RMC Business Plan For Home-Based Business


Homework has taken on new meaning for more than 10 million Americans. The drive for economic self-sufficiency has motivated large numbers of persons to market their skills and talents for profit from home. More than 400,000 persons launched home enterprises in 1985. Our increasingly service oriented economy offers a widening spectrum of opportunities for customized and personalized small business growth.

Though untrained entrepreneurs have traditionally had a high rate of failure, small businesses can be profitable. Success in small home based business is not an accident. It requires both skills in a service or product area and acquisition of management and attitudinal competencies.

The purpose of this SBA Management Aid is to help you take stock of your interests, aptitudes and skills. Many people have good business ideas but not everyone has what it takes to succeed. If you are convinced that a profitable home business is attainable, this Management Aid will provide step by step guidance in development of the basic written business plan.

Information Gathering

A helpful tool for use in determining if you are ready to take the risks of a home based business operation is the SBA Publication #MA 2.016, Checklist for Going Into Business. It will help you focus on the basic steps in information gathering and business planning.

While the reasons for the rapid growth of home based business operations may vary from the need to supplement family income with a few hundred dollars all the way to a sophisticated technical consulting service billing hundreds of thousands of dollars, there are many common characteristics and challenges to be considered in launching most home based businesses, regardless of size. Some tasks are universal to all small business startups, while others are unique to a home base.

The experience of the author and interviews with dozens of home based operators over the past decade indicate that special planning is required to research legal and tax issues, proper space utilization and to establish time management discipline. Inadequate or careless attention to development of a detailed business plan can be costly for you and your family in terms of lost time, wasted talent and disappearing dollars.

The Entrepreneurial Personality

A variety of experts have documented research that indicates that successful small business entrepreneurs, whether male or female, have some common characteristics. How do you measure up? On this checklist, write a "Y" if you believe the statement describes you; an "N" if it doesn't; and a "U" if you can't decide:

I have a strong desire to be my own boss.

Win, lose or draw, I want to be master of my own financial destiny.

I have significant specialized business ability based on both my education and my experience.

I have an ability to conceptualize the whole of a business; not just its individual parts, but how they relate to each other.

I develop an inherent sense of what is "right" for a business and have the courage to pursue it.

One or both of my parents were entrepreneurs; calculated risk-taking runs in the family.

My life is characterized by a willingness and capacity to persevere.

I possess a high level of energy, sustainable over long hours to make the business successful.

While not every successful home based business owner starts with a "Y" answer to all of these questions, three or four "N"'s and "U"'s should be sufficient reason for you to stop and give second thought to going it alone. Many proprietors who sense entrepreneurial deficiencies seek extra training and support their limitations with help from a skilled team of business advisors such as accountants, bankers and attorneys.

Selecting a Business

Perhaps you have already decided what your home based business will be. You know how you will serve your market and with what. If not, but you are determined to establish a home based source of income, then you need to decide exactly what business you will enter. A logical first step for the undecided is to list potential areas of personal background, special training, educational and job experience, and special interests that could be developed into a business. Review the following list of activities which have proven marketable for others. On a scale of "0" (no interest or strength) to 10 (maximum interest or strength) indicate the potential for you and a total score for each activity;

                      My Level     Personal      Market       Total
                     of Interest   Strength     Strength      Points

Personal services
-- house cleaning   ____________ ____________ ____________ ____________
-- baby-sitting     ____________ ____________ ____________ ____________
-- tutoring         ____________ ____________ ____________ ____________
-- secretarial      ____________ ____________ ____________ ____________
-- catering         ____________ ____________ ____________ ____________
-- direct mail      ____________ ____________ ____________ ____________

-- needle work      ____________ ____________ ____________ ____________
-- ceramics         ____________ ____________ ____________ ____________
-- jewelry design   ____________ ____________ ____________ ____________
-- upholstering     ____________ ____________ ____________ ____________

