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Module
1—Getting Started
Module
2—When you have Employees
Module
3—Product & Facilities
Module
4—Industry Analysis
Module
5—The Marketing Plan
Module
6—Bookkeeping & Accounting
Module
7—The Financial Plan
Module
8—Legal & Insurance
Module
9—Writing Your Winning Plan
Module
10—Financing Your Business
Module
11—Putting it all together
Why do a business
plan?
A
good business plan is a tool to measure performance over time. It can be the
basis for sound decision making. It can educate and motivate others. It is a
strategic vision of your company. It is a means to steer your company where you
want it to go. It is a means of communicating your vision to others. It is an
important step in turning ideas for products and services into a successful
venture. It can help you avoid mistakes which can save you effort, time and
money. It is a tool to keep your business under control. It helps you develop
the competitive spirit to make you prepared and ready to operate. It will help
you to make a decision on whether or not to start at all. These are a lot of
good reasons to do a business plan!
The act of “doing” is the
most important aspect of the plan. It forces the entrepreneur to think through
the steps they must perform to take an idea to reality. Today, hard work and
common sense are not enough to automatically assure success. Technology, a
competitive marketplace, and people themselves have become more complicated than
they were even a few years ago. One of the principal reasons for business
failure is lack of planning. “The business that fails to plan, plans to fail.”
Who is the plan for?
Do a plan for yourself,
first and foremost. Plan to update, change and amend your plan regularly. The
process should continue through the life of your business, and will guide you
through every step.
Your plan will give
potential investors the information they need to make a decision on whether to
invest or not. It helps them to analyze risk and make an informed decision,
which can be important if and when things get rough. It gives lenders the
information they need to make an informed decision, also. It answers their
questions of ‘how much’, ‘how long is it required’, and ‘how and when will it be
repaid’. It is today an essential element in applications for startup loans
and Small Business Administration guarantees. Your plan can provide your
accountant, attorney, and insurers with information which they will use to serve
you better. It can also educate, motivate, and empower your employees who will
be your key to success.
Authorship
Investors and lenders
expect a plan to be neatly typed and free of errors and poor grammar. Use
professionals to help only if absolutely necessary. Having another person do
the plan for you is discouraged. Don’t make it too slick or polished, either.
Substance is more important than form. Don’t waste scarce financial resources
on a too-professional looking document. Avoid the “trust me” school of
thought. It does not work with business plans. If your product is the best in
the market explain why. Avoid the use of vague, qualifying words such as
‘might’, ‘probably’, ‘maybe’, or ‘perhaps’. Be positive and definitive or don’t
say it at all. Confidentiality is also a consideration. Don’t just hand out
your plan to anyone. Non-disclosure statements, control numbering, and labeling
each page “confidential” are all methods of making sure your plan doesn’t end up
in the wrong hands.
What do investors and
lenders look for
They want to know your
history. Your experience and credit history are important factors in making
their decision. What is your collateral? What assets do you have and what are
you willing to risk for your success? Lenders look for secondary sources of
repayment. How will they get repaid if things don’t work out as planned? What
is your repayment plan? The investor wants to know that you are receptive to
his needs for information, and have given consideration to how and when he will
be repaid, also. For a lender, the asset financed should meet the term of the
loan. Equipment loans should typically be no longer than five years. Accounts
receivable and inventory are usually limited to one year. What is the demand
for your product or services? Demonstrate through sales history, orders or
other market data, including surveys and market studies for startups. Is there
enough margin of error in your plan? Lenders want room for unplanned events
which would not prohibit repayment of their loan. Are your plans and
projections reasonable and realistic? Take a conservative approach which you
are confident you can achieve. Be able to “out-perform” your projections.
The physical plan
Put your completed plan in
a 3-ring binder for yourself. When you share copies you should try to keep it
as short as possible, while covering all the necessary information we have
covered. Make changes, additions, and deletions over time, and keep it up to
date. Your cover sheet should contain your company name, address, phone
numbers, logo (if you have one), the names, addresses and phone numbers of key
management, the date of the plan, and who prepared it.
A sample
The attached plan is a
sample of an actual plan, with the names changed to protect the identity of
those involved. It is a fairly short, concise example of a well-written
business plan.
BUSINESS PLAN FOR
Local Motel, Inc.
P.O. Box 100
My Town, AZ. 85900
Joe Smith, Developer & Owner
Phone (520) 223-2342
TABLE OF CONTENTS
EXECUTIVE
SUMMARY . . . . . . . . . . . . . . . . . . . . . . .
