OK I've set up our website, our apartment is on target for completion, and just to be on the safe side, and to pay for the furniture, I have been to the bank to request a small loan. They would like me to show them a business plan, but I have had no experience in this. Anyone got any tips?
Helen
Writing a business plan
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Hells Bells
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Oh, how I would love to know this too!
If it were me I would describe in bullet points what I intended to do, point out the website and do some informal "market research" (perhaps using the rental listing site stats thread) to estimate what I should spend on advertising and the returns I could expect. I'd probably also do something similar with determining what I could reasonably expect to charge for a week.
Then I'd set up a spreadsheet showing that the rental income with a somewhat conservative estimate of booked weeks would easily pay for the loan after expenses, and show some kind of expected profits for each year.
The spreadsheets etc. would be fairly detailed so I'd probably then write a cover letter summarizing everything.
However, that's just what makes sense to me -- I have no idea if it resembles an official business plan. I'd love to find out!
If it were me I would describe in bullet points what I intended to do, point out the website and do some informal "market research" (perhaps using the rental listing site stats thread) to estimate what I should spend on advertising and the returns I could expect. I'd probably also do something similar with determining what I could reasonably expect to charge for a week.
Then I'd set up a spreadsheet showing that the rental income with a somewhat conservative estimate of booked weeks would easily pay for the loan after expenses, and show some kind of expected profits for each year.
The spreadsheets etc. would be fairly detailed so I'd probably then write a cover letter summarizing everything.
However, that's just what makes sense to me -- I have no idea if it resembles an official business plan. I'd love to find out!
Brooke
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marcus
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Three years ago the mairie suggested we apply for a grant to cover the costs of renovation of a barn into gites. We looked at the forms and discussed with some other people before deciding not to go ahead (largely because you were tied to gites de france for some years, and because the grant had to be repaid if we sold within 10 years).
Point is, as part of all this we learnt that typically in France the assumption for a grant was 6 - 8 weeks occupancy a year. Any assumption greater than this was not acceptable, this being the average for a French gite. So be aware that if you include, say, 12 - 14 weeks occupancy as a reasonable estimate this may not be acceptable. by your bank. And 20+ weeks will almost certainly be rejected as the ravings of a lunatic
I also suspect that if the weekly rental amount you include is very high that will also not be accepted, if out of line with the bank managers experience of local properties (in France, often much lower than you will expect yourself)
Costs that you perhaps should also include would be tax, social security charges, the loan payments, depreciation of the fixture and fittings (ie the total cost of these, divided by the number of years they will be expected to last on average - since you will need to replace them every few years), cleaners and so forth if applicable, gardener and keyholder services if applicable, and marketing costs. Also a line showing 'general maintenance' of the property would be usual.
Insurance, including third party liability insurance, may well need to be included. And do you have 'taxe de sejour' where you are?
And a very small item for 'postage, telephone, sundry, costs' would suggest that you had thought of everything possible.
If you have no other income they will likely want to see a 'net profit' remaining sufficient for you to live on.
In any event the business plan should explain (perhaps each number could say 'note 1', 'note 2', etc after it in a final column of the spreadsheet, with text below the numbers explaining how you arrived at the figures)
Good luck
Marcus (FCCA - I was a qualified accountant in the old days!)
Point is, as part of all this we learnt that typically in France the assumption for a grant was 6 - 8 weeks occupancy a year. Any assumption greater than this was not acceptable, this being the average for a French gite. So be aware that if you include, say, 12 - 14 weeks occupancy as a reasonable estimate this may not be acceptable. by your bank. And 20+ weeks will almost certainly be rejected as the ravings of a lunatic
I also suspect that if the weekly rental amount you include is very high that will also not be accepted, if out of line with the bank managers experience of local properties (in France, often much lower than you will expect yourself)
Costs that you perhaps should also include would be tax, social security charges, the loan payments, depreciation of the fixture and fittings (ie the total cost of these, divided by the number of years they will be expected to last on average - since you will need to replace them every few years), cleaners and so forth if applicable, gardener and keyholder services if applicable, and marketing costs. Also a line showing 'general maintenance' of the property would be usual.
Insurance, including third party liability insurance, may well need to be included. And do you have 'taxe de sejour' where you are?
And a very small item for 'postage, telephone, sundry, costs' would suggest that you had thought of everything possible.
If you have no other income they will likely want to see a 'net profit' remaining sufficient for you to live on.
In any event the business plan should explain (perhaps each number could say 'note 1', 'note 2', etc after it in a final column of the spreadsheet, with text below the numbers explaining how you arrived at the figures)
Good luck
Marcus (FCCA - I was a qualified accountant in the old days!)
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Hells Bells
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SNOWeSCAPE
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That was a great description Marcus - the only thing I could add is that a business plan is also showing Profit & loss...so do best case i.e. work on 12 weeks rental per year at high income - then show worst case scenario...you only rented it out for half that time at a lower rate - the bank are basically looking to see if you can carry the loan even at the worst times....don't forget to include their charges in your forecast...they will be looking to see if you are astute so therefore a safe bet.
Good luck with it.
