April 13th, 2006
Annual business plan helps hotel companies reach their goals - On Finance/At Your Risk - Column
Whether you’re seeking to raise debt or equity, or projecting next year’s goals and the ways to achieve them for your hotel, it’s wise and beneficial to write an annual business plan.
Going through such an exercise helps crystallize your thinking, plan marketing strategies, design and implement ways to accomplish your goals, assess risks, develop operational and capital-expenditure financial projections, and reach salient financial and operational conclusions. Each of these elements is useful to guide a business to a more successful tomorrow.
So how many entrepreneurs have the discipline to organize an annual business plan, much less follow it? Sadly, far fewer than many would care to admit. But from numerous conversations I’ve had with hotel lenders and equity investors, operators who have cogent business plans available for review often have a leg up in raising funds on better terms than those who don’t. Why? It’s the trust factor.
Lenders or investors usually will take comfort in a well-thought-through business plan provided for their deeper insight into the business. It leads to a greater respect for the team that’s guiding the operation. A business plan shouldn’t just be written for the purpose of raising cash. That’s a secondary reason to develop a plan, which should be done annually by the owner or managing agent and periodically reviewed to see whether adequate progress toward the year’s business goals is being met.
Elements of a plan
What goes into a good business plan? In the article, “Ten elements of a good business plan,” author Paul Larson provides a good summary to build from:
* Executive summary–a concise summary of the basics, including the market opportunities, management team, financial returns and, if asking for fresh capital, the terms you’re seeking.
* Description of the company or management team.
* Facilities description.
* Market and competitors–an analysis of where your business is coming from, new markets that could be tapped, characteristics of target customer groups, listing of your existing and potential competitors, and the rates they are likely to charge.
* Marketing strategy–describe every marketing method you will employ to attract your customer, including advertising, distribution channels and using specific resources from your franchisor.
* Design and development plans–either enhancements to existing facilities or the addition of new space would fit into this section.
* Management team.