2.12 Financial Plan

WEALTH AS A VACATION

What level of taxes will I have to pay to the city, state, and federal government? • 12%? • 20%? • I’m not sure; I need to research this before writing my revenue management plan.

What will my utility bills be? • Water is $20 a month. • Trash collection is $30 a month. • Internet and cable are $100 a month. • Electricity will vary depending on how many guests I’ll have.

What will my staff costs be? • Nothing, I’m doing all of the work myself. • Low, we have a family work philosophy. • High, I’m going to hire a cleaning agency, a marketing specialist, a website developer, etc.

What’s my target monthly income? • Under $10,000? • Over $10,000 to $20,000? • Over $20,000?

2.12 Financial Plan

This business takes signifi cant investment. Give some thought to your startup costs and how you will pay for them. We are not talking about the cost of the VRP itself. This plan will focus on the cost of the operations. Of course, you’ve asked yourself this question many times, “How am I going to aff ord this rental business?” Will it be self-fi nanced or are you planning on taking out a loan? The answers to these questions form your fi nancial plan. As we all know, money

CHAPTER 2

doesn’t grow on trees. Write down your estimates of expenditures and projected income for the fi rst fi ve years of operation.

TIP: If you are not adept at spreadsheets, I recommend that you get a course online on Excel Spreadsheets. This will be a powerful tool for you going forward.

As with anything in life, proper budgeting and planning your fi nances will prevent any stress in the future, and it will mean that your business is ready to thrive.

So, what kind of information makes up a fi nancial plan? Here is a list of questions to start:

Will I need to take out a loan? • No, I’m just renting out an existing property with everything ready to go. • Yes, I will need a small loan to renovate this property. • Yes, I will need a substantial loan to purchase the property/ land where I’m going to build my rental.

What will the interest rates be? • %? • Terms? • Variable?

Do I have savings I’m ready to invest into this? • I don’t want to put my savings into it. • Yes, I have a small amount that I’ll use for redecoration. • Yes, I have lots of savings that I’ve been keeping for a project like this.

What level of monthly loan payments can I manage? • None, my business has only a small income, so I don’t want to take a loan. • $ for a small loan? • $ + for substantial mortgage repayments?