Do you want to start home inspection business?

Do you want to start a home inspection business? Millions of homes are sold, purchased, leased and rented every year in the United States so people will contact you to inspect the homes before they make a deal. It shows how the extent of the opportunity presented by this business niche. Moreover, you can start this business with relatively lower investments and can still make it profitable. But before starting home inspection business, you have to prepare a comprehensive business plan for it. The business plan will help you with startup and will also establish the foundation of your company policies. If you are wondering how to write an effective business plan then here we are providing you the business plan for a home inspection business startup named ‘Sigma Inspection Services’.

Executive Summary

2.1 The Business

Sigma Inspection Services will be a licensed and insured building inspection company owned and operated by Ricky Koch. The company’s main office will be located in the midst of commercial zone of Houston.

2.2 Management

The company will be managed by Ricky and his team of technicians. Ricky is a Civil Engineer who has been associated with construction and real estate industry for more than 13 years. Being experienced in this field, Ricky knows how to start home inspection business.

2.3 Customers

The company aims to serve the homes and buildings (residential, commercial & institutional) present in Houston.

2.4 Target of the Company

Our three-year business targets are summarized in the column chart below.

Home Inspection Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

Sigma Inspection Services will be owned and operated by Ricky Koch. Ricky is a Civil Engineer who has been associated with construction and real estate industry for more than 13 years.

3.2 Why the Business is being started

The business is being started for making profits in this industry. With Ricky’s vast experience and the dedication of his team, the business is expected to achieve success at all levels.

3.3 How the Business will be started

Before starting this business, it is highly recommended to seek assistance from real estate marketers. They will not only help you understand how to start your own home inspection business but they will also guide you how to market home inspection business so as to make it successful.
For the startup, the company has procured an office in the midst of commercial zone of Houston. In addition to the usual office inventory, 2 computer systems, 4 home inspection toolkits, 4 digital cameras, and office furniture will be bought before the startup. The major startup costs are summarized in the column chart below.

Home Inspection Business Plan - Startup cost

The detailed startup requirements are given in the table below.

Start-up Expenses 
Legal$55,300
Consultants$0
Insurance$32,750
Rent$32,500
Research and Development$32,750
Expensed Equipment$32,750
Signs$1,250
TOTAL START-UP EXPENSES$187,300
Start-up Assets$0
Cash Required$332,500
Start-up Inventory$32,625
Other Current Assets$232,500
Long-term Assets$235,000
TOTAL ASSETS$121,875
Total Requirements$245,000
START-UP FUNDING$0
START-UP FUNDING$273,125
Start-up Expenses to Fund$11,875
Start-up Assets to Fund$15,000
TOTAL FUNDING REQUIRED$0
Assets$23,125
Non-cash Assets from Start-up$18,750
Cash Requirements from Start-up$0
Additional Cash Raised$18,750
Cash Balance on Starting Date$21,875
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$332,500
Investor 2$0
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$695,000
Loss at Start-up (Start-up Expenses)$313,125
TOTAL CAPITAL$251,875
TOTAL CAPITAL AND LIABILITIES$251,875
Total Funding$255,000

Services for customers

Before you start your own home inspection business, you must decide what services will you provide to your customers. Deciding your services beforehand is extremely important since it helps in the planning of subsequent components of your business that’s why you must decide your services before starting a home inspection business. Sigma Inspection Services will provide following four types of services to its customers.

  • General Home Inspection: General home inspection refers to a complete inspection of home including its structure as well as the installed facilities. General inspection is needed whenever a home is purchased, rented or leased.
  • Maintenance Inspection: Maintenance inspection is needed by every household owner at regular intervals for the purpose of maintaining the home in a perfect state. Maintenance inspection reveals all the repair works which are needed in homes.
  • Termite Inspection: Termite inspection is regularly needed in all those homes which are either built from wood or have extensive woodwork in them. In other homes, termite inspection is occasionally needed. A termite inspection reveals termite activity in wood which can be then treated in initial stages.
  • Water & Seepage Inspection: Water & seepage inspection is regularly needed in those homes that have basements or tube wells installed in them. In other homes which it is occasionally needed for the purpose of checking sewage drains.

