Creating a business plan is essential for any business, but it can be especially helpful for home builder businesses who want to improve their strategy and/or raise funding. A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success. This article provides an overview of the key elements that every home builder business owner should include in their business plan.
A home builder business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.
A home builder business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable. Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.
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This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.
If you are just starting your home builder business, you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your home builder firm, mention this.
The industry or market analysis is an important component of a home builder’s business plan. Conduct thorough market research to determine industry trends and document the size of your market.
Questions to answer include:
You should also include sources for the information you provide, such as published research reports and expert opinions.
This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.
For example, a home builder’s customers may include:
It is important to understand your target customers’ needs, as this will determine the products or services you offer and how you market your business.
You can include information about how your customers decide to buy from you as well as what keeps them buying from you.
Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or home builder services with the right marketing.
The competitive analysis helps you determine how your product or service will be different from competitors and what your unique selling proposition (USP) might be that will set you apart in this industry.
For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation or advantage; that is, in what ways are you different from and ideally better than your competitors.
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This part of the business plan is where you determine and document your marketing plan. . Your plan should be clearly laid out, including the following 4 Ps.
This part of your home builder business plan should include the following information:
The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.
Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for a home builder include reaching $X in sales. Other examples include adding new products or services, launching a new marketing campaign, or expanding to a new location.
List your team members here, including their names and titles, as well as their expertise and experience relevant to your specific home builder industry. Include brief biography sketches for each team member.
Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.
Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix).
This includes the following three financial statements:
Your income statement should include:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Revenues | |||||
| Revenues | $ 336,090 | $ 450,940 | $ 605,000 | $ 811,730 | $ 1,089,100 |
| Total Revenue | $ 336,090 | $ 450,940 | $ 605,000 | $ 811,730 | $ 1,089,100 |
| Direct Cost | |||||
| Direct Costs | $ 67,210 | $ 90,190 | $ 121,000 | $ 162,340 | $ 217,820 |
| Total Direct Costs | $ 67,210 | $ 90,190 | $ 121,000 | $ 162,340 | $ 217,820 |
| GROSS PROFIT | $ 268,880 | $ 360,750 | $ 484,000 | $ 649,390 | $ 871,280 |
| Other Expenses | |||||
| Salaries | $ 96,000 | $ 99,840 | $ 105,371 | $ 110,639 | $ 116,171 |
| Marketing Expenses | $ 61,200 | $ 64,400 | $ 67,600 | $ 71,000 | $ 74,600 |
| Rent/Utility Expenses | $ 36,400 | $ 37,500 | $ 38,700 | $ 39,800 | $ 41,000 |
| Other Expenses | $ 9,200 | $ 9,200 | $ 9,200 | $ 9,400 | $ 9,500 |
| Total Other Expenses | $ 202,800 | $ 210,940 | $ 220,871 | $ 230,839 | $ 241,271 |
| EBITDA | $ 66,080 | $ 149,810 | $ 263,129 | $ 418,551 | $ 630,009 |
| Depreciation | $ 5,200 | $ 5,200 | $ 5,200 | $ 5,200 | $ 4,200 |
| EBIT | $ 60,880 | $ 144,610 | $ 257,929 | $ 413,351 | $ 625,809 |
| Interest Expense | $ 7,600 | $ 7,600 | $ 7,600 | $ 7,600 | $ 7,600 |
| PRETAX INCOME | $ 53,280 | $ 137,010 | $ 250,329 | $ 405,751 | $ 618,209 |
| Taxable Income | $ 53,280 | $ 137,010 | $ 250,329 | $ 405,751 | $ 618,209 |
| Income Tax Expense | $ 18,700 | $ 47,900 | $ 87,600 | $ 142,000 | $ 216,400 |
| NET INCOME | $ 34,580 | $ 89,110 | $ 162,729 | $ 263,751 | $ 401,809 |
| Net Profit Margin (%) | 10% | 20% | 27% | 32% | 37% |
Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| ASSETS | |||||
| Cash | $ 105,342 | $ 188,252 | $ 340,881 | $ 597,431 | $ 869,278 |
| Other Current Assets | $ 41,600 | $ 55,800 | $ 74,800 | $ 90,200 | $ 121,000 |
| Total Current Assets | $ 146,942 | $ 244,052 | $ 415,681 | $ 687,631 | $ 990,278 |
| Fixed Assets | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 | $ 25,000 |
| Accum Depreciation | $ 5,200 | $ 10,400 | $ 15,600 | $ 20,800 | $ 25,000 |
| Net fixed assets | $ 19,800 | $ 14,600 | $ 9,400 | $ 4,200 | $ 0 |
| TOTAL ASSETS | $ 166,742 | $ 258,652 | $ 425,081 | $ 691,831 | $ 990,278 |
| LIABILITIES & EQUITY | |||||
| Current Liabilities | $ 23,300 | $ 26,100 | $ 29,800 | $ 32,800 | $ 38,300 |
| Debt outstanding | $ 108,862 | $ 108,862 | $ 108,862 | $ 108,862 | $ 0 |
| Total Liabilities | $ 132,162 | $ 134,962 | $ 138,662 | $ 141,662 | $ 38,300 |
| Share Capital | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
| Retained earnings | $ 34,580 | $ 123,690 | $ 286,419 | $ 550,170 | $ 951,978 |
| Total Equity | $ 34,580 | $ 123,690 | $ 286,419 | $ 550,170 | $ 951,978 |
| TOTAL LIABILITIES & EQUITY | $ 166,742 | $ 258,652 | $ 425,081 | $ 691,831 | $ 990,278 |
Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:
Below is a sample of a projected cash flow statement for a startup home builder .
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | $ 34,580 | $ 89,110 | $ 162,729 | $ 263,751 | $ 401,809 |
| Change in Working Capital | $ (18,300) | $ (11,400) | $ (15,300) | $ (12,400) | $ (25,300) |
| Plus Depreciation | $ 5,200 | $ 5,200 | $ 5,200 | $ 5,200 | $ 4,200 |
| Net Cash Flow from Operations | $ 21,480 | $ 82,910 | $ 152,629 | $ 256,551 | $ 380,709 |
| CASH FLOW FROM INVESTMENTS | |||||
| Fixed Assets | $ (25,000) | $ 0 | $ 0 | $ 0 | $ 0 |
| Net Cash Flow from Investments | $ (25,000) | $ 0 | $ 0 | $ 0 | $ 0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from Equity | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
| Cash from Debt financing | $ 108,862 | $ 0 | $ 0 | $ 0 | $ (108,862) |
| Net Cash Flow from Financing | $ 108,862 | $ 0 | $ 0 | $ 0 | $ (108,862) |
| Net Cash Flow | $ 105,342 | $ 82,910 | $ 152,629 | $ 256,551 | $ 271,847 |
| Cash at Beginning of Period | $ 0 | $ 105,342 | $ 188,252 | $ 340,881 | $ 597,431 |
| Cash at End of Period | $ 105,342 | $ 188,252 | $ 340,881 | $ 597,431 | $ 869,278 |
You will also want to include an appendix section which will include:
Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your home builder company. It not only outlines your business vision but also provides a step-by-step process of how you will accomplish it.
A well-written business plan is an essential tool for any home builder company. The tips we’ve provided in this article should help you write a winning business plan for your home builder business.
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