Guides
Writing a short-term rental business plan: what each section must answer to get read
A section by section guide to a short-term rental business plan: the question each part answers, the sentence that proves it, and which parts to write first.
What to take away
- A plan is not a description of your intentions. It is a set of answers a skeptical reader can test, and the test is one sentence per section.
- Write the operating section before the financial section. The numbers are downstream of how many turnovers you can complete.
- The two sections nobody writes and everybody needs are the permission section and the what-happens-when-it-goes-wrong section.
- If a section cannot be written without inventing a figure, that is information. Mark it open rather than filling it in.
Who actually reads it
Three readers, and they test different things.
A lender or investor tests whether the money comes back. They read the cash section and the risk section, then skim the rest.
A property owner considering handing you their asset tests whether you are careful by reading the operating section and the reporting promise. You are testing whether the thing works at all, so you must be the hardest reader on it.
Write for the second reader. A plan that satisfies a cautious property owner satisfies the other two, because that owner asks the operational questions the money people do not know to ask.
The sections, and the sentence that proves each one
| Section | The question it answers | The proving sentence |
|---|---|---|
| The business shape | Do you own, lease and re-let, or manage for others? | "We earn by ___, and if that stops we still have ___." |
| Permission | Are you allowed to do this, at this address? | "The city office confirmed ___ in writing on ___." |
| The property or portfolio | What are you operating and why these? | "These properties are within ___ minutes of each other." |
| Guests | Who books, for what reason, for how many nights? | "A typical booking here is ___ because ___." |
| Operations | How does a turnover get done? | "A turnover takes ___ minutes and is done by ___." |
| Pricing | How is a rate set, and by whom? | "Rates move when ___, decided by ___." |
| People | Who does the work and what happens when they cannot? | "If the cleaner is sick on a Saturday, ___." |
| Money | What comes in, what goes out, and whose is it? | "Guest tax and owner funds are held ___." |
| Risk | What ends this business? | "The three things that would stop us are ___." |
| Reporting | What does an owner receive, and when? | "Owners get ___ by the ___ of each month." |
Fill the blanks with real answers, not with adjectives. A blank you cannot fill honestly is a research task, and marking it open is a stronger plan than filling it with something plausible.
Plan sections and proving sentences
- Business shapeearn by ___, fallback ___
- Permissioncity confirmed ___ in writing on ___
- Propertywithin ___ minutes of each other
- Gueststypical booking is ___ because ___
- Operationsturnover takes ___ minutes, done by ___
- Pricingrates move when ___, decided by ___
- Peopleif cleaner sick Saturday, ___
- Moneyguest tax and owner funds held ___
Write operations before finance
The common failure in these documents is a financial model built on an occupancy assumption and a cleaning cost pulled from nowhere.
Operations first, then finance
- Turnover time at your standard
- Distance between properties
- Turnovers one person per day
- Several check-outs in one hour
- Capacity number
- Capacity x nights x achievable rate
- Revenue
Work backward. Establish how long a turnover takes at your standard, how far apart the properties are, how many turnovers one person can complete in a day, and what happens on the day when several check-outs land in one hour. That produces a capacity number.
Capacity multiplied by nights and by a rate you can actually achieve then produces revenue. The reverse order then produces a spreadsheet that balances and an operation that does not.
The staged version of getting to that capacity number, with a gate at each step, is in how to start a short-term rental business.
The permission section
Put it near the front and keep it boring.
Four permission answers to record
- City or county short-term rental office
- State revenue department on lodging tax
- Building or association rules
- Lease or mortgage terms
- Name office, date asked, what each said
- Document you hold
It should name the offices you asked, the date you asked, what each said, and what document you hold. The city or county short-term rental office, the state revenue department on lodging tax, the building or association rules, and the lease or mortgage terms are four separate answers, and any one of them can be a no.
Do not state a rule as a fact anywhere in the plan. Write what you were told, by whom, and when, because the value of this section to a reader is that it shows you asked rather than that it shows a favorable answer.
The people section
Two paragraphs, not one.
Two paragraphs of the people section
Paragraph 1
- Subject
- Who does the work
- Detail
- The standard
- Length
- One paragraph
- Question
- Who and to what standard
Paragraph 2
- Subject
- When they are unavailable
- Detail
- Busiest day of season
- Length
- One paragraph
- Question
- What happens if they cannot
The first says who does the work and what the standard is. The second says what happens when that person is unavailable on the busiest day of the season. That is the only version of this question anyone should care about.
How to find and keep the people is set out in the hiring and training guide. The practical screen for a first hire is in how to hire reliable staff.
Wage assumptions in this section can be grounded rather than guessed. The Bureau of Labor Statistics is the usual reference for what comparable work pays by area, and a plan that cites a source for its labor line reads very differently from one that does not.
The money section, and what is not yours
The section has to separate three pools: your revenue, tax collected from guests, and money held on behalf of property owners. The last two arrive in the same account as the first and belong to someone else.
Three pools in one account
Your revenue
- Owner
- You
- Arrives in
- Same account
- Kept apart by
- State how
- Record
- What supports split
Guest tax collected
- Owner
- Tax authority
- Arrives in
- Same account
- Kept apart by
- State how
- Record
- What supports split
Owner funds held
- Owner
- Property owner
- Arrives in
- Same account
- Kept apart by
- State how
- Record
- What supports split
State how the two are kept apart and what record supports the split.
The Internal Revenue Service's guide to what a new business has to set up covers structure and identification. The Small Business Administration's counseling and guidance pages connect you with an adviser who reads plans for a living and charges nothing to argue with yours.
The claims section nobody labels
Anything the plan says you will tell guests is advertising, and it has to be supportable. If the plan promises "always spotless" or a headline rate, the operation has to be able to deliver both on the day. The Federal Trade Commission's advertising guidance for small businesses is the plain-language version of what that means.
It is worth a paragraph because a marketing promise written into a plan tends to survive into a listing without anyone checking whether operations can meet it.
When to rewrite it
Rewrite the operating and money sections after your first full season, not before. A plan written from experience is a different document, and the section most likely to change is capacity.
Owners rewriting it because the business works should read the expansion and market guide first. The second market is the decision most plans get wrong.
Read the startup and market guide again if the shape of the business itself has drifted.
Common questions
How long should it be?
Long enough that every row of the table above has a real sentence. That is usually much shorter than the templates suggest.
Do I need financial projections?
You need a cash position by month, because this business is seasonal and the bad months are predictable. Multi-year projections in a document like this are theater.
Should I include competitor analysis?
Include what your competitors do that you cannot, and what they skip that you will not. Naming them adds nothing.
What if I do not know my occupancy?
Then say so and say how you will find out. An honest unknown is more persuasive than a confident invention, and any experienced reader can tell the difference.
Does an owner really want to see this?
Some do. All of them want the reporting section, which is the part that decides whether they stay.