Artistic work
-- painting         ____________ ____________ ____________ ____________
-- photography      ____________ ____________ ____________ ____________
-- prints           ____________ ____________ ____________ ____________
-- wire sculpture   ____________ ____________ ____________ ____________
-- engraving        ____________ ____________ ____________ ____________

Repair services
-- small appliances ____________ ____________ ____________ ____________
-- furniture        ____________ ____________ ____________ ____________
-- clothing         ____________ ____________ ____________ ____________
-- TV and radio     ____________ ____________ ____________ ____________
-- automotive       ____________ ____________ ____________ ____________

Instruction skills
-- languages        ____________ ____________ ____________ ____________
-- math             ____________ ____________ ____________ ____________
-- gourmet cooking  ____________ ____________ ____________ ____________
-- music            ____________ ____________ ____________ ____________
-- home repairs     ____________ ____________ ____________ ____________

Mail order ideas
-- product sales    ____________ ____________ ____________ ____________
-- repairs          ____________ ____________ ____________ ____________
-- business service ____________ ____________ ____________ ____________

Seasonal products
-- foodstuffs       ____________ ____________ ____________ ____________
-- clothing         ____________ ____________ ____________ ____________
-- gift items       ____________ ____________ ____________ ____________

Party sales
-- cookware         ____________ ____________ ____________ ____________
-- plants           ____________ ____________ ____________ ____________
-- plastic goods    ____________ ____________ ____________ ____________
-- cosmetics        ____________ ____________ ____________ ____________

Your own ideas
___________________ ____________ ____________ ____________ ____________
___________________ ____________ ____________ ____________ ____________
___________________ ____________ ____________ ____________ ____________

For other ideas, check your local public library for one or more of the publications listed in the Resource Section of this Management Aid.


  0 to 10    Almost a sure loser
 11 to 15    Reconsider, but proceed with caution
 16 to 20    Some potential here, worth further study
 21 to 25    Probably a winner, if you answered correctly
 26 to 30    How can you lose?

This checklist should give you a good idea of the kind of a business that would suit you best and why.

Time Management

For both the novice and the experienced business person planning a small home based enterprise, an early concern requiring self-evaluation is Time Management.

It is very difficult for some people to make and keep work schedules even in the disciplined setting of an employer's office. At home, as your own boss, the problem can be much greater. To determine how much time you can devote to your business, begin by drafting a weekly task timetable listing all current and potential responsibilities and the blocks of time required for each. When and how can business responsibilities be added without undue physical or mental stress on you and your family? Potential conflicts must be faced and resolved at the outset and as they occur. Otherwise, your business can become a nightmare. During the first year of operation, continue to chart, post and check off tasks on a daily, weekly, monthly basis.

Distractions and excuses for procrastination abound. It is important to keep both a planning and an operating log. These tools will help avoid oversights and provide vital information when memory fails. To improve the quality of home work time, consider installation of a separate telephone line for the business and attach an answering machine to take messages when you do not wish to be distracted or are away from home. A business line has the added advantage of allowing you to have a business listing in the phone book and, if you wish to buy it, an ad in the classified directory.

Is a Home Based Business Site Workable?

It will be important to set aside a specific work area. For example, more than one fledgling business ledger has gone up in smoke, been chewed by the family dog, or thrown out with the trash when business records were not kept separate from family papers. Ready access to business records during work hours is essential, but they must be protected.

Check the reasons below for and against working at home that apply to you. List any additional drawbacks or obstacles to operating this business at home.

  Pros                       Cons

Lower startup costs        Isolation
Lower fixed costs          Space limitations
Tax benefits               Zoning
Lifestyle flexibility      Security concerns
No commuting               Household interference

Note that changes in personal habits will be required. Examples:

Ask family members to comment on pros and cons. Their concerns may require reconsideration of some specifics.

Is a Home Based Business Site Allowable?

Now you will want to investigate potential legal and community problems associated with operating the business from home. You should gather, read and digest specialized information concerning federal, state, county and municipal laws and regulations concerning home based business operations.

