Starting a home based business is actually quite easy, starting one that is going to be profitable and provide you with the level of income that you need to be comfortable and meet your needs may be a different thing all together. Many people every year begin home based businesses, only to find out that they cannot make enough money, or that their expenses are too high to allow them to be profitable. In this article we will review some of the considerations you need to think about while contemplating starting a new endeavor.



The issues can be grouped into marketing, financial and personal issues and we will discuss each briefly.

Marketing your small business is important. You need to understand who your customers will be, what competition you will have and what the cost of your marketing program will be. Creating a realistic marketing forecast is one of the most difficult things to do since we are all often over optimistic. A rule of thumb is to create a realistic market forecast for your business and then cut it in half.

The financial portion of your business plan is probably the most difficult. Using your market forecast, you can generate your total sales revenue. There is a cost to developing these sales and you will also need to estimate the cost associated with sales. Usually this includes advertising, salaries for sales people, any incentives you might give to customers etc.

Operations costs will include your salary and the salary associated with any support personnel you may have. Add in cost for an office, utilities, office furniture, supplies, tools that you may need and any other costs that is associated with your business. You will need to create a cash flow that extends out a minimum of 12 months subtracting your cost from your net sales revenue to calculate your businesses net income. Do some sensitivity analysis on these numbers, reducing your income and increasing your costs by minimums of minus 20% and plus 20% respectively to see what the impact of these potential changes will be. If you are able to survive on these numbers then you are in relatively good shape.

Lastly you will need to assess your aptitude for working at home in a home based business. Not every one is able to tolerate the stress of a home based business. Developing a list of people who can mentor your business, provide guidance and help provide solutions is another area that can assist greatly.