3
Statement of
Purpose . . . . . . . . . . . . . . . . . .
3
Description of the
Business . . . . . . . . . . . . . . .
3
Overall Purpose
of the Business . . . . . . . . . . .
3
Specific
purpose of the business . . . . . . . . . .
3
Marketing
Strategy . . . . . . . . . . . . . . . . . .
. 3
Production Process
. . . . . . . . . . . . . . . . . . .
4
Management Team
. . . . . . . . . . . . . . . . . . . .
4
Objectives of the
Management Team . . . . . . . . . . . .
4
Financial
Considerations . . . . . . . . . . . . . . . .
5
PRODUCTS AND
SERVICES . . . . . . . . . . . . . . . . . . . . .
6
Initial Products
and Services . . . . . . . . . . . . . .
6
Motel 5 Features
. . . . . . . . . . . . . . . . . .
6
Future Products and
Services . . . . . . . . . . . . . .
7
INDUSTRY
. . . . . . . . . . . . . . . . . . . . . . . . . . .
8
What is the
Industry-Definition . . . . . . . . . . . . .
8
Market
Definition . . . . . . . . . . . . . . . . . . . .
9
Competition . . . . . . . . . . . . . . . . . .
. . . . . 9
Major Influences on
the Business and the Industry . . . .
9
MARKETING PLAN
. . . . . . . . . . . . . . . . . . . . . . . .
11
THE PRODUCTION PLAN . .
. . . . . . . . . . . . . . . . . . . .
12
COMPANY
STRUCTURE . . . . . . . . . . . . . . . . . . . . . . .
13
THE FINANCIAL PLAN
. . . . . . . . . . . . . . . . . . . . . .
14
OTHER ATTACHMENTS
PERSONAL FINANCIAL
STATEMENT TRAFFIC STUDIES
BIOGRAPHY OF THE
PRINCIPAL VISITATION STATISTICS
FRANCHISE
APPLICATION COST ESTIMATES
PROJECT ELEVATIONS &
DRAWINGS FRANCHISE AGREEMENT
FIXTURES,
FURNITURE SITE MAP
& EQUIPMENT
ESTIMATES ARIZONA MAPS
FINANCIAL PROJECTIONS
A. Statement of Purpose
1. The purpose of the
business is to provide a quality lodging experience to visitors to Your Town
area.
2. Mission statement: To
provide a lodging experience that will leave the customer with a good
impression of the business and
the community in general.
3. Specific request of the
plan: To solicit financial support for a $2 million loan to construct and
develop a 75-unit Motel 5
Hotel on a 3-acre site in My Town, AZ. (which borders Your Town, AZ).
B. Description of the Business
1. Overall Purpose of the
Business: To provide a return to investors and lenders, while serving the
general region by job
creation and revenues. My Town Motel 5 will be a high quality lodging
establishment, providing lodging and meeting
rooms which will be an asset to the region.
2. Specific purpose of the
business: My Town Motel 5 is a service business in the hospitality industry.
It will be a mid-market lodging establishment with 75 rooms on a 3 acre site
in My Town, a beautiful wooded area overlooking the Your Town area. The
standard size room will be 11’4” x 25’6”. The project is designed to attract
the mid-to-higher-priced hotel patron by providing comparable quality
accommodations and amenities at competitive prices. The premises will include
an indoor swimming pool, meeting facilities, and food and beverage service.
Plans include the addition of an adjacent restaurant, with adjoining meeting
room, which will attract business clients as well as budget leisure
travelers.
C. Marketing Strategy
1. As a retail business,
in a free standing location, sales and advertising will be directed to the
business traveler, tourist, and
others traveling along Highway 77, a major U.S. Interstate highway. Service
and quality will be important factors, along
with the Motel 5 franchise systems, which contribute to promotion, advertising
and reservations.
2. The primary marketing
tools include:
a. Motel 5
advertising & reservation systems for business and individual clients
b. Billboards on
reservation and surrounding areas to attract tourists
c. Direct marketing
of local, business and corporate businesses for meetings, food service and
lodging requirements.
d. Classified
advertising
e. Display
advertising
f. Yellow page
advertising
g. Direct Mail
h. Client referrals
i. Word of mouth and
referral
D. Production Process
1. Management and
Operations will be provided by hiring qualified hospitality
industry managers to
get started, and hiring and training service-oriented
employees. Motel 5
provides an intensive hospitality management training
program for
franchises, which includes classes on more than 45 subjects, including guest
relations, sales presentation
strategies, team building, supervisory skills, cash flow analysis, rate
management, and room inventory pooling.