Check first! Get the facts in writing. Keep a topical file for future reference. Some facts and forms will be needed for your business plan. There may be limitations enforced that can make your planned business impossible or require expensive modifications to your property.

Items to be investigated, recorded and studied are:


____   ____ county or city zoning code restrictions
____   ____ necessary permits and licenses for operation
____   ____ state and local laws and codes regarding zoning
____   ____ deed or lease restrictions such as covenants
            and restrictive conditions of purchase
____   ____ parking and customer access; deliveries
____   ____ sanitation, traffic and noise codes
____   ____ signs and advertising
____   ____ state and federal code requirements for space,
            ventilation, heat and light
____   ____ limitations on the number and types of workers
____   ____ reservations that neighbors may have about a
            business next to or near them

Here are some ways to collect your information. Call or visit the zoning office at county headquarters or city hall. In some localities the city or county Office of Economic Development has print materials available to pinpoint key "code", items affecting home based business. If not, check with the local Chamber of Commerce office.

Even in rural areas, the era of unlimited free enterprise is over. Although the decision makers may be in the state capital or in a distant regional office of a federal agency, check before investing in inventory, equipment or marketing programs. If in doubt call the state office of Industrial Development or the nearest SBA district office. In some states the county agent or home demonstration agent will have helpful information concerning rural or farm business development.

To cover the income tax rules regarding a home based business, be sure to secure the IRS Publication #587, Business Use of Your Home.

Is the Home Based Business Site Insurable?

In addition to community investigations, contact your insurance company or agent. It is almost certain that significant changes will be required in your coverage and limits when you start a home based business. When you have written a good description of your business, call your agent for help in insuring you properly against new hazards resulting from your business operations such as:

Overall Home Site Evaluation

After you have gathered as much information as seems practical you may wish to evaluate a home based site vs. one or more other nearby locations. Here's a handy checklist. Using the "0" to "10" scale, grade these vital factors:

Factors To Consider                   Grades For Each Factor

                                           Home  Other

 1. Customer convenience                   _____ _____
 2. Availability of merchandise or         _____ _____
    raw materials
 3. Nearby competition                     _____ _____
 4. Transportation availability and rates  _____ _____
 5. Quality and quantity of employees      _____ _____
 6. Availability of parking facilities     _____ _____
 7. Adequacy of utilities (sewer, water    _____ _____
    power, gas)
 8. Traffic flow                           _____ _____
 9. Tax burden                             _____ _____
10. Quality of police and fire services    _____ _____
11. Environmental factors                  _____ _____
12. Physical suitability of building       _____ _____
13. Provision for future expansion         _____ _____
14. Vendor delivery access                 _____ _____
15. Personal convenience                   _____ _____
16. Cost of operation                      _____ _____
17. Other factors including how big        _____ _____
    you can get without moving

                              Totals       _____ _____

The greater the difference between the totals of the two columns, the clearer your decision should be. In the space below, write out what your decision and the reasons that support it.


Writing the Business Plan

Now that your research and plan development is nearing completion, it is time to move into action. If you are still in favor of going ahead, it is time to take several specific steps. The key one is to organize your dream scheme into a business plan.

What is it?

A business plan:

Why create it?

Who should write it?

When should a Business Plan be used?

Proposed Outline for Home Based Business Plan

This outline is suggested for a small proprietorship or family business. Shape it to fit your unique needs. For more complex manufacturing or franchise operations see the Resource Section for other options.

Part I. -- Business Organization

Cover Page:

Inside Pages:

Include copies of key subsidiary documents in an appendix. Remember even partnerships require written agreements of terms and conditions to avoid later conflicts, and to establish legal entities and equities. Corporations require charters, articles of incorporation and by-laws.

Part II. -- Business Purpose and Function

In this section write an accurate, yet concise description of the business. Describe the business you plan to start in narrative form.

What is the principal activity? Be specific. Give product and/or service description(s):

How will it be started?

