Creating a Business Plan for Your Commercial Drone Business
You’ve purchased your fancy new drones and all its accessories, you’ve earned your Part 107 remote pilot certificate, and you’ve decided on a niche that you are good at and you think there’s a good chance for profit. What’s the next step you need to take to start your own drone-based service business?
At this point, we recommend taking a step back and evaluating the next steps you’ll need to take. Who are the clients you will be targeting? What will be your deliverables? How will you go about marketing your services? Coming up with a well-thought, detailed business plan is a good way to ensure that you are always on track to achieve your business goals.
You need a license from the FAA if you want to create a commercial drone company. You can get one by passing the Part 107 exam.
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What is a business plan and why do I need one?
A business plan is exactly what its name implies – a plan for how you are going to start and run your business. There isn’t a single template or a prescribed length for a business plan. In recent years, very long business plans have been eschewed in favor of leaner and concise ones, as they are easier to follow. It’s even possible for you to write your whole business plan in a single page.
Your business plan is a brief summary describing your company, the types of services you provide, the milestones you are aiming to achieve at certain points, how you intend to market your services, and your financial goals.
Just as important as formulating your business plan is regularly reviewing and revising it. You may need to check on upcoming milestones and whether you are on track to meet them, or if there are marketing strategies you are yet to implement. A business plan is basically a ‘yardstick’ with which you intend to measure the success of your business.
If you find yourself in a situation where you need to get a loan to start your business, then a business plan becomes even more important. Most financial institutions will require a business plan, among other documents, as proof that your business has a chance of success and that you can pay off the loan you are applying for.
What should I include in my drone business plan?
As we’ve mentioned, there is no hard and fast rule on what you need to include in your business plan. You can add your own sections, or substitutes others to what we have listed down here.
1. Executive summary
An executive summary should provide all of the most important points of your business plan so that a reader can understand the essence of what the plan states without having to read the whole document. The executive summary should mention the name of the business, the nature of services that the business is offering, a list of the members of the management team, the customers your business is targeting, and the long-term financial goals of the company.
This section needs to be short – ideally no longer than 300 words. You may include a single figure to more concisely describe your company’s financial goals.
2. Company overview
This section provides more details on what the company is, who owns it, and how and why it was started. It is prudent, at this point, to provide a good rationale for the founding of the company. Does it serve an important need of an industry or society? What are the qualifications of the company owner that makes them a good suited for this type of business?
Some business plans also provide a breakdown of the company’s startup costs in this section and where the funding will come from. For better understanding, it is often recommended to divide the startup costs into three categories: expenses, assets, and investments. These do not have to be actual values. Forecasted values will do.
If you are applying for funding through loans, then it is worthwhile to note in this section how much of the startup costs will come from a loan. Banks and other financial institutions will better appreciate a more self-funded business than one where most of the initial costs will be coming from a loan.
3. Service information
This part describes the nature of drone-based service that you intend to offer. You should have already decided this before writing a business plan, but you will have to expound it here. The most common options include drone photography, filmmaking, mapping, inspection, or real estate advertising.
No matter which niche you enter, you must include as much detail as possible. Are you going to offer on-site services, or will you just be selling your products in an online marketplace? Are you going to provide post-processing survey data? Do your deliverables include 3D models, NDVI maps, or thermal maps?
4. Marketing plan
The marketing plan is perhaps one of the most complex parts of your business plan, as it will require quite a lot of research. In this section, you need to justify that the services you are offering will serve sizable market demand. To do this, you’ll need to take a detailed look at how the drone-based service market is performing in your area during the past few months or years. You can do market surveys to gauge how potential customers feel about the services you plan to offer. If there is a gap between the current demand and the number of providers of your service, then you can affirm that you have a market opportunity.
You will also need to identify your potential clients. Are you going to cater to individual or corporations? Is there a particular industrial sector that has a high demand for your service? OR are there clients that can pay more for your service? For instance, a pilot doing drone-based surveys may find more clients in the construction industry, but the limited clientele in the oil and gas industry has the potential to pay higher rates.
