One way to ensure that your business cannot succeed is the failure to see its financial future. You need to have an accurate picture of your own personal financial needs before you begin to write your business plan, irrespective of the type of business you are planning. There are many factors to take into account such as health insurance, business licenses and other business related costs. Therefore you cannot base your financial needs on your current earnings.



Some of these costs may only be one time fees or be an annual cost. Others on the other hand will be more regular payments, monthly or even weekly. The first thing that needs to be looked at are your personal finances and what is required to meet these obligations, including rent/mortgage payments, utilities, food and other typical household expenses. Input from other family members who may be involved with the financial needs may be required in determining your minimal monetary needs.

Once you have these needs in writing you can then begin estimating business costs. Setting up a home business can have many benefits apart from just home business tax deduction. Considering a portion of your rent and utilities could also be used as business expenses. For example if your monthly mortgage payment is $1000 and you can allow 10% of household expenses as a deduction, then plan on $100 being spent on your place of business.

The same should be planned for utilities and other costs. Although you could think about using the same equation for your home phone line, it is probably better to have a separate business phone line. This helps prevent after hours interruptions at home as well as preventing your children answering the phone to potential clients. This helps create a more professional image when the phone is answered in a professional manner. This would not be practical with a home phone line.

It is good to start with a conservative estimate of costs, but also planning a contingency fund in the event of an unforeseen repair or project that gets out of hand and begins to go over budget. Once these expenses have been analysed you will have a good idea how much money you will need to bring in through the business to maintain your family lifestyle and meet your business expenses.

Now you have looked at what you need to break even it is time to look at the projected income of the business. If you have calculated that your personal expenses are $2000 monthly and your business expenses are $800 monthly, your monthly income form the business needs to be at least $2800 to cover these costs. If your projected income is less than this then you probably need to rethink whether this business is the right one for you to pursue.

Most business will not be at peak performance form day one. You need to look at whether you have enough savings to cover any shortfalls while you build you business to the level where it covers your expenditure.

There are many aspects to think of before starting a business. Financial aspects are just one. But if you analyse everything and find that it is feasible the rewards are tremendous.