I learn P&L accounts from my days as a Food & Beverage Manager in Hotels...every week the Head Chef & I had to count every bit of food in stock, subtract the invoices in and cost the takings to get your percentage of profit...labourious but good for focusing the mind, wastage and stock control!....but taught me the basics of P&L!!
[/i]
Good luck with it.
I learn P&L accounts from my days as a Food & Beverage Manager in Hotels...every week the Head Chef & I had to count every bit of food in stock, subtract the invoices in and cost the takings to get your percentage of profit...labourious but good for focusing the mind, wastage and stock control!....but taught me the basics of P&L!!
[/i]Helen B,
Some thoughts on approach
1. Introduction (A lot of people do this last) - Why are they reading this, summarise what your conclusions will be.
2. Define your product and service - include differentiators particularily if you will be out of the norm with some of your later projections.
3. Marketing strategy - Who are your customers, why will they buy your product or service, How will you be found, what will you do. You need to convince the bank that you know how to get the customers in or that you can get to new markets not currently addressed if this is also an intent.
4. Market Analysis - Define your Market, who is your competition and how you compare - develop a table of their offerings and yours. You need to get the person reading the report to think that you understand your market and area and there is opportunity.
5. Management - How will your business be managed, what are your processes - ordering, contracts, receiving guests, rules, security, insurance, cleaning, damage and repairs, replacement - and Governance (how are decisions made and approved - include the bank here if required).
6. Revenue projections (good points from Marcus above - but push the boundaries a little to make it stack - they will cut back on whatever you say). Don't make your projections flat - show growth starting low and growing as your business matures. Use information from 4 to justify your rental income.
7 Cost projections (again refer to Marcus - get into the detail). It is important not to miss anything obvious.
8 Risk Analysis and mitigation strategy - List all the things that can go wrong and how you would manage them. Rate them on probability of occurence - High, Medium, Low - and likely impact H, M, L. Address in detail any highs and medium combinations. Generally any highly likely occurence requires active management solutions (think if you dont rent it out much in the first year - at least in the banks eyes), any high impact solution requires a redundant strategy or something like insurance (Think if the house burns down). Careful here - you want to show that you understand the risks but don't over do it so much as to scare the bank - you want them to feel that it will be under control.
9. Conclusion - Summarise the outcome of the plan.
That should be enough to get you there.
If you really want to go the extra mile and develop a strategic plan (and I think this may be going to far for a simple business such as this) you could
1. Come up with a Mission statement
2. Complete a SWOT analysis - Strengths, Weaknesses (these are internal), opportunities and threats (these are external).
3. Define your future goals and objectives for the business based on outcome of 2.
4. Develop strategies to acheive those goals and objectives
5. Develop an action list to deliver each strategy
6. Develop metrics based on a list of Key Performance Indicators to measure your delivery of your goals and objectives.
Its really not daunting as it seems once you get into it.
Anybody still awake
Some thoughts on approach
1. Introduction (A lot of people do this last) - Why are they reading this, summarise what your conclusions will be.
2. Define your product and service - include differentiators particularily if you will be out of the norm with some of your later projections.
3. Marketing strategy - Who are your customers, why will they buy your product or service, How will you be found, what will you do. You need to convince the bank that you know how to get the customers in or that you can get to new markets not currently addressed if this is also an intent.
4. Market Analysis - Define your Market, who is your competition and how you compare - develop a table of their offerings and yours. You need to get the person reading the report to think that you understand your market and area and there is opportunity.
5. Management - How will your business be managed, what are your processes - ordering, contracts, receiving guests, rules, security, insurance, cleaning, damage and repairs, replacement - and Governance (how are decisions made and approved - include the bank here if required).
6. Revenue projections (good points from Marcus above - but push the boundaries a little to make it stack - they will cut back on whatever you say). Don't make your projections flat - show growth starting low and growing as your business matures. Use information from 4 to justify your rental income.
7 Cost projections (again refer to Marcus - get into the detail). It is important not to miss anything obvious.
8 Risk Analysis and mitigation strategy - List all the things that can go wrong and how you would manage them. Rate them on probability of occurence - High, Medium, Low - and likely impact H, M, L. Address in detail any highs and medium combinations. Generally any highly likely occurence requires active management solutions (think if you dont rent it out much in the first year - at least in the banks eyes), any high impact solution requires a redundant strategy or something like insurance (Think if the house burns down). Careful here - you want to show that you understand the risks but don't over do it so much as to scare the bank - you want them to feel that it will be under control.
9. Conclusion - Summarise the outcome of the plan.
That should be enough to get you there.
If you really want to go the extra mile and develop a strategic plan (and I think this may be going to far for a simple business such as this) you could
1. Come up with a Mission statement
2. Complete a SWOT analysis - Strengths, Weaknesses (these are internal), opportunities and threats (these are external).
3. Define your future goals and objectives for the business based on outcome of 2.
4. Develop strategies to acheive those goals and objectives
5. Develop an action list to deliver each strategy
6. Develop metrics based on a list of Key Performance Indicators to measure your delivery of your goals and objectives.
Its really not daunting as it seems once you get into it.
Anybody still awake
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Hells Bells
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