VRS510 - Getting Your Short-Term Rental Business on the Right Track

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Welcome to ‘The Tipping Point’ where we bring you bite-sized education in the business of short-term rental, Airbnb co-hosting and property management.

There are so many reasons to create a business plan. From keeping an eye on your business development, to looking for funding, or starting with the end in mind and selling eventually, it is such good practice.

Building a written plan is not a once-done-and-forget-it exercise. It should be a live document to be reviewed, analyzed and updated regularly.

When a situation arises where you need to pull it out and present it to someone, it shows a recent snapshot of your business and your current goals.

And when it comes time to sell your business, having a strong business plan can help you market, and find the best buyer.

Don't skip doing's important, and could save a ton of time and effort down the road.

>> Download Our Free Business Plan Template

Welcome to the first episode of The Tipping Point, a series where we deliver short, focused nuggets of training for your short-term rental business. I'm your host, Heather Bayer, and in this episode, we are diving into the essential topic of writing a business plan. You know whether you are new to this, or you're an experienced host looking to refine your strategy, this episode is going to provide you with a step-by-step guide to crafting a solid business plan, and every business needs one. We found out about that when we sold our business and we used the business plan that we'd updated every year to create the business brochure, we had everything at our fingertips.

So, as you know, when you start a business, you have to think about the end of it at the very beginning. So this is one of the reasons why you need to have a business plan and get it updated every year. So let's get started.

So talking about my business, I'm going to be completely honest. For the first 15 years of running our property management company, we never gave much thought to having a business plan.

We just operated day- to- day and season to season without really having a blueprint to guide us and we get together at the end of the year and go through, you know, was it good, was it bad? But we didn't take much of the learning forward to help us through to the next year. And looking back, I know now how important it is to have a solid business plan. So I want to emphasize its significance to everyone. Whether you have 200 properties or whether you have one, think about your business plan.

But before we jump into the steps, let's understand what business plan actually is. It's a roadmap. It outlines your business' goals, strategies and financial projections. It serves as a blueprint for your success and helps you stay focused on your goals. So I'm just going to go through this step by step on the things that you need to put in your business plan.

So Step 1, you need to define your business goals and objectives, because every successful business starts with a clear vision.

Ask yourself, what do you want to achieve with your business? If you want financial independence, do you just want to provide exceptional hospitality and do something good? Or is there something else, something else that's driving you? So having well-defined goals provides a sense of direction and purpose, and it's important to write them down and make them SMART. If you've been in business at any time, you'll know what SMART means in relation to goals. It's Specific, Measurable, Attainable, Relevant and Time bound. So think about when you are looking at your goals, make sure they meet that SMART criteria.

So, Step 2, you've got to do your market research and do it continuously over time. Because one of the most common mistakes new managers make is not carrying out enough market research. If you want to be competitive, you've got to have a deep understanding of your target market, along with industry and local trends, you have to identify your target audience and analyze competitors and assess market demand.

In that way, you can make informed decisions. So knowing all this helps you tailor what you're offering to meet your guests needs more definitively.

Step 3 is to determine your business structure and legal requirements. I mean, you may have done this at the outset, but If you are already in this stage now where you are growing, you might be at that stage of needing to decide what your business structure is, whether it's a sole proprietorship, a partnership, maybe it's a , limited liability company.

It's very different in different places, different countries. So think about finding a small business advisor, or talking to a business attorney, and make sure that you are complying with any local regulations and licenses, permits, and tax obligations, because it's so important to get these foundations in place.

I know, in some states, in the US you cannot operate a property management company unless you are a licensed realtor. So just make sure before you get going on all this, that you are sure of what you need to comply with in order to proceed.

So, Step 4. Develop your marketing strategy.

Now comes the fun stuff. So you've got to create a marketing strategy that's going to help you attract guests and differentiate yourself in the crowded short-term rental market. And it really is pretty crowded now. And while you know I love to talk about direct booking, you can still use the online platforms such as Airbnb or VRBO, or, whichever is right for your area to start with. Make sure you optimize your listings. You've heard all this before, professional photos, compelling descriptions, and then you can leverage your social media channels and collaborate with local businesses, maybe, to increase visibility. There's so much you can do.

