A common mistake that some hostel business owners make is to dive headfirst into the hostel industry without having a proper business plan. A hostel is a business and like any other business can not succeed without a business plan.
There are a few steps that are required when writing a business plan and we will go through all the steps in detail in this article so keep reading.
Read more: Understanding the Hostel Business Model
How To Start A Student Hostel Business
There are several things to take note of and into consideration when starting a student hostel business. Factors like location should be given extra consideration because it affects your budget, strategy, customers, and much more.
There are so many ways to start a student hostel business but we have narrowed it down to 4 important steps to guide you.
Find a Location
When you are starting a student hostel business you need to ensure that you pick a location and ensure that the location you pick is close to a university or a student populated area.
Conduct market research and identify your unique value proposition
Market research helps you recognize opportunities in your chosen area which enables you to find a gap in the market. This is where you step in with your unique value proposition. It enables you to identify what you can offer because you’ll be able to see clearly what is available and what is missing.
Define your resources
Identifying your resources like human resources and equipment will help you understand your operating costs and make a financial plan for your student hostel.
Create a business and marketing plan
A business plan contains a cost analysis and projected costs while a marketing plan will help identify your target market and what marketing strategy best suits them.
What Is A Business Plan?
Every new business or startup in search of funds is most likely to turn to a bank for a loan or to an investor and typically they will ask to look through your business plan to help them understand your plan and decide for/against investing or lending you money.
A business plan at its core is a formal document that includes the framework, strategies, and goals of a business. It explains and details how your business will work/works and why it will be profitable and successful to potential investors and funders.
This is achieved by analyzing your industry, competitors, and customers and also making detailed marketing and operations plan and most importantly a financial plan.
A business plan can be written in 2 forms:
- A business plan to obtain funding
- A business plan for personal planning
Why Create A Business Plan For Your Hostel?
As an entrepreneur writing a business plan is the first step to take when looking to start a new business or company.
This is because it allows you to determine the profitability of your business and is also pivotal in presenting your business to prospective funders and investors to get them interested in your business and hopefully provide the funding you need.
A business plan is not just important for your potential investors and funders, it is also important to you. It enables you to determine your business strategy for running a successful hostel.
A good business plan helps you identify the potential risks involved in operating your hostel and it also serves as a progress tracker.
What Information Is Needed To Write A Business Plan For A Hostel
There’s certain critical information you need before writing a hostel business plan firstly you need to conduct market research which includes analyzing the hostel market to confirm if there’s room in the local market for your hostel in your desired area.
A market analysis helps you understand the current demand for hostel accommodation and also gives you insight into the hostels that have already made their name on the market. After your market research, you need to determine the equipment and staff needed to operate your hostel.
You'll need to draft a list of the staff needed to operate the hostel on the daily basis and also research and offer a reasonably competitive salary to give you an advantage in the hiring market
After all this research is done you are ready to write your business plan.
An executive summary is a compelling and concise summary of your business plan. Its aim is to present your business by telling your story that is who you are, what product you are selling/service you are providing, your base of operation, and more importantly, how the investor can help you bring it to life.
This is the most important component of your business plan because although a few people read the entire business plan, the executive summary is read by everyone.
An industry analysis gives you a brief overview of the hostel industry. It reviews trends and growth patterns that have existed within the industry and the anticipated growth forecast for the industry.
An industry analysis gives you more insight into your competitors and supply and demand within your industry, It also helps you determine your business's potential for growth.
A market analysis is an assessment of the local market within the hostel industry. It allows you to determine how suitable the market is for your business.
It is made up of a competition analysis (analyzing the strengths and weaknesses of your competition) and your competitive advantage (your unique selling proposition).
A target market essentially refers to a select group of people with similar characteristics that you have identified as potential customers for your hostel business. Your target market is a subsection of the total market for the hostel industry.
Sales & Marketing Plan
Your sales plan should detail the strategies your hostel business will use to sell its services and increase its revenue, this includes the prices you'll set.
The sales plan often forms part of the marketing strategy. Your marketing plan will help you to identify your business's target market and create strategies for attracting those customers and building customer loyalty.
Advertising & Promotion
The advertising and promotion plan is aimed at informing potential customers about your hostel business and disseminating information about your hostel business. This details how you will increase your hostel business’ visibility.
By definition pricing is the process of setting the price at which a business will sell its services and goods, it may sometimes be part of the business's marketing plan. This is basically how you will set the prices for your services and rooms.
Operations Plan & Human Resources
The operations plan and human resources section are where you provide an insight into how you are going to run your hostel on the daily basis and if you will be hiring any staff to aid in the running of your hostel and what roles they will have.
Some of these daily operations include tax management, insurance, reservations, payment processing, maintenance, and other administrative tasks.
Your organizational structure will outline how certain activities like task allocation, coordination, and supervision are carried out in order to achieve your hostel business goals. It provides the base on which regular operating procedures and routines in your hostel rest.
The financial plan is the main part of your business plan. It is an overview of your current business financials and projections for its growth. In this section, you will illustrate your calculations and assumptions.
It is advisable to work with an accountant when creating your financial plan for your hostel business.
These are some basic information that must be included in your financial plan
The projected profit and loss statement
This table helps you to evaluate the expected growth and profitability of your hostel for the first three years of operating it.
The projected balance sheet
The balance sheet is made up of two components; the assets which include cash, stock, equipment, and everything that your hostel owns, and the liabilities, which are how much your hostel owes at the end of the fiscal year.
The projected cash flow statement
This table enables you to determine how much cash the hostel spends and how much revenue it generates in a fiscal year. This statement enables you to determine if the hostel has enough money to meet up with its financial commitments (like loan repayment).
This is also known as the sources and uses table. It provides an extensive view of the start-up capital needed to set up your hostel and how it will be funded.
Free Hostel Business Plan Sample Template
Need a comprehensive business plan template to help you in creating your ideal business plan? Click here to download our free hostel business plan sample template.
Congratulations on making it to the end of the article, now that you’re done reading the article you should be properly equipped to write your own business plan and start your hostel business.
You should also consider investing into a Hostel Management System to streamline your operation, increase management efficiency and most importantly, optimize your revenue.
Interested to know more about how you can benefit from this system? Schedule a call with us today to learn more!