Business Plan Considerations for SOHO or Sole Proprietors
A business plan is important even if you’re going into business for yourself or have a small office/home office (SOHO). It directs your attention to the parts of business planning that matter most to those who are self-employed. It helps you figure out what to charge and how to get paid for your product or services.
The following tips on tailoring your business plan contents to the needs of your one-person operation can help you focus special attention on certain aspects of your planning for a SOHO or, spelled out, a small office/home office one-person shop.
SOHO business plan: Company overview
Before you wave off this section with the personal assurance that you know what business you’re in and what you intend to do, realize that if your direction is even slightly fuzzy at the launch of your business, you’ll pay the price for your lack of focus ever after. So don’t skip these two steps:
Write vision and mission statements.
These statements describe the purpose of your business and what you hope to achieve.
Set goals and objectives.
Your goals and objectives define exactly what you want to accomplish and how you will go about achieving your aims. For most people, becoming self-employed is a venture into uncharted waters. For the first time, you’re the captain, first mate, and crew all rolled into one with no boss calling the shots or evaluating your performance. Goals and objectives are essential because they serve as an important yardstick to measure your progress.
SOHO business plan: Business environment
You can find out everything you need to know about assessing your business environment in Chapter 4. It helps you analyze your industry, your clientele, your competitive environment, and the economic and business trends on the horizon that can affect your success. All four are important even for one-person businesses. For example, you’ve probably looked around to see whether your regional economy has room for a number of construction contractors, self-employed accountants, freelance designers, or whatever other independent service you’re offering. Even so, you want to look more closely to find out how many others are out there doing the same kind of work you do and decide what makes you a different and better choice — and whether there is, in fact, enough business to go around.
Just as important as assessing your competitive environment is the need to track key trends in your industry. If growth is booming in your area, business may be ripe for the picking. But if economic trends don’t look so hot, you may need to dedicate time and energy devising strategies to attract new business in a slowing market.
As you study industry trends, be sure you read the indicators not just for the moment, but for the future as well. Include both a rosy forecast and a worst-case forecast. The cheerier version of the future should help keep you motivated. But the lesson from the recent downturn is clear: Use the more conservative version for planning. It’s better to be pleasantly surprised when business is better than expected rather than taken by surprise when the profit you’d hoped for doesn’t materialize.
A tax accountant moved into a great new office space at a time when there was more work around than she could possibly take on. What she failed to pick up on, though, was that the local economy was actually slowing. What’s more, many individuals and small businesses — the accountant’s traditional clients — were beginning to rely on tax software programs rather than accounting services. Between higher office rent and a declining client base, she found herself in a financial crunch that she could have averted if she’d taken time to evaluate her business environment beforehand.
SOHO business plan: Company description and strategy
You’re self-employed, so obviously you don’t need much space to describe your company’s organization. Instead, devote the effort to an explanation of how your company will operate — how you’ll work with customers, deliver products and services, get new business, outsource work, and so on.
In this section of your business plan, also describe your strengths and weaknesses, both personal and professional. You are the entire management team and staff, so defining your own capabilities and how you’ll compensate for shortcomings is an essential element of your business planning. For guidance, check out the section on company strengths and weaknesses in Chapter 5.
SOHO business plan: Financial review
The financial review section of your business plan doesn’t have to be long, but it does have to be complete. Show how much you plan to make, how much you need to spend to get started, and how much you need on an ongoing basis to keep yourself in business. The earlier section titled “Putting a price on what you do” will help as you define your pricing and billing policies.
SOHO business plan: Action plan
Your action plan is just what the name suggests — a nuts-and-bolts plan of action, broken down step by step, to move your business ahead. Don’t go forward without one.
Start by carefully looking at your personal strengths and weaknesses. If you know you’re a strong service provider but a bit thin in the marketing area, for example, your action plan may include enrollment in a marketing class or arrangements for freelance marketing or agency assistance. If you’re a little wobbly when in accounting, your action plan may be as simple as hiring an outside accountant.
The reason the action plan is so important to a one-person business is because no supervisor or boss is telling you what to do next. You’re the one who has to set the direction, steer a course, and measure your progress. Ultimately, your action plan is a good device for making sure your company stays on track.