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Writing the plan is the first major test of the entrepreneurs’ commitment. A plan conveys an objective understanding of the business opportunity. It is the written result of the data collection and market research process. A plan describes every process and strategy for the restaurant both the short and long term. A plan determines the financial needs of the restaurant at various stages of growth, and identifies potential obstacles and risks. A plan identifies market solutions and potential opportunities, and establishes milestones for continuous and timely evaluation.
If done properly, a business plan is the primary document for managing your restaurant. It is a communication vehicle for both internal and external purposes. For example, the external benefits of a business plan include: helps to sell the company to the external environments, facilitates the process of securing both debt and equity financing, helps to establish distributor or trade supplier relationships, creates the credibility that can help land an important or major account, and provides a base model if you decide to expand your brand into new locations.
The Internal Benefits of a Business Plan include: a management tool that provides a framework for decision making, it is a blueprint or the road map to guide the restaurant operations, helps the restaurant owner make decisions in an orderly manner, provides a tool to monitor the progress of the business and keep it on track, a vehicle for comparing with the actual results, and finally a tool to ensure that both employees and managers understand the restaurant’s objectives.
How Long Should It Be?
The length depends on the objective. Typically for a restaurant opening one location a standard would be ten to twenty written pages (plus financial statements and an appendix) for a one to three year plan. If you are also applying for a bank loan of up to $50K, then six to ten written pages (plus financial statements and an appendix) should suffice. For $50K to $200K, then ten to twenty pages (plus financial statements and an appendix).
Writing the Plan can be a long and arduous process, especially if it is the first attempt. With proper planning and a strong desire to succeed, it can be accomplished. The downside to starting is that it requires “drive’ and “staying power” to complete.
Many entrepreneurs get stuck because they dislike the writing process, they believe the process is too time consuming, or they know what they want to say, but just can’t seem to translate the ideas to paper. Here are some strategies to overcome this obstacle.
Pre-planning... Use the information from the marketing research effort as the basis for much of the writing. Use a Business Plan Outline for organizing information.
Write a little at a time... Write only a few sentences to start. The plan doesn’t have to be completely written at one sitting. The most important objective is to get your thoughts on paper as quickly as possible without worrying about grammar, punctuation, or critiquing every sentence that has been written.
Don’t write a book... Wherever possible use charts, tables, and graphs to present and analyze information. A picture is truly worth a thousand words. Remember, from the reader’s perspective, this is the primary sales tool for the business.
Correlate the information... A good plan contains certain elements described in the Business Plan Outline, but the plan’s logic and financial projections are the most important elements. If the numbers don’t work, then no amount of beautiful prose and presentation will make it a good plan. If the numbers don’t correlate to the text, then the plan will lose credibility.
Revise and edit... Take an objective view of what has been written and find opportunities to re-write sentences for clarity. Occasionally, some sentences as well as some paragraphs may be moved to a different location so that the plan reads easier. Correct all grammar, punctuation and spelling in this phase.
Proofread... Have an independent advisor read the plan. However, don’t take the critique personally - it is much better to find the mistakes during this phase then to have a potential investor or partner or lender find them later.
Polish the Plan... Make any suggested corrections, fill in the missing information, and do a final proofreading to polish the plan and make it presentable for outside readers.
THE WORST RESTAURANT START-UP MISTAKES
INITIAL UNDER FUNDING of your estimate of start-up costs, the need for working capital, and the failure to think about where you will get additional capital if your estimates are incorrect.
SHORTAGE OF CASH occurs when you fail to realize how important it is to turn cash. You may have under estimated the amount of cash needed to operate, or over estimated the speed with which customers pay. When cash doesn’t come in on schedule, business is severely constrained.
INCORRECT SALES FORECASTS happen when you over-estimate the number of potential customers that will visit your restaurant especially during the first year. There is no magic formula to accurately predict sales in a new market but many entrepreneurs are terminally optimistic. Seek opinions from associates in the restaurant industry with similar operations and demographics.
IMPROPER MARKET TESTING has both long and short term consequences. Business is founded on the basis of polling one’s friends and advisors. Clearly identify your three to five mile demographic radius. It is difficult to accurately predict sales in a new market. Avoid limited time and resources applied toward this function.
A WEAK BUSINESS PLAN sets the success potential for the restaurant. A detailed business plan is invaluable for raising money, and a vehicle for making you think through long-range implications. A plan is a road map for daily operations along with a measuring tool for progress. Your plan should include a statement of objectives, a thorough analysis of the competition, and a description of the administrative system and procedures that will be used.
IMPROPER PRICE SETTING results from underestimating the costs of selling your product. Avoid underestimating the costs of sales, marketing and distribution. Survey the area and determine what the market will bear or understand competitive pricing.
FAILURE TO DELEGATE AUTHORITY sometimes results from a Strong Ego. I know better and I can do better than anyone else. Or, fear that employees will steal your ideas or want to share your wealth. Or, fear of admitting your mistakes. Please remember this business TRAP: Business will grow to the point where you can’t do everything yourself.
LACK OF OBJECTIVE ADVICE will not allow you to see through the trees from inside the forest or behind the counter. Avoid the Strong Ego = nobody knows everything. You need a good board of directors. Find a group of individuals unrelated to your operations that you can trust and will give you honest monthly feedback. These associates should be independent and unemotional and able to evaluate your business plan and strategy. The smart owner will “fill in” the knowledge gaps.
RUSHING TO OPEN the restaurant leaves unfilled business gaps especially if you need the cash and does it prematurely. Even worse is that you will get a bad reputation from which it is difficult to recover in such a competitive market. Your product may be delayed the first weekend of business. Your credit card acceptance machine is not functional. Your hired help does not show up. Be prepared.
LACK OF FLEXIBILITY leads to slow growth. You are in a very competitive environment that requires flexibility to succeed. You need the ability to respond to competitive promotions in your market. Being strapped for cash means lacking the luxury of maneuverability. This one key trait is the independent’s saving grace and silver bullet to success. You can move quicker and more effectively than the National Chain brands.
EGO OF OWNERS should be kept in check. Do not refuse to recognize mistakes. Again, you can not do it all. Learn to trust your employees, vendors by instilling accountability in that if you succeed we all succeed together. Avoid failing to seek help or advice until it’s too late.
WEAK INCENTIVES generate low morale. Work diligently to set up reasonable incentives for those working with you. Create high expectations for hard work and long hours that results in commensurate rewards. Low hourly rates require higher enjoyable environments to work in. Always be in the creative awards mode and reward the employees for the smallest effort week to week. Due to high turnover you want to instill in your employees that working at your restaurant and being associated with you as an owner and person will be the best experience they will have in their lifetime. Your employees should always understand that if during their time of employment they do a good job that you will provide glowing and supportive recommendations for their next endeavor in life. Be a friend first and a boss second.
Finally, if you don’t have a plan just get started. Make a New Years resolution to finish your plan this year. If you fail to plan you plan to fail. There exist numerous business plan outlines and resources to help. Once you make a commitment you will find the people to help you.