You need to define what that marketing strategy is going to be so that you don't fall into the 'spray and pray' type of marketing strategy. It's a marketing terminology for just marketing anywhere and everywhere, and the pray part is just hoping it's going to work.

So you need to develop a customer persona to understand your target audience better, and you would put your customer persona in your business plan. Maybe you've got two or three personas. Put them in the business plan, so anybody reading it, let's say anybody that might be wanting to lend you money in the future, or even buy your business, understands who that target audience is.

So make sure you have your customer persona and then you know how you're going to target them so much better.

So, Step 5. Outline your Operations and Management Plan. How are you going to do this thing? Because you've got to be efficient, so you can't leave any part of the Operations Plan to chance. You know, you've got to document your operational processes, including your guest communication.

How are you going to communicate with incoming guests and guests that are in place? Your check-in and checkout procedures, your cleaning protocols and maintenance schedules. You may be considering outsourcing tasks like cleaning and property management, or you might think about having it in-house, but it's really important that you get all this in place before you start and make sure you have standard operating procedures in place.

And the action point here is research some software that will streamline your processes, and there's plenty of software that's available out there that will help you to ensure that your operations run on rails.

So Step 6 is the bit I hated. Financial projections and budgeting. That's where I, I outsourced!

I'm not very good on numbers, so we outsourced to somebody who was good at it. And then they did all the financial projections and budgeting. Based on our marketing plans and strategies, and they came up with the numbers. But even if you don't like to work with numbers, you've got to know them.

You've got to know what your startup costs are. And that includes your property acquisition. You know, how much does it cost to acquire a new property, whether you are investing in one or whether you are taking on third- party properties. You've got to know how much the furnishings are going to cost, the marketing, the legal expenses, everything that goes into making this business work.

And then either do it yourself and create a comprehensive financial projection or get a bookkeeper or somebody who really knows what they're doing to build out some revenue forecasts, monthly expenses, expected profits because it's absolutely essential to have a realistic budget and a contingency plan to manage your finances effectively.

It's really easy to look at the money that pours in during the summer , if you're summer, seasonal, there's a lot of money comes in and thinking that you've got a ton available without thinking that you've got to use that to keep you going through the rest of the year until that money starts coming in again the following year.

That's so important and doing this financial projection will enable you to do that.

Step 7, you've got to do your risk assessment and contingency planning. Every business faces risks, and you've got to identify and put things in place to mitigate them if they occur. So think of your potential challenges now.

I just mentioned seasonality as a challenge. Competition, regulatory changes, and then you develop your contingency plans to overcome any unforeseen circumstances and safeguard your business.

So do you remember that thing called COVID? Some businesses were ready for it, and they were well able to adapt when it arrived.

Some weren't so ready and they didn't fare so well.

So in Step 8, it's monitoring and evaluating and updating every year, because this is not a static document. You need to regularly review it, and update the plan as the business evolves, monitoring your key performance indicators. That's called KPIs, such as occupancy rates, average daily rate, and guest reviews, things like that, and continually evaluate your strategies to stay ahead.

So that wraps up our first episode on writing a business plan for your short-term rental business.

We have a great download for you. It's our Business Plan Template that covers everything I've mentioned here, and much, much more. It's the blueprint I used to create the business plan that ultimately guided the successful sale of our company. If you're watching on YouTube, go to the link in the description below, or if you're listening on the podcast, go to the Show Notes and you can download our Business Plan Template there. Remember, a well-crafted business plan sets the foundation for success and helps you navigate challenges along the way. Stay tuned for our next episode, where we'll discuss more effective strategies for your short-term rental business.

If you found this episode helpful, please subscribe to our podcast and to our YouTube channel and leave us a review. Thank you for listening and best of luck on your short-term rental journey.