Do you need a business plan for an Airbnb? Well you definitely need a plan, that’s for sure!
People get into hosting on Airbnb for many reasons, some right, some wrong, and some are completely personal preferences. I would say that if your hopes are to replace your current income from your job or to eventually hire a Co-host, then yes you should definitely have a business plan. Airbnbs are not a ‘get rich quick’ revenue stream. Just like anything else it takes time, patience, and some investment.
I’ll provide you with some of the resources that I use when I’m hired to develop such a business plan or a client.
Consider your (financial) goals
With any business venture the first question that you hope to answer is, “Is it a viable option?” Simply meaning, will this work financially? I don’t want you to get discouraged when you outline your financial ‘goals’ and they can’t be supported by the market research. Knowing your financial goals is the ‘long-term’ goal. This could be years away (or not), so I want to set the expectation that your Airbnb doesn’t start making your money in your first month. I’ve heard the saying, “The goal never changes, just the plan to get there.”
This is true.
Set your goals now and the marketing research and other variables will help determine what that first phase of the plan will look like.
And I also want to mention that there are several different ways to get started with Airbnb. I’ll outline them here:
- Airbnbing the bedroom down the hall from you.
- Airbnbing a property a property you own
- Co-Hosting -this means you help an Owner, which could be a landlord, Property Developer, etc., run their Airbnb. Most often, Co-Hosts get paid a flat fee or, like me, a commission.
- Rental Arbitration -this means that you rent a space from a landlord and then have an agreement that you -or they- will furnish the space and then you will rent it out on Airbnb. Some arbitragers pay their landlords a little more than market value and keep the rest, some split, in some way, the profits, and some just pay rent and keep the rest for themselves. One thing I want you to know or think about with rental arbitrage is although you can get started with Airbnb without owning property that you are on the hook, via a lease, for rent each month. This is why I personally like the Co-Hosting model better. It’s win-win for everyone.
Do market analysis
Market analysis is always a fancy way of saying ‘do your homework.’
There are several sites that will help you analyze the potential income for other short-term rental properties in the area.
The one I use consistently is AIRDNA. This site will allow you to see other listings in your area and provide you with an estimated income for your potential property. I’ve often found that AIRDNA’s ‘estimated income’ to be on the low side, but this is good for getting bare-bone numbers. If you can make these numbers work, then there are several other areas that we can use to help increase your revenue.
Define your niche
Finding a niche often starts taking shape when talking about the space itself. This section could be endless! For example: Is the space located in a special area? Are there unique characteristics about the space? Does this space fit a target demographic better? Can this space be better furnished to suit your ideal guest? The market research feeds the ‘business owner’ side of your mind and now you need to start tapping into the side of your mind, the ‘ideal guest.’
Everything from the type of furnishings you use, to the style of pictures you take begin to cater to a certain audience. This is where you begin to find your niche. Keep in mind that spaces evolve over time and so do you! Your space may fit a target audience better, but that doesn’t gel with your hosting style. All things to consider.
As business owners I believe we choose our ‘competitors.’
To me, this is the highest form of flattery. I see competitors as someone I resonate with because they are doing what I want to do and they do it well.
How you choose these people is completely up to you, but measuring yourself only by those in your neighborhood will become self limiting. Even though we are in Columbus, Ohio some of my competitors are halfway across the world.
Keep in mind you choose these people for different reasons; their decorating style, their witty writing style they have in each listing, or how their reviews always seem to be unique and always amazing.
Consider legal factors
Legal factors are a huge hurdle for some and almost nothing for others. This is going to vary from city to city and state to state.
This may be the most tedious part of getting the right answers for your business plan.
Legislation could, one day, force you into a position where short-term renting is no longer worthwhile for you. This is why I will ALWAYS use long-term rental numbers to justify the viability of a property.
I live in the mindset of being prepared for the worse case scenario. I have back ups for my back ups! It always seems a little crazy until you run into that situation yourself and then there is no turning back! It’s crazy train full steam ahead!
There is no substitute for experience!
You can totally go it alone and comb through your property to come up with a checklist of things, but you will miss things.
Hiring a consultant is a great way to cut down on the number of ‘missed things.’ No one is perfect and can foresee the future, but I know when I walk through a property for clients I provide way more value than a checklist. I talk through the things to include in a listing, things to look into, and hazards that don’t seem like it at first. Standards for everyone are different and mine are high. This affects the steps I take to prepare a listing before it goes live. This is everything from the cost of cleaning, maintaining par levels, furnishing and more.
The financial plan is where the rubber meets the road. This is where financial goals and financial feasibility begin their negotiations. As you go through your property’s checklist there will be things you invest in and others in which you get creative with.
Furnishing a space is one of the ‘x’ factors that could help increase revenue. Pieces don’t just need to look nice, but they need to be functional and serve multiple purposes if possible.
The goal is to create a unique experience for guests and this is a large part of it.
If you furnish a space to stand out then it will show in the photos. All of which in turn will gain you greater visibility over time and develop your niche.
A portion of this that most business plans leave out is accounting for ‘par-levels’ for your property. This is the amount of on-hand stock we store at the property for consistent use: trash bags, soaps, detergents, paper towels, etc. I try to get my properties on a quarterly schedule for tracking these. This way, I only have to shop 4x a year and I’m not making a ton of small runs to Costco or ordering items all the time on Amazon.
The Airbnb platform does a great job of giving new listings some love by giving them a bump in the search listings. Aside from this you may be asking what else do I need to account for in a marketing plan?
Quality photography is an absolute must. Here is another article I wrote if you’re having a hard time with the decision of whether or not to invest in it. Why quality photography is a must. These photos are going to be used in your listing and potentially on your instagram account. But long story short -photography and your listing’s copywriting are all potential guests have to go off of before they decide to “buy”!
Creating an Instagram account for your property is a great way to get the word out. If you do invest in the furnishings and photography the exposure potential is so much higher! People who are simply looking at traveling to your area could stumble upon it simply because of ‘geo-tags’ and other strategic hashtags. Accounts such as ThanksforVisting_ repost other short term rentals that stand out from the crowd in unique ways.
Leave Room for Future Renovation
Put money aside for repairs, maintenance, updates, upkeep, and any other unknown reasons that could pop up that would financially impact your business. It’s amazing to profit. And it’s amazing to see funds roll in month after month -heck, with each guest who checks in the next day is essentially pay day! But please please please operate smart. Set aside 2-3 months of operating expenses for those unexpected -or expected because hey, furniture and rugs and towels don’t live on forever!
Travel restrictions, economic downturns, and so many other forces that are out of our control can and will happen. You want to be the Host that is in it for this for long haul. Putting aside funds is something any smart business owner does. And, like the title of this post suggests, no matter how you get started with Airbnb you are now a business owner! So you’ll need to act like one!
I’m always talking with potential Airbnb Hosts about what it’s like to run Airbnbs as a business. We could chat for hours about your space and what it could go for, but until you have hard numbers everything is just hearsay.
Once you’ve taken the time to do your homework and build out your business plan, then things can start to happen. You may find that through the process of compiling the information for your business plan that your starting point isn’t quite where you thought it would be. There is a little more work ahead of you before you can really get started.
The Airbnb platform does a great job on helping streamline the process of getting things up and running, however building this into a business does take an investment of time and money. I’ve recorded a Airbnb 101 Podcast Series to help answer a ton of the questions that first time Airbnb hosts will have as you start your business plan. Hopefully it will give you some better insight and additional tools!
And check out this video we did in collaboration with Airbnb! We go over some other Airbnbiz (see what I did there!) tips to help you get started on your Hosting journey!