Why will it succeed? Promote your idea!

What is your experience in this business? If you have a current resume of your career include it in an appendix and reference it here. Otherwise write a narrative here and include a resume in the finished product. If you lack specific experience, detail how you plan to gain it, such as training, apprenticeship or working with partners who have experience.

The Marketing Plan

The marketing plan is the core of your business rationale. To develop a consistent sales growth a home based business person must become knowledgeable about the market. To demonstrate your understanding, this section of the home based business plan should seek to concisely answer several basic questions:

Who is your market?

How large is the market?

Who is your competition? No small business operates in a vacuum. Get to know and respect the competition. Target your marketing plans. Identify direct competitors (both in terms of geography and product lines), and those who are similar or marginally comparative. Begin by listing names, addresses and products or services. Detail briefly but concisely the following information concerning each of your competitors:

Remember, your business can become more profitable by adopting the good competitive practices and by avoiding their errors.

To help you evaluate how successful your product or service will be, go down the following list of standard characteristics (you may want to add more from your knowledge of your field) and make a candid evaluation of your competitive "edge:' On a scale of "0" (theirs puts mine to shame) to 10 (mine puts their to shame) indicate the potential for you and a total score:

 Price                                   _______
 Performance                             _______
 Durability                              _______
 Versatility                             _______
 Speed/accuracy                          _______
 Ease of operation or use                _______
 Ease of maintenance or repair           _______
 Ease or cost of installation            _______
 Size or weight or color                 _______
 Appearance or styling or packaging      _______

                            Total Points _______

A Total Points score of less than 60 indicates that you might reconsider the viability of your product or service and/or think about how you can improve it. Over 80 points indicates a clear competitive edge.

What percent of the market will you penetrate?

 1. estimate the market in total units or dollars
 2. estimate your planned volume
 3. amount your volume will add to total market
 4. subtract 3 from 2

 Line 4 represents the amount of your planned volume
 that must be taken away from the competition.

What pricing and sales terms are you planning? The primary consideration in pricing a product or service is the value that it represents to the customer. If, on the previous checklist of features, your product is truly ahead of the field, you can command a premium price. On the other hand, if it is a "me too" product, you may have to "buy" a share of the market to get your foothold and then try to move price up later. This is always risky and difficult. One rule will always hold: ultimately, the market will set the price. If your selling price does not exceed your costs and expenses by the margin necessary to keep your business healthy, you will fail. Know your competitors pricing policies. Send a friend to comparison shop. Is there discounting? Special sales? Price leaders? Make some "blind" phone calls. Detail your pricing policy.

What is your sales plan? Describe how you will sell, distribute and/or service what you sell. Be specific. Below are outlined some common practices:

Direct sales by telephone or in person. The tremendous growth of individual sales representatives who sell by party bookings, door to door, and through distribution of call back promotional campaigns suggests that careful research is required to be profitable.

Mail Order

Specialized markets for leisure time or unique products have grown as more two income families find less time to shop. Be aware of recent mail order legislation and regulation.


a. You may decide to either buy into someone else's franchise as a franchisee or

b. Create your own franchise operation that sells rights to specific territories or product lines to others. Each will require further legal, financial, and marketing research.

An excellent starting point if you are considering franchise involvement is the SBA Publication #MA 7.007, Evaluating Franchising Opportunities. The International Franchise Association also publishes a number of valuable aids in this field.


You may decide to work as a local or regional distributor for several different product lines.

Outline your sales plan.

What is your advertising plan? Each product or service will need its own advertising strategy as part of the total business marketing plan. Before developing an advertising campaign for your business plan, take time to review a few basic assumptions. By definition, advertising is any form of paid, non-personal promotion that communicates with a large number of potential customers at the same time. The purpose of advertising is to inform, persuade and remind customers about your company's products or services. Every advertising activity should have specific goals. Common examples are:

These might include one or more of the following;

To assist in determining what types of advertising are appropriate and within company budget projections, it will be necessary to carefully review your customer profile. From this review, establish a clear statement of advertising goals. Write down what you want your advertising to accomplish.

