Your business plan should begin with a summary of the entire plan. Even though it is the first thing that a reader will see, it should be written last after the more detailed sections of your business plan have been written. The purpose of this summary is to capture the attention of the reader with enough information about your business, whether ongoing or proposed, to convince them to read further. The summary should give the reader an overview of your business and why you think your business or new venture will be successful. Following the opening summary should be a table of contents including the following sections:
- Market Analysis
- Company Description
- Organization and Management
- Marketing and Sales Management
- Service or Product Line
- Funding Request
- Financials
As a self-employed person, you may be able to deduct certain expenses associated with the business use of your home. The deduction includes the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. To deduct these expenses you must use a designated part of your home regularly and exclusively for its business purpose.
Regarding legal requirements for you home-based business, your first consideration should be any local zoning restrictions that might prevent the operation of your particular business out of your home. Once you have determined that you can legally operate your business out of your home, you will be subject to the same laws and regulations as any other business. Your CPA can assist you with determining which laws and regulations apply to your business and can also assist you in determining your tax filing requirements, such as income taxes, payroll taxes and sales taxes.
Avoiding cash flow problems begins with having an understanding of how cash flows through your business. This flow of cash is referred to as the operating cycle. The cycle begins with an initial cash outlay required to provide your particular product or service and continues through to the collection of accounts receivable. As you track cash through the operating cycle, you should note any deficiencies, or excesses, in cash. When compared with previous operating cycles, a pattern should develop which will help predict cash flow problems and allow you to plan for deficiencies.
Planning before the fact is the best step you can take toward having a positive cash flow and avoiding a cash shortage. Your planning should begin with the correct pricing of your product or service. Under pricing will never produce adequate cash flow to cover your expenses and overpricing will likely not generate the sales volume, and subsequent revenue, required to cover your expenses.
Next, you should bill on a timely basis and actively pursue the collection of accounts receivable. Related to the collection of receivables is monitoring the terms of payment that you extend to your customers. You may want to be flexible with customers who have their own cash flow issues. Therefore, establishing reasonable credit terms for the collection of receivables will help attract and retain the customers necessary to produce a steady cash flow.
Short-term borrowing such as using a credit line can also be used to meet cash flow shortages when sales and collections are not adequate to meet cash requirements.