When starting up a small business, you start out with a business plan that encompasses your fixed costs along the lines of rent, food, utilities and cost of living and things of that nature.
My question is ,that when you already have a full time job and the business would be more along the lines of part time hours, how do you modify the business plan to shift the cola costs to the prime job, or do you simply duplicate exactly what you make to the business plan.
Probably making it too complicated. Your living expenses don’t belong in your business plan.
You may want to account for a personal salary or drawing money out.
However, a series of questions that someone interested might ask would relate to if you need to live off of this endeavor or if you have adequate funds/time to put into it.
It’s true that the cost of living doesn’t belong in the business plan. However, some of those costs may become expenses that can be paid by your new business. For example, costs of a home office or mileage on your car could be paid by your business - assuming they are used for your business. This could have tax implications both for you personally and for your business. Make sure you plan accordingly - and perhaps speak with an accountant or tax adviser.
This is probably the best response so far from What… - the business plan is about the performance of the business. Tally fixed costs, variable costs against projected sales, hopefully some sort of realistic basis for expected revenue projections.
Then of course each month or more often, you compare real vs. planned and adjust accordingly; tracking how you are doing against plan gives a good idea how well(or not) things are going
One of the question backers will ask is what is the owner’s draw? This is a variable cost that maybe can be adjusted based on how well the business performs. Of course if the number is low, they will ask how you expect to live.
Your plan and progress analysis should also distinguish between paying back investment/startup expenses vs. owner’s pay, so that you can see whether the business is making money as an ongoing business; plus if others are also backing you, they will want to see how and when you will pay them back.
You should keep the business and personal expenses in separate pockets, even if it is not a separate, incorporated company. Separate bank account, etc. Nothing makes the IRS start digging with a fine tooth comb like finding groceries, golf club memberships, personal gas fill-ups, or other private expenses in what you claim as expenses for the business. Nothing is more confusing that trying to separate theses costs when doing the books for the business yourself.
Keep in mind that many businesses do not make a profit right away, it can take months to establish a solid customer base, and a while to fully pay back startup expenses. Your plan should account for that. You may also want to do a personal budget so that you can show backers that you will not have to abandon the business to take care of things like food or mortgage; and also include a work schedule to be sure you have the time to deveote to this. But that’s not part of the business plan, that’s your personal plan.
One of the reasons that I mentioned the cola items, was that when I took a course in small business start-ups, the prevalent meme was to make a business plan. For all the reasons mentioned above.
The course seemed to be aligned with the entrepeneur who has this businesss as his or her primary bread winning job, and to place all expenses and such in the plan. Now as I am not quitting my full time day job anytime soon and will be self financing the business, the plan has gotten a bit more complicated than I thought, in drawing it up.
You shouldn’t get into too much detail for a side business. I don’t know what you’re doing, but it’s probably more important to price your products and services correctly based on actual costs, and not any of your time or personal expenses. You have no idea what your volume might be, and your day job has to come first, so you don’t know how much time you can put into the sideline. So try to work out a way to make sure after any initial investment that can’t be avoided, that you never sell anything at a loss. Over time you’ll gather some real numbers that you put into a detailed plan if you ever want to take it full time.
Good response to OP question. (Never occurred to me it might possibly read as "all previous posts by WT are dumb… sorry)
Yes, have a business plan. But the personal budget/plan is separate from the business plan, the only thing they should have in common is “how much money will the business give you?” and “how much time do you plan to put into the business?”
It’s amazing how many of these sorts of businesses fail on very simple math - they cannot make a profit ever with realistic sales projections, or they cannot pay the owner enough to live. “I’m losing money on every sale, but I’m making up for it on volume of sales.”
I would not ever include personal or living expenses as part of the business plan. It should include some consideration of owner’s compensation. If you want to decide whether that’s enough to live on, you do a separate personal budget.
Especially for a side business, the business plan should address these issues:
All fixed costs that don’t change much as sales go up.
Some analysis of when fixed costs do change. (For example, maybe you can get to $x of sales from your home, but you need to start renting an office in order to grow bigger).
All variable costs that depend directly on sales, such as materials or labor.
Some analysis of how variable costs might change with volume. (For example, if you double sales, you might get a volume discount on materials).
Discussion of the skills required in the business and whether those functions will be performed by the owner or hired out.
Long-term strategic goals and exit strategy. (i.e. is this always going to be a side interest, will you grow it up and sell it off, or do you intend to establish a commercial empire to hand to your children?)
Issues of startup costs and financing.
Also, keep in mind that a business plan is a working document. Review it periodically so that you can laugh at how wrong you were, and then update it to reflect the new realities. You’ll learn as much from seeing which assumptions/predictions were wrong as you will from the process of creating the plan in the first place.
I’m not even sure what you’re asking. Food? Why would food go in a business plan? And what do your other jobs have to do with your new business?