Creating Your Business Plan –Setting Up the Structure?

When you are creating your business plan, you want to define everyone’s role. Who is going to be part of the business? What are they going to do? Are they going to contribute time, money, or both? Will these roles change over time as you bring in new investors and new partners? If so, how will these roles change?

Initially, you may be the only person in your business and that is o.k. However, you need to plan for growth. As you start to become successful, other people will get excited and want to work with you. If you already know how you want to partner with them, it will make it much easier to sit down with them and say, here is what I can do to help you. Your business plan can help you with these decisions before you are put on the spot.

You need to consider what form of entity you are going to use for asset protection. This is a great time to discuss with your accountant and your attorney what you are going to be doing. Have your attorney set up the best form of asset protection for your situation. You want to make sure that you will be in a situation where you can deduct the most expenses and protect your assets from any unpredictable lawsuits. Do your own research too. Find out what options you have so that you can have an educated discussion with your attorney.

While you are talking to your attorney, talk about how to set up future partnerships. You don’t need to do this in detail yet but ask about whether or not you should set up your partnership through an LLC or a corporation. This may vary depending on who you are partnering with. If you have already brainstormed with your attorney, you will sound more educated when you are discussing options with potential investors.

When you bring on partners, what role is each person going to play. Is the new partner going to be actively involved in the business and in the decision making process or are they going to be a silent partner who just invests cash into the business? This is important. If they are completely uneducated about self-storage investing, but they want to have a say in what happens, this could lead to either slow decision making where you lose opportunities, or bad decisions. Always retain 51% ownership so that you don’t have a tie. You need to be able to have the deciding vote to make sure that you can get things done. When you have multiple partners, make sure that you set it up so that there is no way to have a tie.

Another thing that you want to address is the profit sharing. How much is each investor going to make? Are you going to pay them a lump sum when you sell the property or refinance? Are they going to invest for a certain amount of time and then get their money back with interest? Do they want to be here for the long haul? Do they just get a percentage of the profits? There are a variety of ways to set up profit sharing. It takes time to turn around an unprofitable self-storage property. You need to let them know that they are going to be investing in a long term investment.

Finally, you want to think about how you are going to grow your pool of investors. People with money typically know people with money. Set up a multi-level marketing system where they can get paid for brining in more partners. Set up a referral fee or a small percentage of the profit on each property that their new investor invests in. If they are incentivized to bring in more people, your business will grow even faster.

Your business plan not only helps you plan for the things that you are going to run into as you build your business, but it also keeps you excited about the potential that your self-storage business has. If you already know how you are going to invite people to work with you, it makes it so much easier to talk to them. If you have no idea how you want to structure your partnerships, it makes it much harder to invite people to join you. Take the time to prepare now so that you are ready when people ask you about your business. As always, happy investing.