Here are two words that most real estate entrepreneurs don’t get overly excited about: business plans. Yes, most of us would agree they are important, but they are not always the easiest to create and follow. And they are not as fun as looking at deals and making offers. However, after starting a business over 10 years ago, I can tell you how imperative creating business plans is to your growth, progress, and achievement of goals. I am certainly not the ultimate expert in writing these business plans. However, I want to share a simple and even fun process to writing a business plan that you will use — not put away in some drawer and forget about. Before we get into this business plan process, I want to first discuss the purpose of business plans.
Why Are You Writing a Business Plan?
Sometimes entrepreneurs write business plans because they are seeking investors in their business or they are seeking financing from an institution. These types of business plans might be more extensive than the business plan process I am going to walk you through in a moment. Please note, before writing a business plan, you want to be crystal clear on why you are writing this business plan. Who is it for? What is the purpose? Then, the answers to these questions will guide you on what type of business plan you will need to write.
For my husband Matt and myself, we wrote our first business plan back in 2006 — 10 years ago! We wrote ours with the sole purpose of getting focused in our business. For the first year of investing, we were all over the place. We were getting involved in rentals, flips, development projects, commercial buildings, residential buildings. You name it, we were involved with it.
Fast forward a year to 2007, and we decided we really needed to write a business plan to help us become more focused and strategic in our approach. I have to tell you that writing out a business plan together back in 2006 made a huge difference for us. Our business activity started to become more focused and strategic. We began to say “no” to activity that did not align with our vision, mission, and goals.
OK, let’s get into the structure of writing this one-page business plan!
Structuring Your Business Plan
I want to recommend a phenomenal book and resource you should order immediately on Amazon called the The One Page Business Plan for the Creative Entrepreneur by Jim Horan. Before I get into how much I love this book, I want to add I have no affiliation to Jim Horan or his company. Jim Horan wrote this book in the ’90s. However, the process he lays out in this book is timeless and will help you today more than ever get focused and clear on your goals and plan. It helps define the “big picture” and the “details” to make it happen.
Related: Think Your Business Plan is Flawless? Don’t Forget This Key Element!
What I love most about this book is that it is more of a “workbook” than anything else. It is not some book that speaks of theory (which I am not a huge fan of). This workbook is structured in a way that helps you answer critical questions about your business. And as you gain clarity on these answers, he provides space in the book to write these answers in. He also includes a CD full of templates for you to use and download on your computer. I am going to walk you through the process on a high-level basis. However, I would highly recommend you purchase this book immediately.
The 5 Sections of Your Business Plan
“The One Page Business Plan does something outrageous! It causes very busy people to stop and think. As they start to write […] It confirms both their clarity and their confusion.” — Jim Horan
There are five main sections of the One Page Business Plan. I will explain each section and share examples with you when we did this exercise back in 2006 since it was our first one. Before we jump in, please know that the best business plans evolve as you and your business evolve. They are not static; they are ever-changing and evolving. This is a “living” document that should get reviewed and tweaked on a continual basis. At the beginning, I would suggest at least once a month.
OK, back to the five sections:
It all begins with a vision. As the late Steven Covey said often, you always want to “begin with the end in mind.”
In 2006, here was the vision statement we came up with: “Within the next five years, grow DeRosa into the #1 recognized and sought out commercial and residential real estate redeveloper in central NJ. DeRosa will transform existing buildings into their highest and best use to suit the needs of the community and the tenants.”
The funny thing is that as I re-write this vision statement that we came up with 10 years ago, our current vision statement has not changed that much but has evolved. The key when writing an effective vision statement is to answer the question: “What are you building?” The vision statement answers who will your target market be, geographical focus, services offered, and how big the company will be. The vision statement should inspire YOU most importantly.
The mission statement answers the question, “Why does this business exist?” The vision is all about the “what” and the mission statement is the “why.”
Here is our mission statement from 2006: “Revitalizing urban America.” Again, our mission statement has evolved. Here is our current mission statement: “To transform lives through real estate.”
An effective mission statement will answer questions like “who will you serve?” and “what will you do for them?” What are you committed to providing your customers? A mission statement should also be inspiring and motivating!
Objectives define success in a measurable manner. Objectives answer the question “what will we measure?”
Here were some of our objectives from many years ago:
- Finish first flip by 3/1. Agreement in place by 3/31. Twenty percent profit on sale price. (We ended up losing money on this deal unfortunately but it was a GREAT learning experience.)
- Build a construction team of 10 people by 12/15/2007. (We did achieve this objective, but it took us much longer than 2007.)
- By 3/30/07, purchase rental property (or properties) to generate $1,500 passive income. (We did achieve this, but it took longer than 2007!)
As you can see with these objectives, they are well defined, with dates and specific targets. The key when writing objectives is to focus on all aspects of your business — from revenue to profitability to marketing to people to processes. Objectives are so important because they decrease subjectivity. Objectives are black and white and move you towards your vision and mission!
Strategies answer the question, how will you build this business?
Here were some of our strategies to achieve the above objectives:
- Network and build relationships with local business owners, merchants, and local government.
- Align with five financial lenders including banks and private equity.
- Document systems and processes for evaluating, developing and managing properties.
You want to take each of your objectives and brainstorm the “how” you are going to make these happen. Think of these strategies as a road map to achieving your goals. Strategies are great because they set direction and values for a business. They help you stay on track and establish what you are willing to do and what you are NOT willing to do.
The best way to determine what your strategies will be is to study successful investors who have built the type of business you want to be build. Remember, success always leaves clues. Study others so you can determine “best practices.”
In a nutshell, this section (which is the last section) answers the question “what is the work to be done?” This is where the rubber meets the road!
Here were a few of our action plan statements:
- Hire an administrative assistant/bookkeeper by 12/07.
- Write a detailed manual for evaluating, developing and managing properties by 12/07.
- Build strong relationships with 3 new private lenders and 3 banks by 12/07.
Think of these action plan statements as plans to implement strategies and achieve your objectives. Again, the vision and mission is there to keep you on course and to inspire you. Keep in mind these action plan statements are not meant to be job descriptions. These statements should directly relate to either a strategy or objective. These statements should always involve a completion date and an actual description of the work that needs to be done.
I hope this overview of Jim Horan’s One Page Business Plan process has been helpful to you. Please note that I have only scratched the surface here. Jim Horan’s tremendous materials, books, and resources go into the type of depth you need to do this process effectively. I encourage you to make this happen sooner than later. Goals are great, but without the rest of this — vision, mission, strategy, and action plan — goals are just that: goals. I love this one page business plan because it starts with this huge vision statement and ends with the day-to-day plan that needs to happen to make the vision a reality.
I would love to hear from others who have written and re-written a business plan before. What has worked for you? What has not worked for you?
Thanks for reading and get moving on that business plan!