The next step will be to develop answers to the following crucial questions:

What should be said about the business and how should it be stated? What media should be used? How much can be afforded? How can the advertising program be implemented? How can its effectiveness be measured?

The basic criteria for selecting specific types of media will include concise answers to the following:

Management Plan

Who will do what? Be sure to include four basic sets of information:

  1. State a personal history of principals and related work, hobby or volunteer experience (include formal resumes in Appendix)
  2. List and describe specific duties and responsibilities of each
  3. List benefits and other forms of compensation for each
  4. Identify other professional resources available to the business: Example: Accountant, lawyer, insurance broker, banker, etc. Describe the relationship of each to business: Example: "accountant available on part time hourly basis, as needed, initial agreement calls for services not to exceed x hours per month at $ xx.xx per hour."

To make this section graphically clear, start with a simple organizational chart that lists specific tasks and shows who (type of person is more important than individual name other than for principals) will do what indicated by arrows, work flow and lines of responsibility and/or communications. Consider the following examples:

                   Company President
             |             |               |
       Shop Manager   Sales Manager     Office
                     (owner-manager)  (owner-manager)

                    Company President
             |              |              |
       Sales Manager   Shop Manager     Office
                      (owner-manager) (owner-manager)

As the service business grows, its organization chart could look like this:

                    Company President
             |              |              |
       Shop Manager   Sales Manager     Office
             |                        (owner-manager)
         |       |
     Foreman   Parts

Concisely answer the following questions:

Detail a proposed work schedule by week and month for at least the first year.

Calculate total salaries, wages, fringe benefits and payroll taxes for each month of the first year:

            Compen-    Fringe   Payroll
            sation    Benefits   Taxes

1st Mo      $______   $______   $______
2nd Mo.     $______   $______   $______
3rd Mo.     $______   $______   $______
4th Mo.     $______   $______   $______
5th Mo.     $______   $______   $______
6th Mo.     $______   $______   $______
7th Mo.     $______   $______   $______
8th Mo.     $______   $______   $______
9th Mo.     $______   $______   $______
10th Mo.    $______   $______   $______
11th Mo.    $______   $______   $______
12th Mo.    $______   $______   $______
Full Yr.    $______   $______   $______

If you have identified any gaps in personnel skills, state how these will be overcome by training, purchase of outside services, or subcontracting. Check with the nearest state employment service office for assistance. Write your plan.

What is your banking plan?

What will be the location and type of bank accounts opened for the business. A word of caution, keep business accounts separate from personal or family accounts. These vital records will be necessary for future tax and accounting purposes. Describe your banking plan.

How is Your Credit Rating?

There may be several partial answers to this question. All will be of importance to the future of the business. First, what is your personal history of paying debts? Just to be safe, purchase a copy of your personal credit record from the local credit bureau for a small fee and make sure that it is accurate. Look in the classified telephone directory under "Credit Reporting Agencies."

To establish a credit rating, it is necessary to secure credit with a number of businesses and to use it. Your rating will be based upon your record for paying for goods and services based upon the agreed terms. If your prior credit rating is poor, discuss with your lawyer accountant and banker options for improvement before seeking and being refused business credit.

Operational Plans Summary

The purpose of this section is to summarize from previous sections the various operations of your business and link them to the finance section of your business plan. In addition, you will want to summarize the advantages and disadvantages of a home based business operation. Refer to your earlier checklist, and write your summary.

The Financial Plan

Clearly the most critical section of your Business Plan Document is the Financial Plan. In formulating this part of the planning document, you will establish vital schedules that will guide the financial health of your business through the troubled waters of the first year and beyond.

