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Trading costs §Interest charges §Leasing §Packaging materials §Travelling expenses & networking
Break even point
Knowing costs are important to calculate sales needed to reach break even point. This is where
gross profit is same as your operating costs. If your business doesn’t make enough money to reach break even point, plus profit for all your efforts, this business idea may not be feasible.
Borrowing funds
You may have sufficient cash to start and operate business. Typically you could approach family, banks and financial societies to help you kick start your idea.
When you borrow money make sure you know: §How much you need §What you will do with it §When and how you will repay it §What collateral you can offer
Target market
You must know group of people you want to sell your product or service to:
§Who they are §Their location §When & how often they buy §How much are they willing to pay §Their age
The competition
Most times there are already others doing what you are going to do. Think about what way you can compete with them:
§Price §Quality §Knowledge §Service
This way you and your customers will be clear on your competitive advantage.
SWOT Analysis
A SWOT analysis is a tool to help you determine whether your business will work. SWOT stands for:
§Strength §Weaknesses §Opportunities §Threats
Strength and weaknesses are factors inside your business which business has a control over. These are what your business is good and bad at.
Opportunities and threats are factors outside your business which business has no control over. You will find that your opportunities will emerge from your strengths, while your weakness would become threats to your business.
Suppliers
When you have determined what products you need, find a supplier. Research various suppliers and explore what they can offer you. Negotiate best possible price and trading terms you can. Working closely together with suppliers will form a strong backbone for your business.
Cash flow forecast
This management tool is essential and gives you a summary of your monthly earnings and costs over 12 months. The basic format of a cash flow forecast is:
§Starting balance §Add projected cash inflow §Deduct projected cash outflow §Result is budgeted cash balance
Usually when you first start a home based business it may be easier to do a three month cash flow projection. List actual monthly results and this will let you know how accurate your projections are and gives you and idea of a trend so you will be project next 3 months.
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