's what you've decided is your achievable target.

Now, take that $30,000 and decide what you think would be a reasonable target for each year, the stepping stones to your end target. I have called the table below a net profit forecast. In fact, at this stage it is more a part of a wish list, the profit part. When your own small business has been going for a few months or years, your forecasts can become based on real experience. Then they truly will be profit forecasts.

Net Profit Forecast (Annual)      
         
2009   2005 2006 2007 2008
$   $ $ $ $
           
30000   5000 10000 15000 22000

 

You decide that a steady increase from a low base year is sensible, so you start with a forecast of $5000 profit for your first year. If you are going for an online business, bear in mind that most people who try earn nothing, so $5000 in your first year is a tough, but achievable, target.

 

The Rest of Your Plan for Your New Business

You now have the barest of bare bones financial plans. Profit of course is just the final figure out of what can be a complex calculation. Put simply, sales - costs = profit. We will come back to that later. For your purposes now, you are aiming for a $30000 profit in 2009, but perhaps more importantly, $5000 in 2005.<

Your new business though is more than just a financial outcome. Your plan also includes a personal lifestyle change. Hopefully you have thought about the alternative lifestyle seriously too, and have tried to relate it to the financial plan.

From now on, let us assume you have decided on an online business. There's a very good chance of that as you have arrived at this website.

Working From Home in Your New Online Business

Two of the main  attractions of starting your own online business are working from home and being your own boss. If you have a spouse and children, hopefully you have brought them along with you as you considered your plan. Now your outline plan is falling into place, at least in your mind, you can now bring the "working at home" aspect together with the financial plan. Here, reality has to hit home, especially if you are considering quitting your day job. You need to work your budget and cash flow without the new business, with the new business and your job (if you intend to hang on in there), and finally with the new business.

Unless you have a lot of capital behind you, you probably have to keep your current job going. How do you fit in getting your new business established? If you and your spouse are both working that gives you another option. If so, can you manage if one of you packs up their job and concentrates on the new online business? These are obvious, but it is essential to think about them and plan for them realistically, otherwise you could be falling off that rollercoaster at the first bend.

Let us assume now that your new online business will be run from home, but initially you cannot afford to do so full time. You have an outline financial plan as in the example. You have the reality of your home budget and finances. How do they gel together, without putting your family's security at risk?

For a while, concentrate on your home budget. Look at your outgoings, everything including interest on loans, capital repayments on loans and mortgages, food, electricity, car expenses, everything. Miss out nothing, you're dealing with reality here. You want to improve your financial situation, not make it worse. Try to come to a figure that is the absolute minimum you could live on.

Let's say the person in the example does this calculation. Just to remind you, their profit plan was:

Net Profit Forecast (Annual)      
         
2009   2005 2006 2007 2008
$   $ $ $ $
           
30000   5000 10000 15000 22000

Their current income is $20000 per annum. But they have calculated that by 2007, by which time a loan will be paid off, they can get by on $15000 per annum. So, there is the crossover point in their plan. They can sensibly aim to quit their job in 2007 if all goes according to plan. That simplifies things for them, and they can concentrate on achieving those financial targets year by year. If all goes well, when they go back and review this plan in 12 months, they may already be on the verge of earning $15000 per annum. Who knows? This is the exciting part.

Of course, your situation will be different. You may have capital, you may be able to refinance, there are all sorts of variables. Just try to plan realistically, as the last thing you need is unnecessary pressure on yourself.

The sort of planning I've talked about so far is very rudimentary. A full business plan can be dozens of pages long. But what's gone before here assumes you are just on the point of taking the plunge into starting an online business. You are early in the thought process. If it's been a help to you going through this preliminary planning, then it's been worth my while. Yours is a very personal situation, and I appreciate that. >

Good luck with your new business! However, I am sure you will run your business in a way that ensures the need for luck is minimised. You've read this far, so you are obviously someone keen to learn.

I hope you find other worthwhile resources on this website. When you get the business under way, your financial control and planning will become even more important. You will be running a small online business which you are going to manage. I hope to be able to bring you further assistance at that stage.