Individual Business Plan for Short-Term Renting of Houses and Apartments

This report focuses on a business plan for short-term renting of houses and apartments. It includes a summary of the business idea, analysis of risks, funding sources, fixed and variable costs, profit forecast, budgeted cash flow, breakeven point, MOS, KPIs, and recommendations. The business owner plans to run the business as a sole trader in the UK, targeting people who want to rent a place for a short term.

Individual Business
Plan

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Business idea summary................................................................................................................1
Analysis of risk that business will be facing...............................................................................2
Source of initial funding for business..........................................................................................2
Outline and discuss key fixed and variable costs........................................................................3
Profit forecast...............................................................................................................................3
Budgeted cash flow......................................................................................................................4
Breakeven point and MOS...........................................................................................................4
Key performance indicators (KPIs) to monitor progress towards business goals.......................6
Recommendations based on the results.......................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business plan can be defined as a written document that helps in explaining main
business aim, objectives and plan though which those objectives can be achieved (Ferreras-
Garcia, Hernández-Lara and Serradell-López, 2019). Development of business plan directly help
in management of finances of business, helps in achievement of desired goals and objectives in
an appropriate manner. It is extremely important to develop business plan for launching a new
business or for expansion of existing business for management of business finance, activities,
operations etc. This report will lay emphasis upon summary of business idea, risk associated with
business, funding of business, key fixed and variable costs, budgeted profit forecast for the first
year of operation, budgeted cash flow for the first year of operation, break- even point and
margin of safety, Key performance indicators (KPIs) for monitoring process towards business
goals. This report will focus upon a business idea of short- term renting of houses and
apartments.
MAIN BODY
Business idea summary
Business idea chosen for is from hospitality industry and is of short- term house renting
where customers will be able to rent houses as per the places they want to rent. Not only this,
provision of shipment containers for developing a place to rent will also be provided as a service.
Business owner already has family houses or apartments ready to be rented and want to use it as
an opportunity for developing business in this sector. Due to this requirement of building houses
will not be required. Initially all the family members would be working for providing services to
customers such as provision of house or apartments on rent, provision of breakfast and other kind
of services. This is because cost of building and decorating houses can be minimized and with
the help of short- term renting. Business owner will be running the business as a sole trader but
for future expansion might operate as partners for business expansion. This business will be
based in UK and main customers will be people who want to rent a place for short term.
Competition in this in industry is high as there are already existing competitors providing similar
services such as showhop is one of the already existing competitors who provide climatic places
for rent.
1

Analysis of risk that business will be facing
There are many different kinds of risk that are associated with the business that can work
as a barrier in expansion and suitability of business in the market in which they operate. Some of
the main type of risk associated with this short- term house renting business plan are as follows:
 Compliance risk: Exposure to legal penalties, legislation and failing to act in accordance
with legislation in this industry is one of the main types of risk associated with this
business (Broekhuizen, Bakker and Postma, 2018). Privacy breach is one of the main
types of risk associated with this business because in order to monitor safety and security
of customers and property cameras will be installed. Due to this breach in privacy of
customers issue can arise. In order to provide high quality service to customers
environmental law breaching issue can arise such as distribution of natural habitat for
expansion of business etc.
 Competitive risk: Current competition in this industry is one of the main types of risk
associated with this business (Akaeze and Akaeze, 2020). This is because, in order to
sustain and gain competitive advantage it is extremely important for business to cost and
quality of products and services provided by them as per current competition in the
market because quality and costing is not according to the competitors then it can make it
a bit difficult for business to sustain within the market.
Source of initial funding for business
There are three main sources of funding business that can be focused upon for stating this
new venture successfully:
 Self-financing or family financing: As there is already available family houses or apartments
ready to be rented so for stating this business either personal investment will be done or loan
from family such as from parents, grandparents will be asked for (Atarah and et. al., 2021). It
is one of the most appropriate source of funding business through which initial funding for
business can be obtained.
 Bank loan: Loan from bank is second priority source of initial funding of business because it
is one of the most reliable and safe source of funding business (Obeid and et. al., 2017).
Almost every private and public bank offer loan to business or start-ups but interest rate, loan
amount, repayment tenure different from bank to bank due to which selection of appropriate
bank for loan will be identified.
2

