Starting a business from scratch is easier said than done. Hearth is here to help you with the resources to craft your business from the ground up. Before your business idea can take off, you’ll need to create a business plan.
Main components of a business plan
- Business structure (sole proprietorship, LLC, general partnership, C corporation, etc.)
- Your services and products
- Your target market
- Marketing plan
- What jobs you will consider bidding on
- Annual regulations and licensing requirements
- Total employees you plan on hiring to begin your business
- Business startup financing and maintenance costs
- What kind of insurance and coverage you’ll need
- First-year business expenditures and revenue goals, proposed budget, and success metrics (Ex: deals closed, jobs completed, referral jobs, etc.)
In this section, we’ll discuss the key elements of creating your own business plan.
Steps to complete your plan
1. Find reputable resources and conduct relevant market research
As a business owner, you need to understand your competition, their strengths, and their weaknesses. The purpose of this exercise is to find what services and products will stand out in your slice of the market. Visit the websites and social media pages of similar businesses in your area. Make a list of their services and prices. Create a profile of their average customer. A quick way to do this is to find demographic data for your area, city, or county. After you consider all the information, you must decide on what services you will offer.
2. Choose a service area and location
After you’ve decided what you’re going to do, you need to figure out where you’re going to do it. Some businesses focus on particular neighborhoods or suburbs. Others will travel all across a city or county for jobs. Consider travel costs, the effort it takes to move equipment, and how well you know the area before deciding on a service area. Or, you can just take any and every job.
3. Decide on a structure and register your business
For a new business, deciding on a business structure is very important. Most home improvement businesses will choose to become sole proprietorship, limited liability company (LLC), general partnership, or S corporation. However, there are several other options for businesses to choose from. Before deciding, consider each structure’s tax implications for your business revenue.
Things you’ll have to consider outside of taxes and liability implications is the amount of employees you’ll want to hire and what type of growth trajectory you expect from your company. It is possible to change your business structure as your business grows. Once you’ve decided on a structure, register your business with the appropriate state agency. You may also have to register at the county and city levels of government, depending on your local statutes.
We recommend that you find an experienced business expert or tax specialist for a consultation.
4. Get a Tax ID Number
After you’ve decided on a business structure, you’ll need to register your business with the federal government to create an Employer Identification Number (EIN), which also works as your Tax Identification Number. You’ll need this information to be able to pay employees and file your annual business taxes. Get your ID here.
Build a pricing structure
This is a great time to think about pricing. It’ll get harder to change your processes once you get started and are too busy. To start building your pricing structure, you need to consider your overhead, your material costs, and desired profit per hour to create a pricing structure that keeps you in the black. Although pricing should be competitive, you want to protect your bottom line and make smart decisions that keep your company growing.
In April 2021, Hearth hosted a webinar with business consultant Ruth King on pricing strategies. Watch the full session to learn more.
Through Hearth Learn, you will gain the knowledge and resources to complete your business plan and build a healthy, growing company. Find finished business plan examples on the SBA website.
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The above content is for informational and/or educational purposes only. It does not constitute professional financial advice. If you have more questions, please reach out to a financial advisor for more information.
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