Putting together a business plan for a motel can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.
We will explore why writing one is so important in both starting up and growing an existing motel, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.
Without further ado, let us begin!
Why write a business plan for a motel?
Being clear on the scope and goals of the document will make it easier to understand its structure and content. So before diving into the actual content of the plan, let's have a quick look at the main reasons why you would want to write a motel business plan in the first place.
To have a clear roadmap to grow the business
It's rarely business as usual for small businesses. The economy follows cycles where years of growth are followed by recessions, and the business environment is always changing with new technologies, new regulations, new competitors, and new consumer behaviours appearing all the time...
In this context, running a business without a clear roadmap is like driving blindfolded: it's hazardous at best. That's why writing a business plan for a motel is essential to create successful and sustainable businesses.
In order to write an effective business plan, you will need to take stock of where you are (if you are already in business) and where you want the business to go in the next three to five years.
Once you know where you want your motel to be, you'll have to identify:
- what resources (human, equipment, and capital) are needed to get there,
- at what pace the business needs to progress to get there in time,
- and what risks you'll face along the way.
Going through this process regularly is beneficial, both for startups and existing companies, as it helps make informed decisions about how best to allocate resources to ensure the long-term success of the business.
To get visibility on future cash flows
If your small motel runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your motel's future cash flows.
So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.
The good news is that your motel business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.
To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.
By diligently monitoring your motel's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.
To secure financing
Crafting a comprehensive business plan for your motel, whether you're starting up or already established, is paramount when you're seeking financing from banks or investors.
Given how fragile small businesses are, financiers will want to ensure that you have a clear roadmap in place as well as command and control of your future cash flows before entertaining the idea of funding you.
For banks, the information in your business plan will be used to assess your borrowing capacity - which is defined as the maximum amount of debt your business can afford alongside your ability to repay the loan. This evaluation helps them decide whether to extend credit to your business and under what terms (interest rate, duration, repayment options, collateral, etc.).
Similarly, investors will thoroughly review your plan to determine if their investment can yield an attractive return. They'll be looking for evidence that your motel has the potential for healthy growth, profitability, and consistent cash flow generation over time.
Now that you understand the importance of creating a business plan for your motel, let's delve into the necessary information needed to craft an effective plan.
Information needed to create a business plan for a motel
Drafting a motel business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.
Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.
Carrying out market research for a motel
Carrying out market research before writing a business plan for a motel is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
You might discover that customers may prefer to book motels that offer modern amenities, such as free WiFi and updated appliances. Additionally, market research could also reveal that customers may be more likely to stay at motels that offer a variety of recreational activities, such as swimming pools and fitness centres.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your motel.
Developing the sales and marketing plan for a motel
Budgeting sales and marketing expenses is essential before creating a motel business plan.
A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.
This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.
The staffing and equipment needs of a motel
Whether you are at the beginning stages of your motel or expanding its horizons, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is vital to ensure your business's success.
To achieve this, both the recruitment and investment plans must align coherently with the projected timing and level of growth in your forecast. It is essential to secure appropriate funding for these plans.
A motel may incur staffing costs for hiring front desk staff, housekeepers, and maintenance staff. You may also need to purchase equipment such as beds, furniture, towels, cleaning supplies, and other necessities. Additionally, you may need to invest in security equipment such as cameras, locks, and alarm systems.
To create a financial forecast that accurately represents your business's outlook, remember to factor in other day-to-day operating expenses.
Now that you have all the necessary information, it's time to dive in and start creating your business plan and developing the financial forecast for your motel.
What goes into your motel's financial forecast?
The objective of the financial forecast of your motel's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for a motel are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
The projected P&L statement for a motel shows how much revenue and profits your business is expected to generate in the future.
Ideally, your motel's P&L statement should show:
- Healthy growth - above inflation level
- Improving or stable profit margins
- Positive net profit
Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established motel. And similarly, an established company should showcase a higher level of profitability than a new venture.
The forecasted balance sheet of your motel
The projected balance sheet of your motel will enable the reader of your business plan to assess the overall financial health of your business.
It shows three elements: assets, liabilities and equity:
- Assets: are productive resources owned by the business, such as equipment, cash, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors, lenders, and other entities, such as accounts payable (money owed to suppliers).