Outline and discuss key fixed and variable costs
There are various kinds of cost that are required to be paid in business. Some of them come
under fixed cost category (cost which is required to be paid regardless of sales made or profit
generated) and variable cost category (cost which depends upon sales volume of business)
(Domínguez and et. al., 2019).
Fixed cost is a kind of cost that remains constant for time irrelevant of level of output. For
example: rent, salaries, loan payment etc. Whereas Variable cost is a kind of cost or expanses
that changes directly proportionally to changes in business activity. For example: raw materials,
buying of apartments or houses for business expansion, advertisement etc.
Fixed and variable cost for this business have been explained below:
Variable cost: Raw material, Advertisement, Contribution
Fixed cost: Labour, Administrative, Interest
Cost and profit analysis:
Sales volume and income
Particular Jan Feb Mar Apr May June July Aug Sept Oct Nov dec Total
House
Unit 0 0 1 0 0 1 0 0 1 2 1 1
Selling
price 0 0 250000 0 0 200000 0 0 1500000 100000 100000 150000
Income 0 0 250000 0 0 200000 0 0 150000 200000 100000 150000 1050000
Cost £
Promotion cost 150000
labor cost 100000
Administrative
cost 15000
Brokerage 20000
Other variable cost 200000
Total cost 485000
Total cost analysis summary
Cost type £ Fixed/Variable
3

Promotion cost 150000 variable
labor cost 100000 variable
Administrative
cost 15000 Fixed
Brokerage 20000 Fixed
Other variable cost 200000 variable
Total 485000
P&L as per cost sheet
Particular Jan Feb Mar Apr May June July Aug Sept Oct Nov dec Total
Sales 0 0 250000 0 0 200000 0 0 150000 200000 100000 150000 1050000
Less: Variable
cost
Promotion
cost 0 0 -30000 0 0 -31000 0 0 -22000 -20000 -15000 -32000 -150000
labor cost 0 0 -15000 0 0 -20000 0 0 -15000 -20000 -10000 -20000 -100000
Other variable
cost 0 0 -40000 0 0 -25000 0 0 -38000 -30000 -27000 -40000 -200000
Contribution 0 0 165000 0 0 124000 0 0 75000 130000 48000 58000 600000
Less: Fixed
cost
Administrative
cost -15000 -15000 -15000 -15000 -15000 -15000 -15000 -15000 -15000 -15000 -15000 -15000 -180000
Brokerage -20000 -20000 -20000 -20000 -20000 -20000 -20000 -20000 -20000 -20000 -20000 -20000 -240000
Net profit -35000 -35000 295000 -35000 -35000 213000 -35000 -35000 115000 225000 61000 81000 180000
Profit forecast
In order to make forecasting of profit, Profit and loss plays an important role. This is
because with the analysis of P&L statement, an evaluation of income as well as expenses will be
analysed. P&L is one of the major financial statement that enable the company and concerned
organization to measure its profitability state.
Budgeted profit forecast for the year ended 31/03/2021
4

Particular Amount Amount
Total income 1050000
Less: Variable cost 200000
Other variable cost
Advertisement 150000 -350000
Contribution 700000
Less: Fixed cost
Labor -100000
Administrative -180000
Brokerage -240000 -520000
Net profit 180000
From the above analysis of P&L it would be said that the net profit in association with
short- term rent organization is £500000. This means that the profit projection with respect to
SHORT- TERM RENT ORGANZATIONis positive and it would be right to state that the
company would earn sufficient profit in the upcoming year. In the same way it was also analysed
that the expenses of the company are around £300000. However, on a wider terms it would be
right to state that the overall profitability of the company is high i.e. depicting positive financial
position.
Budgeted cash flow
Cash flow refers to a statement that enable the company to make measurement of its cash
position that how much cash is moving inwards and how much cash is going outwards. Cash
flow statement depicts the cash and liquidity position of the company.
Cash Flow Statement
Particular Amount Amount
Opening cash Balance 100000
Cash Flow Operations
Cash Received from
Rent of property 150000
Enabling additional services including breakfast 100000 250000
Cash paid for
Purchasing of raw material -20000
Maintenance of house -20000
Daily labor wages -10000 -50000
Net cash outflow/inflow 300000
5

As per the above cash flow statement it would be right to depict that the net cash flow of
the short- term rent organization is £30000. As it has high cash flow and liquid cash so it would
be right to state that the company need to make maintenance of it i.e. try to lower down the cash
and liquidity. This would lead to make better engagement of its funds.
Breakeven point and MOS
Breakeven point refers to a situation where a company will neither earn profit and nor
incur loss. This is the situation where a company would make operation its business on smooth
flow (Manuho and et.al., 2021).
Particulars Formula Figures
Selling price per unit £500000
Variable cost per unit £300000
Contribution per unit
Selling price per unit - variable
cost per unit £200000
Fixed cost £250000
BEP (in units)
Fixed cost / contribution per
unit 1
BEP (in value or monetary terms)
BEP (in units) * selling price
per unit £625000
As per the above analysis of BEP it would be interpreted that the breakeven point of
SHORT- TERM RENT ORGANZATIONis £625000. This means with the performance of its
operation if the company earn and generate £625000 then it would lie in the situation of no profit
and no loss. This means that the SHORT- TERM RENT ORGANZATIONmust need to reach
this level in order to sustain in the market. A falling below this level would lead to the situation
of loss and it would negatively affect the company.
Margin of safety:
6

