Creating a home-based business model is about scoping out just how much money the business expects to make and it's value.
It's important to look critically and individually at your business model to decide whether it is worth investing your time and money in. Because it is difficult to remain apart to the model it is a good idea to get in touch with your local SBA for advice and guidance.
There are never guarantees your business model will be a success and that is why planning is a critical step in the process. It help take you from idea to deciding on your financial commitment.
You also need to consider the return on investment you want and the risk you are willing to accept.
There are 4 stages to look at when designing your business model which we will look at now.
Stage 1 – Analyze
This stage is all about looking objectively at your model and determining it's profitability. To do that you need to ask the following questions:
- What is the size of the market I am entering?
- What is my competitive advantage?
- How much capital will I need? (if you are working from home this could also mean borrowing money to support your day-to-day living until the business picks up).
- What are your management skills? can you manage your time and are you disciplined enough to work at home?
- How else has tried this business model and did they fail / succeed? Why / why not?
Stage 2 – Market Scope
Once you know the market you want to serve you need to do research on the following:
- Demand – What is the demand for your model? how big is the size of your market and what is it's capacity for growth?
- Supply – How will you supply your product / service? You also need to ask if this is the right time to enter into your space.
- Network – What is the network and relationships that you have available to draw on? Which of these can you use for bargaining power?
Stage 3 – Competitors
If at this point you have decided that your business model is a good one, there is a market scope for your product / service and you know what makes your model special it's time to look at your competitors.
Start by answering these questions:
- How is your model different to your competitors?
- Will people buy from you? What makes you and your business special?
- What barriers will you face?
- Why are my competitors successful?
Stage 4 – Finances
The last stage is to assess your finances. This is where you prepare a sales forecast, estimate start-up costs and profitability, assess the financial viability of your business. At this point you may need an accountant to help you. I know when I started in business I needed this help, but once you have been through the process the first time any future businesses you will be able to assess on your own.