At this point, you will have to set a rate for your services. It’s your choice on whether you want to do it on a per job, per day, or per hour basis. Just make sure that the rate you declared is consistent with the financial goals and milestones that you have established in the latter parts of this business plan.
Lastly, you need to answer the most important question behind every marketing plan: how will you reach your clients? Are you going to build a professional website? Are you going to pay for advertisements on social media? How about attending conferences and doing cold calls? Different clients require different approaches, so an in-depth knowledge of the clients you are targeting will be a huge help in developing this section. You can also take a look at what your competition is doing and identify what works versus what doesn’t.
5. List of milestones
A milestone is basically a target you set for your business. You can have several milestones set in regular time intervals, such as every three or six months. You can also set your milestones in terms of either the number of sales or amount of earnings.
A milestone doesn’t even have to be a number. In the initial phase of your business, you can define a milestone that focuses on marketing: how many clients you’ve come in contact with, how many have responded, and how many have proposed potential jobs.
When coming up with your goals, we suggest sticking to the SMART formula: they must be specific, measurable, attainable, realistic, and time-bound. By having clearly defined milestones, you have a measure of how well your business is doing and if you need to step up to improve your company’s performance.
6. Company members and stakeholders
If your company is under sole proprietorship, then this section is hardly necessary. However, if your company consists of multiple people, then you need to define the roles and responsibilities of each person. You can also provide a breakdown of how these members will be compensated. Do they get a fixed percentage of the earnings for each project? Or are they going to receive a regular salary?
7. Financial plan
Lastly, the financial plan shows how you are going to generate profit based on your forecasted sales. The figures you have cited in previous sections, including the startup costs, personnel salaries, milestones, and loans will have to be incorporated into the financial plan. You will also need to make a list of recurrent expenses, such as the cost of website hosting, annual insurance premiums, office rental, and other business expenses.
Remember to list down all the assets, including your drone and its various accessories. Of course, every asset depreciates in value, so take the time to find out the useful life for each piece of equipment you have.
There are various ways for how you can present your company’s financial plan, and we are probably not qualified enough to give you advice on this matter. At the most basic, you need to provide monthly and annual profit forecasts, a break-even analysis, and a cash-flow diagram.
Reviewing your business plan
Just as important as formulating your business plan is reviewing and revising it now and then. As the saying goes, plans are made to be changed. A lot of things can come up, especially in the first few months of your business, that will prompt you to make changes in your business plan.
1. Checking up on milestones
Goals are important, but they are useless if they are not monitored with regards to actual performance. By periodically comparing actual figures to your milestones, you can assess if your business is in the right track or if you need to step in with some drastic changes.
Do you need to increase efforts towards marketing? Are contracts being fulfilled and are payments being received on time? Perhaps you need to reevaluate the types of clients you are targeting if you are failing in achieving your milestones.
2. Updating your financial plan
A financial plan that forecasts turning a profit over a year could change quickly due to a lot of factors. Did you fail in securing a client in the first three months of business operations? Did you have unanticipated expenses due to equipment breakdown? Are the actual interests on your loan higher than what you had forecasted?
By plugging in those revised numbers in your financial plan, you gain a more realistic picture of how the company is performing. Perhaps you’ll have to wait a little more to gain a profit, or perhaps you can do something to improve your performance such as renegotiating the terms of your loan. By reviewing your business plan regularly, you can identify these problems and come up with a solution right away.
Starting any business is both exciting and scary, more so if it’s based on a passion project such as drone flight. As long as you have the skills and there is a demand for the service you offer, then there shouldn’t be any reason for your business idea to fail. However, it takes more than flight skill and passion for a drone business to succeed.
Coming up with a detailed and realistic business plan is the best thing you can do before you start your drone business. By taking a detailed look at the market, listing down your startup costs and recurrent expenses, and setting performance-based milestones, you will have a better picture of how profitable your business idea could be. It’s horribly cheesy, but there is quite a lot of wisdom to the saying that those who fail to plan, plan to fail.
Play around with your idea, come up with a business plan, and who knows? You might just be the next big thing.