How to Write a Network Marketing Business Plan - Best practices example - Part 3 of 3

Welcome back. It’s Lee, again. In this video, I’m going to explain why a Business Plan can qualify you for deductions even if your business hasn’t ever made a profit. We’ll also examine the remainder my Business Plan and view each page’s content. Now you may have heard that your Network Marketing business has only 3 years to become profitable. That statement is absolutely untrue. In the IRS Enhanced Examiner Guide, it states that a taxpayer who can demonstrate that their expectation of eventual profit outweighs their cumulative losses is likely to establish that a profit-motive exists. The Enhanced Examiner Guide further states that the test to determine whether a taxpayer is conducting a for-profit activity is from a consideration of all the facts and circumstances. A well-written Business Plan will absolutely present all the facts and circumstances needed to make that determination. Even if a home-based business loses money for 10 out of 10 years, that business owner will still be qualified to claim home business deductions and have them be fully accepted by the IRS during an audit. Now let’s get back to examining the rest of this Business Plan. One way that the IRS verifies that you have the knowledge and expertise necessary to run a for-profit business s to examine your company’s Marketing Websites. Technology changes rapidly and if you’re able to show that you’re using replicating technology to enhance and accelerate your customer base and your marketing team’s growth potential, that’s very advantageous. It shows that you can consistently communicate your company’s message and build a very large business, via long-distance sponsoring, education and mentoring, using modern technology. There are three key benefits of having a corporate Blog. A Blog promotes your brand. It puts a human voice to your company’s name — it’s a way to start a conversation with your industry, your clients and your potential marketing team members. But most importantly it provides a measurable way to drive traffic to your Web site. Having a Blog to promote your Business is the norm in today’s business environment, so it’s very important that your Business Plan describes your Blog’s implementation strategy. The Milestones subsection is one of the most important sections of your Business Plan. Your business is currently at point A. Where you want to go is to point B. Now getting from point A to point B requires you to complete milestones. Milestones are the events that occur on the way toward achieving your business goals. They signal whether your business venture is growing according to plan. Any assumptions upon which your Business Milestones were based are detailed in this section. The next Section details your Sales Strategy with regards to your target market. This is where you’ll document the primary tools that your Business will use to generate sales. Be sure to discuss the specifics of your sales websites, as well. In the Sales Forecast part of this Sales Strategy Section you’ll describe the assumptions that were used in setting your sales forecast. The Sales Forecast Table and the Monthly and Annual sales charts are very important elements of your Business Plan. The IRS will examine this Section closely in their effort to validate whether or not your business has a reasonable chance of becoming profitable at some future point. Most Business Plan readers are interested in determining the Viability, the Feasibility and the Profitability of a business. Thus far our videos have presented a pretty convincing argument for the Viability of our business. The remainder of this video delves into the Feasibility and Profitability question. Feasibility is addressed in this, the Operations section. The Profitability question will be addressed in the Financial statements that follow. The Operations Section is where we dig into nuts-and-bolts of our business — it’s basically an outline of the actions that are taking place to keep this home-based business on a true-course towards profitability. It includes information: on how the business conducts itself in a business-like manner whether the business is operated on a full or part-time basis how milestones and goals are evaluated and modifications are made to improve sales and profitability on what experts and resources are consulted to grow the marketing team and increase sales exactly what activities are considered to be paramount in generating the cash-flow necessary to fund operations on whether Capital Assets are available on what Continuing Education efforts are underway and what Tools are being regularly used daily. Every business has options which, due to current circumstance, they might not be able to immediately undertake. Future plans should be detailed in the Upcoming Options Section of the Business Plan. A Business Plan is all conceptual until the financials are provided. Information about your marketing strategy and sales plan are interesting to read, but they don't mean a thing if you can't substantiate your bottom-line in your Business Plan’s Financial Plan Section. And even though most home-based businesses don’t need to win over investors or obtain financing from a bank, a financial forecast is still essential because, should you ever be audited, it makes it much easier for an IRS examiner to declare the Hobby-Loss Rule if your Business Plan lacks a Financial Plan Section. The most important reason to compile a realistic financial forecast, however, is for your own benefit. Basically, the Financial Plan Section consists of the five parts listed here. Sound financial planning is critical — it allows you to project the speed at which your business accomplishments will be made. Making financial projections based on solid assumptions is a necessity. Clearly stating what assumptions were made while developing the projections in a Business Plan serves two purposes: It gives a Business Plan reader confidence in your projections and it helps you recognize the financial impact should the basis of an assumption change. Break-even Analysis delineates the amount of sales income that needs to be generated on a monthly basis in order to cover the costs of doing business — that’s the break-even point. At the breakeven point, no profit has been made, nor have any losses been incurred. A Profit and Loss statement lists sales and expenses, recorded on a monthly and yearly basis. This Business Plan’s Profit and Loss statement, which is also referred to an Income Statement, lists all sales and expense items with the dollar amount for the next five years. It’s important to understand that Profit and Cash Flow are two different things. Profit is the result of sales over a given period and Cash Flow is what’s required to keep a business funded by covering day-to-day expenses. Poor cash flow is one of the main reasons why small businesses fail. In this Business Plan, the Cash Flow statement lists all incoming and outgoing cash items with the monthly dollar amounts for the current year and annually for the next 4 years. The Internal Revenue Service requires that businesses report their Principal Business Activity, using a NAICS Business Activity Code, on their Federal tax return. Companies that show substantially different ratios from the average for their Industry group are more likely to be scrutinized. In the Business Ratios Section, this Business Plan provides the NAICS code information along with the Ratios for a Network Marketing Home-based business with respect to other businesses in the Direct Sales Industry. Now, just like we did in the last video, let’s examine each half-page of this Business Plan, in random order, so you’ll gain a greater understanding of what a Network Marketing home-based Business Plan should contain. I’m sure that the contents of this Business Plan will spark a host of ideas of how to modify this Business Plan to reflect your own Direct Sales Business. Once again, I’ll show a random Table of Contents line item followed by a half-page view of the information being provided. Don’t forget to pause the video whenever necessary to read the text on each page.