MOS enable the company to determine the difference between the actual and breakeven
sales (Deutsch and et.al., 2018). This will enable the company to make determination that how
much sales would decline before the company would move in the situation of loss and
unprofitability.
= Current sales -Break even sales
= 800000-625000
= 175000
As per the analysis of MOS of SHORT- TERM RENT ORGANZATIONit would be
analysed that the sales would decline by £175000 before the company would move in the
situation of loss and unprofitability. Thus, it would be essential that adequate steps would be
taken so that it can make recovery of its sales and prevent the unprofitability situation.
Key performance indicators (KPIs) to monitor progress towards business goals
Key performance index are extremely important to be defined in order to monitor
progress of business towards business goals (Domínguez and et. al., 2019). Key performance
index directly help organizations in evaluating whether they are moving in correct direction for
achievement of their main business goals or not. Some of the main Key performic index that will
be used to monitor overall progress of business towards achievement of business goals are as
follows:
 Number of customers registered themselves for renting houses or apartments. This KPI will
help in identifying whether they are successful in attracting their target customers or not.
 Overall growth in revenue. This KPI will directly help business owners in identifying
whether they are successful in generating revenue or not.
 Number of customers retained and opted for renting place again: this KPI will directly help
in monitoring whether they are successful in retaining their target customers or not.
 Customer satisfaction rating for staying in rented place: This KPI will help in identifying
whether they have successfully provided desired quality of service to their customers in
terms of maintenance of place to be rented and other services or not.
 Monthly traffic on website for booking a place for rent: This KPI will help in identifying
whether their marketing and advertisement is successful in attracting customers or not.
7

Recommendations based on the results
Here are following recommendations that can be focused upon for sustaining within the
market and gaining competitive advantage:
 By providing personalized or customized experience to the customers by providing them
option to customize service provision for their rental place as per their convenience. This will
directly help them in enhancing overall satisfaction level of customers.
 Using social media platform for marketing and advertising this is because today maximum
number of people are using social media platforms and it is one of the best option for
attracting target customers and reaching or communicating with target customers.
 By providing additional required supplies to the customers as per their needs and
requirements even after renting a place whether those requirements are for getting party
supplies, cooking supplies etc.
CONCLUSION
From the above report it has been summarized that development of business plan is
extremely important to be developed in order to run a business successfully. There are various
kinds of risks associated with the business that are required to be identified in business plan in
order to be addressed. It has further been summarized that identification of source of funding is
important to identify sources from where funds for business will raised so that outlining of fixed
and variable costing can be done and budgeting of forecasted expenditure can be done. It has
further been summarized that identification of KPI is important to be identified so that
continuous monitoring of achievement of business goals can be done.
8

REFERENCES
Books and Journals
Akaeze, N.A. and Akaeze, C.O.,2020. Original Paper Small Business Startup Funding for Youth
Employment in Nigeria.
Atarah, B.A., and et. al., 2021. Making do by doing without: bricolage in the funding sources of
female entrepreneurs in resource-constrained environments. Journal of Global
Entrepreneurship Research, pp.1-18.
Broekhuizen, T.L., Bakker, T. and Postma, T.J., 2018. Implementing new business models: What
challenges lie ahead?. Business Horizons, 61(4), pp.555-566.
Deutsch, and et.al., 2018. Sensitivity of the Margin of Safety. International Journal of Power
Systems. 2018(3). pp.1-10.
Domínguez, E., and et. al., 2019. A taxonomy for key performance indicators
management. Computer Standards & Interfaces, 64, pp.24-40.
Ferreras-Garcia, R., Hernández-Lara, A.B. and Serradell-López, E., 2019. Entrepreneurial
competences in a higher education business plan course. Education+ Training.
Manuho, and et.al., 2021. ANALISIS BREAK EVEN POINT (BEP). Jurnal Ipteks Akuntansi
Bagi Masyarakat. 5(1). pp.21-28.
Obeid, T., and et. al., 2017. Fixed and variable cost of carotid endarterectomy and stenting in the
United States: A comparative study. Journal of vascular surgery, 65(5), pp.1398-1406.
9