Monday, May 4, 2015

Restaurant Tip of the Month

Tip #2: Developing a Business Plan


What should a business plan include?
A business plan should prove that your business will generate enough revenue to pay all of your expenses, including debt service and make a satisfactory return.  Most funding sources are looking at a minimum debt coverage ratio (“DCR”) of 1.2/1 (we will explain more about DCR in our next tip, “Financing Your Restaurant.”  A good business plan should include: 

(1)       Executive Summary:
Characterize the highlights of your plan and sell your concept in two pages or less.

(2)       Company Summary:
Provide a factual description of your company, ownership hierarchy chart, and brief history.

(3)       Concept Statement:
Describe your concept, products (including menu) and/or services and how they stand out from your competition.  Include photographs and/or renderings that can help paint a picture (a picture tells a thousand words).

(4)       Implementation
Illustrate how you will implement your concept, how you will put your plan into action, and establish goals and milestones.

(5)       Management:
Present background on yourself, your management team, your key employees, their experiences, and notable accomplishments.

(6)       Market Analysis:
Include area demographics with a summary of your typical customers, competitive landscape, market size, and expected market growth.

(7)       Financial Proformas
Model your business financially to show year 1 income & expense forecasts, a 12-month operating plan and cash flow analysis, multi-year projections and a break even evaluation.

Finally, your business plan must be well thought out, written clearly and concisely, with a clear, logical structure, illustrating management's ability to make the business successful and profitable.

How do you write a business plan?
A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea. However, producing a professional product that is tailored specifically to your business and has all of the specific components your intended audience is looking for, usually does not come out of a generic software package.

Hire a Professional
A professional consultant may be the right way to go.  He/she will create the business plan that is specifically tailored for your business and specifically targeted at your intended audience.  However, you still have to be prepared to think through your business and understand the underlying. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business idea. One such firm with a great deal of experience in creating business plans within the hospitality industry is Equity Enterprises, Inc., Allenhurst, New Jersey (732) 988.2722.

Make sure to look for Tip #3 next month... "Financing your restaurant." 

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