E. Management Team
1. My Town Motel 5 is a
Corporation owned and operated by Joe Smith, a successful My Town businessman
who has owned
and operated a retail business in My Town for approx. 10 years. He has
considerable experience, education and background
in business management and business operations. Conventional organizational
structure for a Motel 5 will be utilized, with a
General Manager reporting directly to Mr. Smith. The General Manager
typically will organize operations where employees
report directly for
Front Desk, Housecleaning and Audit. These key employees will be responsible
for supervision of staff in
performing the day-to-day operations.
F. Objectives of the Management Team
1. The objective of the
Motel 5 management team is to implement the overall goals of the franchise; to
create a lodging
experience that will leave the customer wanting to return to relive the
experience. The hired manager will report directly to
owner/operator Joe Smith. Joe will oversee the operation, but the day-to-day
management of operations will be left up to
the qualified management team.
G. Financial Considerations
1. Anticipated profits
for the first three years of operations are as follows:
a. Year 1
$72,500
b. Year 2
$81,800
c. Year 3
$95,100
2. Sources of funds for
financing are as follows for:
a. Equity by
owner $
300,000
b. Loan secured
by property & FF&E 2,000,000
TOTAL
SOURCES $
2,300,000
3. Uses of funds are as
follows:
a. Purchase
Land* $
45,000
b. Construction
Costs** 2,000,000
c. Fixtures,
Furnishings & Equipment+
150,000
d. Startup
Expenses
105,000
TOTAL
USES $
2,300,000
Notes
to above
*Land
purchase is for 3 acres of Highway 77 property (see maps
attached).
**Construction Costs are an estimate only.
+FF&E
estimated conservatively at $2,000 per room. See
FF&E
estimates attached.
4. The Projected Key Balance
Sheet Ratios for the next three years will be as follows:
Year 1 Current
ratio: 2.9
Debt to Equity
ratio: 5.8
Return on
Equity ratio: 20.9%
Year 2 Current
ratio: 2.8
Debt to Equity
ratio: 4.9
Return on
Equity ratio: 20.4%
Year 3 Current
ratio: 2.7
Debt to Equity
ratio: 4.1
Return on
Equity ratio: 20.6%
II. PRODUCTS AND SERVICES
A. My Town Motel 5 will offer the
following amenities:
1. 75 rooms, approx. 12’ x
25’, configured with a mix of bed configurations,
including allowances
for disabled and non-smoking rooms. The majority
of the rooms will be
configured as double/doubles, with two beds, to offer
the maximum
flexibility to patrons.
2. Meeting rooms in-house
for use of organizations, meetings and business
and civic groups in
the area.
3. Indoor swimming pool
4. Food and beverage
service or adjacent restaurant to be developed.
B. Motel 5 Features
1. Motel 5 was founded in
1970 by Atlanta real estate developer John Five, who
started out with a
group of six no-frills motels. They were
acquired by
Hospitality Franchise Systems, Inc. in 1994, which makes
them a part of the
largest motel system in the world. With approx. 1,500
properties in 49
states, Motel 5 is presently the fastest mid-market
lodging chain, and the
third largest hotel organization. Motel 5 has
consistently achieved
high occupancy rates chain-wide. At one point,
the average occupancy
for properties less than five years old was over
80 percent.
2. To boost franchisee’s
occupancy rates, the chain currently promotes
five corporate
membership programs, each aimed at a different
demographic group.
For example, one club targets senior citizens,
whereas another caters
to budget-minded business travelers. Yet
another is aimed at
government employees.
3. Franchisee’s properties
are linked via a satellite-communications
reservations network,
which supplies nearly 40 percent of chain-wide
reservations.
Franchisees also receive national and regional media
exposure, listings in
major hotel directories and travel references, and
representation in
airline reservation systems.
C. Future Products and Services
1. Expansion possibilities
exist for the marketplace, with a 75-unit project
actually being on the
small side for new Motel 5 properties. Their
typical new project
consists of 115 rooms. This project was chosen at
its smaller size due
to capital limitations of the developer and not lack
of support for larger
facilities.
2. A restaurant addition
is planned for the first year, with an outside
developer or
owner/operator being sought. A Denny’s or other
franchise would be
optimal, with a high success ratio present
nationally in locating
with Motel 5 projects.