- Equity: includes the sums invested by the shareholders or business owners and the profits and losses accumulated by the business to date (which are called retained earnings). It is a proxy for the value of the owner's stake in the business.
Analysing your motel projected balance sheet provides an understanding of your motel's working capital structure, investment and financing policies.
In particular, the readers of your plan can compare the level of financial debt on the balance sheet to the equity value to measure the level of financial risk (equity doesn't need to be reimbursed, while financial debt must be repaid, making it riskier).
They can also use your balance sheet to assess your motel’s liquidity and solvency:
- A liquidity analysis: focuses on whether or not your business has sufficient cash and short terms assets to cover its liabilities due in the next 12 months.
- A solvency analysis: takes and longer view to assess whether or not your business has the capacity to repay its debts over the medium term.
The projected cash flow statement
A cash flow forecast for a motel shows how much cash the business is projected to generate or consume.
The cash flow statement is divided into 3 main areas:
- The operating cash flow shows how much cash is generated or consumed by the operations (running the business)
- The investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.)
- The financing cash flow shows how much cash is raised or distributed to investors and lenders
Looking at the cash flow forecast helps you to ensure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
It is also a best practice to include a monthly cash flow statement in the appendices of your motel business plan so that the readers can view the impact of seasonality on your business cash position and generation.
The initial financing plan
The initial financing plan - also called a sources and uses table - is an important tool when starting a motel.
It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).
Having this table helps understand what costs are involved in setting up the motel, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).
Now that the financial forecast of a motel business plan is understood, let's focus on what goes into the written part of the plan.
The written part of a drugstore business plan
The written part of the business plan is where you will explain what your business does and how it operates, what your target market is, whom you compete against, and what strategy you will put in place to seize the commercial opportunity you\'ve identified.
Having this context is key for the reader to form a view on whether or not they believe that your plan is achievable and the numbers in your forecast realistic.
The written part of a motel business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Let's go through the content of each section in more detail!
1. The executive summary
The first section of your motel's business plan is the executive summary which provides, as its name suggests, an enticing summary of your plan which should hook the reader and make them want to know more about your business.
When writing the executive summary, it is important to provide an overview of the business, the market, the key financials, and what you are asking from the reader.
Start with a brief introduction of the business, its name, concept, location, how long it has been in operation, and what makes it unique. Mention any services or products you plan to offer and who you sell to.
Then you should follow with an overview of the addressable market for your motels, current trends, and potential growth opportunities.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Finally, you should detail any funding requirements in the ask section.
2. The presentation of the company
In your motel business plan, the second section should focus on the structure and ownership, location, and management team of your company.
In the structure and ownership part, you'll provide an overview of the business's legal structure, details about the owners, and their respective investments and ownership shares. This clarity is crucial, especially if you're seeking financing, as it helps the reader understand which legal entity will receive the funds and who controls the business.
Moving on to the location part, you'll offer an overview of the company's premises and their surroundings. Explain why this particular location is of interest, highlighting factors like catchment area, accessibility, and nearby amenities.
When describing the location of your motel, you could point out its proximity to major highways, its access to popular attractions, and its potential for drawing in business from the local area. You might emphasize the potential for repeat customers, as well as the potential for drawing in customers from further afield.
You may also want to highlight the area's natural beauty and any other points of interest that could draw guests in. Additionally, you could point out any potential for additional development in the area, which could result in increased business for your motel.
Finally, you should introduce your management team. Describe each member's role, background, and experience.
Don't forget to emphasize any past successes achieved by the management team and how long they've been working together. Demonstrating their track record and teamwork will help potential lenders or investors gain confidence in their leadership and ability to execute the business plan.
3. The products and services section
The products and services section of your motel business plan should include a detailed description of what your company sells to its customers.
For example, your motel might offer customers complimentary breakfast, complimentary Wi-Fi, and 24-hour desk service. Breakfast can provide customers with a convenient and healthy meal option, Wi-Fi can allow customers to stay connected to their work and family, and 24-hour desk service can provide customers with assistance and support at any time.
The reader will want to understand what makes your motel unique from other businesses in this competitive market.
When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channel/s that you are targeting them through.
4. The market analysis
When outlining your market analysis in the motel business plan, it's essential to include comprehensive details about customers' demographics and segmentation, target market, competition, barriers to entry, and relevant regulations.