Before going into the details of building the Financial Plan, it is important to realize that some basic knowledge of accounting is essential to the productive management of your business. If you are like most home business owners, you probably have a deep and abiding interest in the product or services that you sell or intend to sell. You like to do what you do, and even more fulfilling is that you are making money doing it. There is nothing wrong with that. Your conviction that what you are doing or making is worthwhile is vitally important to success. Nonetheless, the income of a coach who takes the greatest pride in producing a winning team will largely depend on someone keeping score of the wins and losses.

The business owner is no different. Your product or service may improve the condition of mankind for generations to come, but, unless you have access to an unlimited bankroll, you will fail if you don't make a profit. If you don't know what's going on in your business, you are not in a very good position to assure its profitability.

Most home based businesses will use the "cash" method of accounting with a system of recordkeeping that may be little more than a carefully annotated checkbook in which is recorded all receipts and all expenditures, backed up by a few forms of original entry (invoices, receipts, cash tickets, etc.) For a Sole Proprietorship, the business form assumed by this Management Aid, the very minimum of recorded information is that required to accurately complete the federal Internal Revenue Service Form 1040, Schedule C. Other business types (partnerships, joint ventures, corporations) have similar requirements but use different tax forms.

If your business is, or will be, larger than just a small supplement to family income, you will need a something more sophisticated. Stationery stores can provide you with several packaged small business accounting systems complete with simple journals and ledgers and detailed instructions in understandable language.

Should you feel that your accounting knowledge is so rudimentary that you will need professional assistance to establish your accounting system, the classified section of your telephone directory can lead you to a number of small business services that offer a complete range of accounting services. You can buy as much as you need, from a simple "peg-board" system all the way to computerized accounting, tax return service, and monthly profitability consultation. Rates are reasonable for the services rendered and an investigative consultation will usually be free. Look under the heading, "Business Consultants", and make some calls. Be sure to let them know the size of your business so you get to the ones who specialize in home based operations. Many of them are home-based entrepreneurs themselves and know what you will be going through. Let's start by looking at the makeup of the Financial Plan for the business.

The Financial Plan includes the following:

  1. Financial Planning Assumptions -- these are short statements of the conditions under which you plan to operate.

      * Market health:
      * Date of startup:
      * Sales buildup ($):
      * Gross profit margin:
      * Equipment, furniture and
        fixtures required:
      * Payroll and other key expenses that will affect
        the financial plan:
  2. Operational Plan -- Profit and Loss Projection -- this is prepared for the first year, broken into twelve individual months. It should become your first year's budget. See Exhibits A & A-1.

  3. Source of Funds Schedule -- this shows the source(s) of your funds to capitalize the business and how they will be distributed among your fixed assets and working capital.

  4. Pro Forma Balance Sheet -- "Pro forma" refers to the fact that the balance sheet is before the fact, not actual. This form displays assets, liabilities and equity of the business. This will indicate how much investment will be required by the business and how much of it will be used as working capital in its operation.

  5. Cash Flow Projection -- this will forecast the flow of cash into and out of your business through the year It helps you plan for staged purchasing, high volume months and slow periods.

Creating the Profit and Loss Projection

Refer to Exhibits A & A-1. Create a wide sheet of analysis paper with a three inch wide column at the extreme left and thirteen narrow columns across the page. Write at the top of the first page the planned name of your business. On the second line of the heading, write "Profit and Loss Projection". On the third line, write "First Year".

Then, note the headings on Exhibit A and copy them onto your 13-column sheet. If startup is indefinite, just write "Month #1", "Month #2", etc. Column 13 should be headed "Total Year".

In the wide, unnumbered column on the left of your 13 column sheet, copy the headings from the similar area on Exhibit A. Then follow the example set by Exhibit A and list all of the other components of your income, cost and expense structure. You may add or delete specific lines of expense to suit your business plan. Guard against consolidating too many types of expense under one account lest you lose control of the components. At the same time, don't try to break down expenses so discretely that accounting becomes a nuisance instead of a management tool. Once again, Exhibit A provides ample detail for most home based businesses.