A. Lodging Industry Profile
1. The Lodging Industry is
the largest segment of the Hospitality Industry,
which is the fastest
growing major industry in the U.S. today, and the
largest industry
worldwide. By the year 2000 the Hospitality Industry is
expected to be the
largest employer in the U.S. and World. The Lodging
Industry for the U.S.
consists of approx. 45,000 properties, 3.3 million rooms,
$61.7 billion in sales, with an average occupancy rate of 63.6%
(source:
Amer. Hotel & Motel
Assoc., 1993).
2. The Economy Market
segment of the Lodging Industry is the fastest
growing, most
profitable segment of the industry, representing approx.
34% of the total
Lodging Industry. Motel 5 falls within the economy
segment, and has been
the best performing of all major competitors,
including Travelodge,
Super 8, Quality Inns, Motel 6, Fairfield Inn, Econo-
Lodge, Comfort Inns,
and Budgetel. They control 14% of the market,
with the 2nd largest
competitor representing 10%, and #3 7%. Their
reservations system is
the largest in the U.S., with six centers throughout
the country, almost
twice the size of their closest competitor.
3. The Lodging Industry
has proven to be cyclical, and the industry is just
pulling out of a
period of overbuilding in the 1980’s. The Economy
Market has not been
subject to this trend however, and has steadily
exhibited grown and
acquired market share from the high-end hotels.
Industry analysts are
predicting steady improvement in occupancy rates
during the 1990’s,
with much improvement noted since 1992. The
biggest challenge
facing the industry, according to Arthur Andersen & Co,
is maintaining rates
at a higher level. Motel 5 has benefited from what
might be considered
this long term trend toward more economy minded-
ness.
4. The Hospitality and
Lodging Segment in Arizona have grown faster than
the National
averages. According to a 1995 Business Journal article, the
average occupancy
rates in the state have been running over 75%, with
larger gains noted for
the economy segment of the market. The Arizona
Department of Tourism,
local Chambers of Commerce and Visitors
& Convention Bureaus
have been effective at promoting the state as both
a desirable product
and good value.
5. The Navajo County
includes a large section of Highway 77, which is a
major U.S. highway,
and boasts the largest traffic patterns through the
state. Interstate
commerce, tourism and statewide travelers all represent
large users of this
corridor. The Grand Canyon reports over 4 million
visitors per year
annually, most of which use this section of Highway 77
for thoroughfare.
Copies of traffic surveys through this area are shown as an
exhibit to demonstrate
demand via traffic, and a copy of the latest Tourism
Site Visitation list
is also shown as an attached schedule.
B. Market Definition
1. Who is the customer?
The major customer of My Town Motel 5 will
be a tourist traveling
the region. Secondary customer groups would be
the regional business
traveler and local populations using facilities and
meeting rooms.
2. Travel and tourism is
the world’s largest industry and the worlds largest
generator of jobs.
Tourism ranks as the number one industry and
employer in Arizona,
and is the fastest growing industry statewide.
C. Competition
1. The only local
competitor for this project is the No Tell Motel,
located in downtown
Your Town. It is a 56-unit project, owned and
operated by
corporation. Other lodging facilities falling within a 60
mile radius include
other cities, which has over 20 motel
properties.
2. Strengths and
weaknesses. The No Tell Motel is an older project,
approx. 30 years old,
and their rooms are smaller than that planned for
this project. Well
furnished with Southwest design, they have demonstrated
occupancy rates in
excess of 65%, despite a high rate structure, with rooms
starting at $65.
Their location is approx. 3 miles east of this project,
along Highway 77 with
good visibility and appearance. Their rooms are
located in a separate
wing from a main restaurant/dining facility, and have
an older-style outside
entrance with a dark parking lot for access. Service
is minimal, with few
amenities typically found in higher priced projects.
D. Major Influences on the
Business and the Industry
1. Government. Regulation
is minimal for the industry, with consideration
required for American
With Disabilities Act considerations, Health and
Safety, and local
taxation.
2. Business cycle. With
tourism being the primary customer, the business
should be somewhat
seasonal, with larger revenue months during the
Spring and Summer
months. Consideration in the plan was given to
lower occupancy and
rates for off-season months. Generally, with a
Motel 5 franchise,
separate rate structures for off-season months are
only required in the
more highly competitive markets.
