The financial needs of home-based businesses are completely different from those of larger brick-and-mortar companies. For example, when you decide to start a home-based business, you do not need to worry about the down payment to obtain commercial real estate. However, remember that for your business to succeed, you will need to have a rock-solid financial management plan in place.
Here are five financial tips that will maximize the potential of your home-based business.
1) Create a formal business plan
If you are thinking of securing financing for your home-based business, it is essential that you chart out a proper business plan. Think of your plan as a resume for your business. Ideally, it should include your vision, background, goals, and some information about your competition. You should also explain how you intend to make your business profitable, and list some of the equipment and other infrastructure that you will need to purchase. A formal business plan lets lenders know that you have done all your research and are prepared to take the next step.
2) Get help from the Small Business Development Center in your city
Many home business owners are first-time entrepreneurs who have to figure out business ownership as they go along. If you need additional guidance in launching your business, visit the Small Business Development Center in your city to get the training and learn the skills needed to be a small business owner. As you attend the various SBDC programs, seminars, and meetings, you will become much better prepared for all the challenges you’ll encounter along the way. These courses will also make you more confident when you seek home-based business loans.
3) Generate projected financial statements
If you want to determine the overall performance of your home-based business, the best way to do so is to generate projected financial statements. These will include your income statement, cash flow statements, as well as the balance sheet. The balance sheet is simply a sheet that shows all your assets, equities, and liabilities. These projected statements will be extremely helpful in planning the future of your business.
4) Approach your friends and family members
Since it can be very difficult to obtain traditional business financing when launching a home-based business startup, you may want to consider asking friends and family members for financing. Show them your business plan and talk with them about what you hope to achieve by starting this business. If they see potential in your plans, they might give you the capital you need to get your home-based business off the ground. Related: Does Your Small Business Need a Partner, or Just a Loan?
5) Make a real investment in marketing
If you can’t afford to invest in marketing, your home-based business may not be ready to make the jump from idea to execution. From setting up a great website to offering free consultations to attending trade shows, there are countless ways to attract potential customers — and you’ll need to take advantage of all them to stand a chance at succeeding. Before you officially set up shop, do some research to understand who your ideal customers are and where you can find them. Building a sustainable customer base shouldn’t be left to trial and error.