Now, in the small column just to the left of the first monthly column, you will want to note which of the items in the left-hand column are to be estimated on a monthly (M) or a yearly (Y) basis. Items such as Sales, Cost of Sales and Variable Expenses will be estimated monthly based on planned volume and seasonal or other estimated fluctuations. Fixed Expenses can usually be estimated on an yearly basis and divided by twelve to arrive at even monthly values. The "M" and "Y" designations will be used later to distinguish between variable and fixed expense.

Depreciation allowances for Fixed Assets such as production equipment, office furniture and machines, vehicles, etc. will be calculated from the Source of Funds Schedule,

Exhibit A-1 describes line by line how the values on the Profit and Loss Projection are developed. Use this as your guide.

Source of Funds Schedule

To create this schedule, you will need to create a list of all of the Assets that you intend to use in your business, how much investment each will require and the source of funds to capitalize them. A sample of such a list is shown below:

ASSET                     COST   SOURCE OF FUNDS
Cash                   $ 2,500   Personal savings
Accounts Receivable      3,000   From profits
Inventory                2,000   Vendor credit
Pickup truck             5,000   Currently owned
Packaging machine       10,000   Installment purchase
Office desk and chair      300   Currently owned
Calculator                  75   Personal cash
Electric Typewriter        500   Personal savings

Before you leave your Source of Funds Schedule, indicate the number of months (years x 12) of useful life for depreciable fixed assets. (In the example, the pickup truck, the packaging machine and the furniture and office equipment would be depreciable.) Generally, any individual item of equipment, furniture, fixtures, vehicles, etc., costing over $100 should be depreciated. For more information on allowances for depreciation, you can get free publications and assistance from your local Internal Revenue Service office. Divide the cost of each fixed asset item by the number of months over which it will be depreciated. You will need this data to enter as monthly depreciation on your Profit and Loss Projection. All of the data on the Source of Funds Schedule will be needed to create the Balance Sheet.

Creating the Pro Forma Balance Sheet

Refer to Exhibit B. This is a Balance Sheet form. There are a number of variations of this form and you may find it prudent to ask your banker for the form that the bank uses for small business. It will make it easier for them to evaluate the health of your business. Use Exhibit B to get started and transfer the data to your preferred form later. Accompanying Exhibit B is Exhibit B-1 which describes line by line how to develop the Balance Sheet.

Even though you may plan to stage the purchase of some assets through the year, for the purposes of this pro forma Balance Sheet, assume that all assets will be provided at the startup.

Cash Flow Projection

An important subsidiary schedule to your financial plan is a monthly Cash Flow Projection. Prudent business management practice is to keep no more cash in the business than is needed to operate it and to protect it from catastrophe. In most small businesses, the problem is rarely one of having too much cash. A Cash Flow Projection is made to advise management of the amount of cash that is going to be absorbed by the operation of the business and compares it against the amount that will be available.

SBA has created an excellent form for this purpose and it is shown as Exhibit C. Your projection should be prepared on 13-column analysis paper to allow for a twelve month projection. Exhibit C-1 represents a line by line description and explanation of the components of the Cash Flow Projection which provides a step-by-step method of preparation.

A Final Word

In completing this Management Aid, you have put in a great deal of time and effort. You should now have all of the elements needed to present as simple or sophisticated a prospectus for your enterprise as you desire. More important, you have created the management tools to guide you in your venture. Once the business opens its doors, you will be inundated by the details, problems, challenges and joys of going it alone. It will be difficult to hold to your course through the rough seas ahead, but don't forget this "chartbook", it will see you through to "Port Profit." It should be a living document, referred to regularly, massaged constantly, and revised to reflect your experience. Begin a planning cycle that expands this first year plan into one that spans three or five years out. Update it at regular intervals. Set your goals and live by them. Your success is in your hands. Good planning and good execution!

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A Furniture Refinishing Business in Your Home

If you have a garage or work building and are willing to learn a craft, upholstering, re-upholstering and/or furniture refinishing would make an excellent home business.