A. Marketing Overview
I. As a retail business,
in a free standing location, sales and advertising will be
directed to the business traveler, tourist, and others traveling along Highway
77, a major
U.S. Interstate highway. Service and quality will be important
factors, along with the Motel 5
franchise systems, which contribute to
promotion,
advertising and reservations.
2. The primary marketing
tools include:
a. Motel 5
advertising & reservation systems for business and individual clients
b. Billboards on
reservation and surrounding areas to attract tourists
c. Direct marketing
of local, business and corporate businesses for meetings,
food
service and lodging requirements.
d. Classified
advertising
e. Display
advertising
f. Yellow page
advertising
g. Direct Mail
h. Client referrals
i. Word of mouth and
referral
A. Facility Requirements
1. The basic design and
schematics are shown in attached schematics. These
are preliminary and
subject to change, but demonstrate the general quality
and appearance for the
project. Construction cost estimates are also shown
as an attachment.
2. Furnishings, Fixtures
and Equipment are shown as a separate schedule.
We have allowed $2,000
per room, which is higher than the preliminary
estimates attached.
3. Labor. Management
staff will probably be hired from the
Hospitality Industry,
probably from out of the area initially. It is our
intent to train and
promote from within over time, and to utilize local
citizens whenever
possible for employees.
4. Training. Hospitality
Franchise Systems provides training and classes for
management and other
employees. They provide a comprehensive training
program for new
franchisees. The curriculum covers property management
supervisory and sales
skills, financial analysis, and related legal and
industrial topics.
Outlet managers receive a two-week orientation at the
Day Learning Center in
Atlanta. An operating team is assigned to every
new property to
oversee hotel development and staff training.
A. How Company Will be Structured
1. My Town Motel 5 is
owned by Joe Smith, Inc., a corporation
wholly owned by Joe
Smith.
B. Business Advisors
1. Accountant: Brian
Adams
c/o Epic Records
100 W. Buffalo
St., Holbrook, AZ 86025
Phone (520)
524-1000
2. Business
Consultant: Mark Engle
Small Business
Development Center
P.O. Box 610,
Holbrook, AZ 86025
Phone (800)
266-7232
3.
Lawyer: Larry Landers
P.O. Box 650
Your Town, AZ
85900
Phone (520)
223-7000
4.
Banker: Dan Manning
Yourtown State
Bank
P.O. Box 101, Your
Town, AZ 85900
Phone: (520)
223-5567
A. Summary: We used Robert
Morris Associates figures to estimate costs for the
project. On the income
side, the estimates were based on actual results
Motel 5 has compiled
for their other state operations, which would be
very comparable for
this operation. We were conservative on occupancy
rates and average
daily room rates used. Refer to the state
statistics in a letter
attached, and specific assumptions shown below in
section C.
B. Projected Financial Proformas
- see attached
1. Profit and loss
2. Break-even analysis
3. Balance sheet
4. Cash Flow
5. Operating Budgets
6. Ratio Analysis
C. Financial Assumptions
----Years -------
_ 1 2
3 4 5
1. Income assumptions were based
on:
Average Daily
Rate $45 $48 $53 $55
$55
Occupancy
% 60% 65% 70% 70%
70%
Other Income (mtg
facilities, etc.) $12 $12 $12 $12 $12
2. Expense Assumptions:
Operating Expenses (RMA%)
83% 83% 83% 83% 83%
Other Overhead (Dep,
int., etc) 8.7% 8.7% 8.7% 8.7% 8.7%
Income
Tax 35% 35% 35%
35% 35%
3. Balance Sheet:
----All Years
-----
Cash
13.7% of sales
Inventory
6,9% “ “
Subject Loan $2MM
$240Mpmts, CPLTD $60M, Interest $180M
A/P
2% of COGS
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Module
1—Getting Started
Module 1 Resources
Module 1 Worksheet Module
2—When you have Employees Sample
Employment Forms
Module 2 Worksheet Module
3—Product & Facilities Module
3 Worksheet
Module
4—Industry Analysis Module 4
Worksheet
Module
5—The Marketing Plan Module 5
Worksheet
Module
6—Bookkeeping & Accounting
Sample Accounting Forms
Module 6 Worksheet
Module
7—The Financial Plan
Sample
Projection Reports
Module 7 Worksheet
Module
8—Legal & Insurance
Module 8 Worksheet
Module
10—Financing Your Business
Financing Resources
Module 10 Worksheet
Module
11—Putting it all together