Table of Content

    Home inspection business plan for your 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 with a relatively lower investment group for the business plan 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 Home Inspection 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 of Home Inspection

    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.

    Immigration Business Plan
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    2.3 Customers of Home Inspection

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

    2.4 Target of the Home Inspection Company

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

    Home Inspection Business Plan - 3 Years Profit Forecast

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    Home Inspection 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 the construction industry and rental real estate business for more than 13 years.

    3.2 Why the Home Inspection 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 Home Inspection 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

    Note

    Before you start your own home inspection business, you must decide what services will you provide to your customers.

    Services for 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.

    Strategic/Operational Business Plan

    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 Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
    Home owners & dwellers 35% 11,433 13,344 16,553 18,745 20,545 13.43%
    Home buyers & renters 40% 22,334 32,344 43,665 52,544 66,432 10.00%
    Residential, commercial & institutional buildings 25% 12,867 14,433 15,999 17,565 19,131 15.32%
    Total 100% 46,634 60,121 76,217 88,854 106,108 9.54%

    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.

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    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.

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    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 Sales Year 1 Year 2 Year 3
    General home inspection 1,887,030 2,680,320 2,588,240
    Maintenance inspection 802,370 815,430 823,540
    Termite inspection 539,320 770230 1,002,310
    Water & seepage inspection 265,450 322,390 393,320
    TOTAL UNIT SALES 3,494,170 4,588,370 4,807,410
    Unit Prices Year 1 Year 2 Year 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 Costs Year 1 Year 2 Year 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 Home Inspection 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 1 Year 2 Year 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

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    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 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 10.00% 11.00% 12.00%
    Long-term Interest Rate 10.00% 10.00% 10.00%
    Tax Rate 26.42% 27.76% 28.12%
    Other 0 0 0

    8.2 Brake-even Analysis

    Home Inspection Business Plan - Brake-even Analysis

    Brake-Even Analysis
    Monthly Units Break-even 5530
    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 1 Year 2 Year 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/Sales 30.00% 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 Received Year 1 Year 2 Year 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
    Expenditures Year 1 Year 2 Year 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
    Assets Year 1 Year 2 Year 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 Capital Year 1 Year 2 Year 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 1 Year 2 Year 3 Industry Profile
    Sales Growth 4.35% 30.82% 63.29% 4.00%
    Percent of Total Assets 4.35% 4.71% 5.80% 9.80%
    Accounts Receivable 5.61% 4.71% 3.81% 9.70%
    Inventory 1.85% 1.82% 1.79% 9.80%
    Other Current Assets 1.75% 2.02% 2.29% 27.40%
    Total Current Assets 138.53% 150.99% 163.45% 54.60%
    Long-term Assets -9.47% -21.01% -32.55% 58.40%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 4.68% 3.04% 2.76% 27.30%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
    Total Liabilities 4.68% 3.04% 2.76% 54.10%
    NET WORTH 99.32% 101.04% 102.76% 44.90%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 94.18% 93.85% 93.52% 0.00%
    Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
    Advertising Expenses 2.06% 1.11% 0.28% 1.40%
    Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
    Main Ratios
    Current 25.86 29.39 32.92 1.63
    Quick 25.4 28.88 32.36 0.84
    Total Debt to Total Assets 2.68% 1.04% 0.76% 67.10%
    Pre-tax Return on Net Worth 66.83% 71.26% 75.69% 4.40%
    Pre-tax Return on Assets 64.88% 69.75% 74.62% 9.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 19.20% 21.16% 23.12% N.A.
    Return on Equity 47.79% 50.53% 53.27% N.A.
    Activity Ratios
    Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
    Collection Days 92 99 106 N.A.
    Inventory Turnover 19.7 22.55 25.4 N.A.
    Accounts Payable Turnover 14.17 14.67 15.17 N.A.
    Payment Days 27 27 27 N.A.
    Total Asset Turnover 1.84 1.55 1.26 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.02 -0.04 N.A.
    Current Liab. to Liab. 1 1 1 N.A.
    Liquidity Ratios
    Net Working Capital $120,943 $140,664 $160,385 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 0.45 0.48 0.51 N.A.
    Current Debt/Total Assets 4% 3% 2% N.A.
    Acid Test 23.66 27.01 30.36 N.A.
    Sales/Net Worth 1.68 1.29 0.9 N.A.
    Dividend Payout 0 0 0 N.A.

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