Home Business Vision Must Incude Financial Goal Setting
Failure to accurately see the financial future of your business is one sure way to make sure it cannot succeed. Before you even begin to write your business plan, regardless of the type of business, you will need to have an accurate vision of what your personal financial needs will be once you start your own venture. You cannot base you needs on your current earnings, as there are other factors to calculate into the total such as health insurance, business licenses and other business-related costs.
While some of the costs will be one-time fees or will represent annual costs, other will be monthly and some cases weekly. The first step is to determine what you and your family needs to meet your obligations including rent or mortgage payments, utilities, food and typical household expenses. If your spouse is the one handling the family's financial affairs you will need their input in determining your minimal monetary needs.
Once you have that in writing, you can begin estimating business costs. Even though you are setting up an office in the home and plan to take a business use of the home tax deduction, you should still consider the portion of the rent and utilities that will be represented by your tax deduction as a business expense. For example, if your month;y mortgage payment is $1,000 and you can allow 10 percent of house expense as a deduction, then plan on $100 being spent on your place of business.
The same should be planned for utilities and other costs, including a telephone line. Even though you probably have a home phone, a separate line for the business is a good idea to prevent interruptions at home after hours as well as to keep children from answering the phone when a potential client calls. It just sends a more professional message when the business phone is answered in a business manner.
Conservative estimates can be a good starting point, but you will also need a contingency fund in the event of an unforeseen repair or a project that gets out of hand and costs more than anticipated. Once you have gong through the home and business expenses you will have a good idea of how much money you have to bring in through the business to maintain your family lifestyle and meet your business expenses.
Now it is time to seriously think about the projected income of the business. Remember it is not only the business expenses you need to cover. For example, if you anticipate personal expenses of $1,500 a month and business expenses of $500 a month, anything less that $2,000 a month is going to leave you with some unpaid bills. If the business you are planning to open is not capable of delivering that amount of income, you may have to rethink your prospects.
Even if the potential is there for a minimum of $2,000 per month, you will need to be realistic about how long the business will need to be operating before that level is achieved and determine if you have enough money to survive until it does grow to the necessary level.
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