Marketing Analysis of home inspection business

If you are developing a home inspection business plan for your company then make sure to pay special attention to its marketing analysis. You can also take help from this home inspection business plan template. The most important component of the effective home inspection business plans is their marketing analysis that’s why Ricky hired the services of marketing experts to help him develop a good home inspection small business plan. The marketing experts also provided various home inspection marketing ideas and helped him develop an effective marketing home inspection business.

5.1 Market Trends

As of 2018, there are around 130 million houses in the United States. These 130 million houses need to have maintenance inspection, water & seepage inspection and termite inspection at regular intervals. Moreover, millions of houses are sold/purchased, rented or leased every year in the United States and before every deal to take place the houses are inspected. According to IBISWorld, building inspection industry generates $3 billion revenue every year in the United States. The industry comprises of more than 24,500 businesses responsible for employing around 38,500 people. Furthermore, the industry is growing at an estimated rate of 4.6% and the number of building inspection companies are increasing in the United States. Considering the industry states, the market for this industry has a lot of potential, provided that you plan your business successfully.

5.2 Marketing Segmentation

Our target market comprises of all those people who own a house and the people who are buying, selling, leasing or renting a house in Houston. The success of a startup totally depends upon how it markets itself to target its specific customer groups. A successful marketing strategy helps you determine how to run a successful home inspection business but it can only be developed after knowing the target audience and potential customers. Our marketing experts carried out an extensive research to identify our target customers and develop an effective marketing business plan home inspection to attract them. Following type of target audience can become the future customers of our services.

Home Inspection Business Plan - Marketing Segmentation

The detailed marketing segmentation of our target audience is as follows:

5.2.1 Home Owners & Dwellers:

Homeowners need a regular inspection of their homes to keep them maintained. This regular inspection is extremely important because it reveals all repair works which can become even costlier to repair if they aren’t repaired in time. This category not only includes the owners of homes but also include all kinds of dwellers whether they are living in rented or leased homes.

5.2.2 Home Buyers & Renters:

This category includes those people who are buying, selling, renting or leasing a home and wants to get the home inspected prior to the deal. Every year millions of deals take place in the United States and in every deal, the concerned people have to acquire inspection services. This target group will contribute the biggest part of the revenue to our business and hence will dictate our marketing strategy.

5.2.3 Residential, Commercial & Institutional Buildings:

This group includes large-scale residential buildings, apartments, condos, as well as the buildings of hotels, restaurants, factories, schools, colleges, offices, hospitals, municipal authorities and other institutions.
The detailed market analysis of our potential customers is given in the following table:

Market Analysis
Potential CustomersGrowthYear 1Year 2Year 3Year 4Year 5CAGR
Home owners & dwellers35%11,43313,34416,55318,74520,54513.43%
Home buyers & renters40%22,33432,34443,66552,54466,43210.00%
Residential, commercial & institutional buildings25%12,86714,43315,99917,56519,13115.32%
Total100%46,63460,12176,21788,854106,1089.54%

5.2 Business Target

Our business targets are as follows:

  • To become the best inspection services of Houston within next 3 years of launch
  • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
  • To balance the initial cost of the startup with earned profits by the end of the first year

5.3 Product Pricing

Setting the prices of services is a challenging part because it is very difficult to achieve the MARR (minimum attractive rate of return) while also attracting the customers. Considering our competition and all restraints, we have priced all of our services in the similar ranges as of our competitors.

Strategy

After identifying the market trends, the market demand, and the potential customers of the startup, the next step is to develop an effective sales strategy. Like marketing analysis, sales strategy is also an important component of a home inspection business start up so make sure to plan it before you start a home inspection business.

