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.