Every business must start with a business plan. No matter how simple, not having a plan is planning to fail. The biggest mistake I see with investors is never creating a business plan with focus on one strategy. They spread themselves too thin and never master their craft. Here is an outline of a very simple business plan. At minimum I recommend starting with this and building on it weekly.
- Mission Statement – When people ask you what you do, what do you tell them? This is your purpose for existence and includes the benefit you provide. Research and come up with a solid mission statement.
- Strategy – Pick one strategy and become a master. Focus all of you efforts on perfection and automate a system that runs your strategy whether you are there or not.
- Market – Define your market. Many are only comfortable with their local market. Me on the other hand, I did tons of research to identify markets with great returns and ability to mitigate risk. Now I focus on one state where I can cherry pick from incredible LTVs and rent to purchase ratios.
- Criteria – Define your LTV, cash flow, max purchase amount, max rehab amount, max timeframe, etc. Stick to your criteria, walk away from any deal that does not meet your criteria. If you are not finding enough deals to cherry pick from, change your market and/or strategy.
- How to find deals, marketing plan – How are you going to automate a system so motivated sellers come to you? MLS, agents, online searches, direct mail to lists, other? This is the 2nd biggest mistake, investors do not find good enough deals and it all comes down to marketing and persistence with their marketing plan.
- How to finance deals – Are you using conventional, hard money, private money, equity or JV partners, seller financing, lease options, other? This is often a challenge in today’s market and private money is a tremendous solution. Learn to generate private money!
- How to do deals – How are you going to turn a purchase of a property into profit? Clearly define the steps. Repairs, rent, management, implementation of exit strategies, etc.
- Exit strategies, Backup Plans – One of the most important sections, especially to investors. How are you going to exit the deal? What are your backup plans as it is wise to have multiple exit strategies? Do you flip, lease option, wholesale, bird dog, sell the note, sell the entity holding title, rent and hold, other?
- Team & Systems – Clearly define your team and systems used to delegate and automate tasks. A true entrepreneur will step away from the daily processes and the business will run whether you are there or not.
- Illustrate example deals – Illustrate LTV, cash flow numbers and cash on cash return for example deals. Include images of properties and show your successful track record here if possible.
- Financials – Include financials for the timeframe of your strategy.
Once you have completed the first version of your business plan, get feedback. Have other investors and even consult a professional business plan writer. Your business plan is the backbone of your business success and always your first step to success.
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Article Author: Ryan MoellerRyan has written 45 articles for us.
Visit Ryan's Website: http://www.realreturnrealestate.com
Ryan is the founder of Real Return Real Estate™ , a company focused on buying property at extreme discounts, selling and renting with cash flow.
Joshua Dorkin
{ 11 comments… read them below or add one }
I love these kinds of posts! Businesses don’t plan to fail, they fail to plan
Thanks Nick, glad you like it and hope it helps everyone who reads my post. Enjoy your week!
.-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.
Hi Ryan,
A well thought out details description of how a business plan should look.
A very organized article. Thank you for sharing.
As a side note, not too long ago, I started to add a lot of graphics and drawings in my business plan. The reason for this is because I am a visual learner. As a result, I found that when I repeatedly was reviewing these graphics and drawings, it was more beneficial to me than if I was reading just plain text.
I was able to retain the information a lot better when it was in graphic form.
Regards,
Neil.
.-= Neil Uttamsingh´s last blog ..2 big fat reasons I don’t want to be a real estate investor anymore =-.
Thanks Neil, pictures, charts and graphs definitely help. Most people are visual and most investors will skim the business plan rather than read the detail word by word. The summary, pics, charts and graphs will stand out.
.-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.
Great basic outline, Ryan . . . I’m going to point to it from the forums for all to see.
Ryan, one more thing that I would recommend, is implementing some form of technology into your business. With technology continually changing, people are turning to the internet more often than not to find what they are looking for. Google has implemented technology that allows users to view the house/ neighborhood without leaving their homes. This has a critical impact on the relationship between real estate agent and the buyer. Even in Anchorage, I have made most of my sales through the internet. It is a great driving force for a business if it is used correctly.
Wouldn’t that fall under the marketing section of the business plan, which Ryan talked about in the article, Cindy?
Cindy,
Technology is used in almost every aspect of your business whether it is communication, searching for deals, creating and sending your marketing, evaluating deals, creating systems, finding your team, finding investors/buyers, etc. It is everywhere.
.-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.
Ryan,
Thanks a lot for this post; it’s exactly the kind of thing I’ve been looking for. Would you happen to have any examples you could point us to that uses this outline or this format?
What advice would you give for a business that isn’t really a going concern yet? In our case, we’re trying to put together a business plan in order to borrow money for a business entity, but we don’t have a specific strategy or specialty because, actually, it would depend on what kind of funding we might be able to get. For example, with access to more cash we might rehab and flip on our own. With access to less money we might pool money with other investors.
On the one hand, we want to show that we’re flexible and open to whatever opportunities the market provides — depending on the opportunity, different acquisition and exit strategies might make the most sense. On the other hand, we don’t want to seem directionless? How do we cover both bases?
On a related note, if we say we intend to pursue X, but don’t have a track record in X, how do we handle that?
Thanks!
Hey Eric,
The biggest mistake I see investors make is not having a focus. Savvy investors will see the lack of a focused strategy and lack of track record as a red flag. I recommend focusing on one strategy and finding a partner that has a track record. You can implement different exit strategies, just don’t spread yourself too thin.
I am planning to write a sample business plan in a future article. It will of course by simple and around 3 pages, not 30+ pages like the thorough plans get to.
I hope this helps. I can give you feedback on your business plan if that would benefit you.
.-= Ryan Moeller´s last blog ..Cash Flow Duplex =-.
Hey Ryan is that biz plan up yet b/c i have a great rental idea that i have seen work.