6.1 Competitive Analysis

We have a really tough competition ahead of us because there are hundreds of established inspection companies in Houston. But we believe that we will surpass all of our competitors in very less time due to various reasons. The first and the most important reason will be the quality of our services which will be second to none. We will make sure that our technicians inspect your property in the least possible time and in the best possible way. We will make sure that your property does not get damaged during our inspection process. Our second competitive advantage will be our exceptional customer service where all of our customers will be treated with utmost respect.

6.2 Sales Strategy

We will offer 10% discount on our services so as to increase sales during the first three months of our launch. We will carry out a large-scale social media campaign for our advertisement. We will introduce our startup to our target customers and stakeholders by sending brochures and introductory letters about us. We will arrange different seminars where we will emphasize the importance of building inspection and how helps to save money in the longer run, and in this way, we hope to promote ourselves.

6.3 Sales Monthly

Our forecasted monthly sales are given in the column chart below.

Home Inspection Business Plan - Sales Monthly

6.4 Sales Yearly

Our forecasted yearly sales are given in the column chart below.

Home Inspection Business Plan - Sales Yearly

6.5 Sales Forecast

Considering the market demand and the quality of our services, our sales pattern is expected to increase with years. Our forecasted yearly sales are summarized in the column charts below.

Home Inspection Business Plan - Unit Sales

The detailed information about sales forecast, total unit sales, total sales is given in the following table.

Sales Forecast   
Unit SalesYear 1Year 2Year 3
General home inspection1,887,0302,680,3202,588,240
Maintenance inspection802,370815,430823,540
Termite inspection539,3207702301,002,310
Water & seepage inspection265,450322,390393,320
TOTAL UNIT SALES3,494,1704,588,3704,807,410
Unit PricesYear 1Year 2Year 3
General home inspection$140.00$150.00$160.00
Maintenance inspection$600.00$800.00$1,000.00
Termite inspection$700.00$800.00$900.00
Water & seepage inspection$650.00$750.00$850.00
Sales
General home inspection$2,149,800$2,784,000$3,383,200
Maintenance inspection$120,050$194,500$268,500
Termite inspection$50,110$71,600$93,000
Water & seepage inspection$139,350$194,600$249,850
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
General home inspection$0.70$0.80$0.90
Maintenance inspection$0.40$0.45$0.50
Termite inspection$0.30$0.35$0.40
Water & seepage inspection$3.00$3.50$4.00
Direct Cost of Sales
General home inspection$989,300$1,839,000$2,679,700
Maintenance inspection$66,600$119,900$173,200
Termite inspection$17,900$35,000$52,100
Water & seepage inspection$19,400$67,600$115,800
Subtotal Direct Cost of Sales$1,294,100$1,699,400$2,104,700

Personnel plan

The personnel plan shows the staff required for the company along with their estimated salaries, and it must also be developed before you start home inspection business.

7.1 Company Staff

Ricky will act as the General Manager of the company, while the company will initially hire following people:

  • 1 Front Desk Officer for acting as a Receptionist in the company head office
  • 2 Accountants for maintaining financial records
  • 3 Technicians for leading and directing the team of inspectors
  • 4 Sales and Marketing Executives responsible for discovering new ventures
  • 5 Assistants for assisting Technicians with inspection work
  • 2 Drivers for facilitating the movement of team and equipment throughout the city

To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs.

7.2 Average Salary of Employees

 Personnel Plan   
Year 1Year 2Year 3
Front Desk Officer$85,000$95,000$105,000
Accountants$45,000$50,000$55,000
Sales Executives$152,000$159,000$166,000
Assistants$145,000$152,000$159,000
Drivers$50,000$55,000$60,000
Total Salaries$152,000$159,000$166,000

Financial Plan

The last thing you need to do before starting your own home inspection business is to prepare a detailed financial plan. Ricky hired financial experts to help him develop the financial plan for his home inspection business startup. The company will be solely financed by Ricky and he will also control the direction of business so as to make sure that it is expanding at the forecasted rate. No equity funding or loan will be required unless the company expands faster than forecasted.

