Holly Howard runs Ask Holly How, a small business consulting company based out of Williamsburg, Brooklyn that works with a wide variety of businesses from restaurants to retail to art studios and pretty much everything in between. Her clients report increased income and profit, decreased expenses and a significantly better quality of life. Holly also heads up the Small Business Book Club at McNally Jackson Books and teaches business classes at The Yard in Williamsburg.
Got a question for Holly about running your small business? Email her and she’ll address it in her next column: email@example.com
I have been through the process of helping to open several restaurants, as well as developing business plans for my own ventures that have yet to come to fruition. My question is this: How do you develop a business plan that is specific enough to be feasible, and broad enough to be sell-able, before getting a space and financial backing? In the early planning stages, what items of the business plan need to be more concrete and which can be more flexible?
Thanks in advance for your advice,
–Reinventing the Meal
Congratulations on all of your previous success. Business planning can be a real snore and discouraging if you don’t approach it correctly. Seems like you have some experience in this already, and here is how you can make it work for you.
The objectives with a business plan are to create clarity, build trust and motivate potential investors. You mentioned that you have yet to find the space or seek financial backing, but you want to collect your thoughts now so you can communicate clearly and confidently when that time comes.
Here are the items I recommend you complete now, before the space and investors are involved:
-Mission, vision, values and company goals. This will clarify who you are as a company and where you are going.
-The concept, differential advantage and desired demographic. Describe your concept, how it is different from your competitors and who the customer is that wants your food. You might even want to include a *sample* menu here. Your menu can obviously evolve during your process, but you’ll surely know if you’re a pizza place or a taco joint and the basic components. And, you must be able to tell me how you are different from your competitors. Knowing your differential advantage will show me that you’re aware of who your competition is, how you will set yourself apart from them, and how you will target your desired demographic.
-Shameless self promotion. Tell me why you are the guy to do this; include any press reviews you may have received while you were at another restaurant. Always quantify your success if you can. Did you help your previous restaurant grow a certain percentage? Did you contribute to lowering food costs and increasing profit margins? What can you tell me about yourself and your past experience that convinces me you are qualified to open this next restaurant and attract customers.
The team. Tell me who the key people are and how they will help you build this company. Know that the success of your business is not just dependent on you, but your team. As Jim Collins says, “Get the right people on the bus.” Be sure to elaborate on key players such as your head chef and general manager. Again, if any of your key people have press reviews, include them here. Finally, be as specific as you can about the number of employees you will need to hire and the wage and benefits you will offer them.
-Build-out costs. You’ve told me that you haven’t found a space yet so obviously these numbers are just estimates. I would create 2 versions of this plan. The first version will be for a space you design, build and for which you buy all of the equipment. The second version will be for taking over an existing restaurant with equipment already in it. Since you haven’t found a space yet, start with some research and base your estimates on averages of price per square foot.
Number of seats. Even though you don’t have a space yet, you do know roughly how many seats you are considering. It is important to know the laws. Once you cross over a certain number of seats, you are required to put certain safety measures in place and possibly acquire different licensing. Do your research and have a good idea of what size restaurant you want to open.
-Average ticket price. Even if you don’t have your menu nailed down, you have an idea of your concept and the price point of your restaurant. Are you quick serve, casual or fine dining? Deciding your price point and average ticket price will inform all of your financials. In order to know your average ticket price, you must have a solid idea of who your suppliers will be and the prices they charge. Do some research to make sure that your price point is realistic based on your vendors pricing.
-Financial projections and break even. Again, because you haven’t found the space, you can’t know exactly how many seats you will have. But, you can start your financial projections based on the desired number of seats you are considering. You will obviously be using estimates here for rent, utilities etc. until you acquire your actual space, but you can set up this spreadsheet and always change those numbers once you have them. Ultimately, you want to know your break even: when have you sold enough food to recoup your expenses? This is important because you will want to know how quickly you will see a profit, and your investors will want to know how quickly they will start to see a return on their investment.
Here are the items that you can work out as you go:
-Your marketing plan.
-Your day to day operations plan.
-Your personnel plan.
Good luck! Investing in this type of planning now will surely save you time and headaches in the future. It will also show potential investors that you are serious and prepared.