The primary aim of this section is to give the reader an understanding of the market size and appeal while demonstrating your expertise in the industry.
To begin, delve into the demographics and segmentation subsection, providing an overview of the addressable market for your motel, key marketplace trends, and introducing various customer segments and their preferences in terms of purchasing habits and budgets.
Next, shift your focus to the target market subsection, where you can zoom in on the specific customer segments your motel targets. Explain how your products and services are tailored to meet the unique needs of these customers.
For example, your target market might include business travelers. These are people who are travelling for work and need a place to stay for the night or the weekend. They typically book their stays in advance and look for amenities like free breakfast, Wi-Fi, and comfortable beds. Business travellers usually need a reliable, convenient place to stay while on the road.
In the competition subsection, introduce your main competitors and explain what sets your motel apart from them.
Finally, round off your market analysis by providing an overview of the main regulations that apply to your motel.
5. The strategy section
When writing the strategy section of a business plan for your motel, it is essential to include information about your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
The competitive edge subsection should explain what sets your company apart from its competitors. This part is especially key if you are writing the business plan of a startup, as you have to make a name for yourself in the marketplace against established players.
The pricing strategy subsection should demonstrate how you intend to remain profitable while still offering competitive prices to your customers.
The sales & marketing plan should outline how you intend to reach out and acquire new customers, as well as retain existing ones with loyalty programs or special offers.
The milestones subsection should outline what your company has achieved to date, and its main objectives for the years to come - along with dates so that everyone involved has clear expectations of when progress can be expected.
The risks and mitigants subsection should list the main risks that jeopardize the execution of your plan and explain what measures you have taken to minimize these. This is essential in order for investors or lenders to feel secure in investing in your venture.
Your motel faces a wide variety of risks. For example, you may be exposed to financial risks due to the potential for theft or fraudulent activities.
You might also face the risk of lawsuits due to liability issues, such as accidents or injuries on the premises. It is important to anticipate these risks and have a plan in place to mitigate them.
6. The operations section
The operations of your motel must be presented in detail in your business plan.
Begin by addressing your staff, specifying the main roles and your recruitment plan to support the anticipated growth. Outline the qualifications and experience needed for each role and discuss your recruitment strategies, which may involve using job boards, referrals, or headhunters.
Next, clearly state your motel's operating hours, allowing the reader to gauge the adequacy of your staffing levels. Additionally, mention any considerations for varying opening times during peak seasons and your approach to handling customer queries outside regular operating hours.
The key assets and intellectual property (IP) required to run your business should also be highlighted. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, ensure they are well-documented in this section.
You may have key assets such as the land or building that the motel is on, as well as furniture and equipment within the motel.
Additionally, you might have intellectual property such as a brand or logo associated with the motel, as well as any copyrighted material used in marketing or advertising the motel.
Finally, provide a comprehensive list of suppliers you intend to collaborate with, along with a breakdown of their services and main commercial terms, such as price, payment terms, break clauses and contract duration. Investors often seek insight into the reasons behind your supplier choices, which may include a preference for higher-quality products or established relationships from past ventures.
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of a motel business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my motel's business plan?
In this section, we will be reviewing the two main options for writing a motel business plan efficiently:
- Using specialized software,
- Outsourcing the drafting to the business plan writer.
Using an online business plan software for your motel's business plan
Using an online business planning software is the most efficient and modern way to create a motel business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your motel's business plan
Outsourcing your motel business plan to a business plan writer can also be a viable option.
Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.
However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.
From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).
You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.
The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.
For these reasons, outsourcing the motel business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.
Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their own business plan using online software.
Why not create your motel's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a motel business plan is a terrible idea.
Why?
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my motel business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
- ...
Overall, while Word or Excel may be viable options for creating a motel business plan for some entrepreneurs, it is by far not the best or most efficient solution.
Takeaways
- Having an up-to-date business plan is key to maintaining visibility on your future cash flows.
- A business plan has 2 parts: a financial forecast highlighting the expected growth, profitability and cash generation of the business; and a written part which provides the context needed to interpret and assess the quality of the forecast.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this guide helped you to better understand how to write the business plan for a motel. If you still have questions, do not hesitate to contact us.
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