8.1 Important Assumptions

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

Home Inspection Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
Monthly Revenue Break-even$159,740
Assumptions:
Average Per-Unit Revenue$260.87
Average Per-Unit Variable Cost$0.89
Estimated Monthly Fixed Cost$196,410

8.3 Projected Profit and Loss

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$309,069$385,934$462,799
Direct Cost of Sales$15,100$19,153$23,206
Other$0$0$0
TOTAL COST OF SALES$15,100 $19,153 $23,206
Gross Margin$293,969$366,781$439,593
Gross Margin %94.98%94.72%94.46%
Expenses
Payroll$138,036$162,898$187,760
Sales and Marketing and Other Expenses$1,850$2,000$2,150
Depreciation$2,070$2,070$2,070
Leased Equipment$0$0$0
Utilities$4,000$4,250$4,500
Insurance$1,800$1,800$1,800
Rent$6,500$7,000$7,500
Payroll Taxes$34,510$40,726$46,942
Other$0$0$0
Total Operating Expenses$188,766$220,744$252,722
Profit Before Interest and Taxes$105,205$146,040$186,875
EBITDA$107,275$148,110$188,945
Interest Expense$0$0$0
Taxes Incurred$26,838$37,315$47,792
Net Profit$78,367$108,725$139,083
Net Profit/Sales30.00%39.32%48.64%

8.3.1 Profit Monthly

Home Inspection Business Plan - Profit Monthly

8.3.2 Profit Yearly

Home Inspection Business Plan - Profit Yearly

8.3.3 Gross Margin Monthly

Home Inspection Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

Home Inspection Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

Home Inspection Business Plan - Projected Cash Flow

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 3
Cash from Operations
Cash Sales$40,124$45,046$50,068
Cash from Receivables$7,023$8,610$9,297
SUBTOTAL CASH FROM OPERATIONS$47,143 $53,651 $59,359
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0$0$0
New Current Borrowing$0$0$0
New Other Liabilities (interest-free)$0$0$0
New Long-term Liabilities$0$0$0
Sales of Other Current Assets$0$0$0
Sales of Long-term Assets$0$0$0
New Investment Received$0$0$0
SUBTOTAL CASH RECEIVED$47,143 $53,651 $55,359
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$21,647$24,204$26,951
Bill Payments$13,539$15,385$170,631
SUBTOTAL SPENT ON OPERATIONS$35,296 $39,549 $43,582
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0$0$0
Principal Repayment of Current Borrowing$0$0$0
Other Liabilities Principal Repayment$0$0$0
Long-term Liabilities Principal Repayment$0$0$0
Purchase Other Current Assets$0$0$0
Purchase Long-term Assets$0$0$0
Dividends$0$0$0
SUBTOTAL CASH SPENT$35,296 $35,489 $43,882
Net Cash Flow$11,551$13,167$15,683
Cash Balance$21,823$22,381$28,239

8.5 Projected Balance Sheet

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$184,666$218,525$252,384
Accounts Receivable$12,613$14,493$16,373
Inventory$2,980$3,450$3,920
Other Current Assets$1,000$1,000$1,000
TOTAL CURRENT ASSETS$201,259 $237,468 $273,677
Long-term Assets
Long-term Assets$10,000$10,000$10,000
Accumulated Depreciation$12,420$14,490$16,560
TOTAL LONG-TERM ASSETS$980 $610 $240
TOTAL ASSETS$198,839 $232,978 $267,117
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$9,482$10,792$12,102
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$9,482 $10,792 $12,102
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$9,482 $10,792 $12,102
Paid-in Capital$30,000$30,000$30,000
Retained Earnings$48,651$72,636$96,621
Earnings$100,709$119,555$138,401
TOTAL CAPITAL$189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL$198,839 $232,978 $267,117
Net Worth$182,060$226,240$270,420

8.6 Business Ratios

 Ratio Analysis    
Year 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets4.35%4.71%5.80% 9.80%
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.