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A-to-Z Intro
Preplanning
 Developing
a Business Plan
Finding Your
Location
Financing
Menu Planning
Design & Build-out
Alternate
Operational
Concepts
Learning About Coffee
What About Decaf?
Anatomy
of American Espresso
Making Tea Work
in a Coffeehouse
Coffee Equipment
Espresso
Equipment
Additional
Equipment
The Role of Accessories
Training
Successful Staff
Scheduling
Operational
Systems
Marketing
Measuring Up
Against
the Chains
Additional
Resources
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Developing a Business Plan
by David Evert
Starting your own business is the American dream. Coffee businesses aren't complicated,
but you can make them overly complex and sometimes overwhelming if you avoid creating
a simple yet organized approach. The first important step is developing a solid
business plan you believe in and will continue to use to guide your decisions.
There is nothing difficult about writing a business plan if you
keep it simple. The two most frequent reasons people don't write business plans
is they think there is some special way to do a plan and they fear calculating
the numbers because they can't figure out how those numbers can be more than a
guess. Neither needs to be true.
Many people also think they should write a plan according to a
book or computer disk. Write what you believe, know what you want to accomplish
and others will believe it also. If you don't know where you are going, it doesn't
matter how or where you begin. Consider this: Would you ever think of buying an
airline ticket before deciding why you are taking the trip, where you are going,
when you will depart and return, or how much you are willing to spend? A plan,
written by and for you, is essential to reach your objectives and goals.
A business plan needs to state your vision and mission, what you
wish to do and sell, and who your customer is. It should also consider the competition,
address legal issues, compute a capital budget, project profit and loss, include
a cash flow spreadsheet, and contain a marketing and implementation plan. Here
is an outline of these ideas.
1.
What is your vision? When you are successful, what difference will you be making
in the lives of your customers, employees and family? What feelings are you trying
to create in your business? When you can reduce your answers to a single sentence
or two-sentence statement, everything becomes more organized. Vendors, sales people,
regulators, contractors, and even family—guided by your concise statement—stay
focused on your vision and objectives.
2.
What type of legal organization will this be? Who are the owners?
3.
What type of physical set-up are you looking for? This requires you to tell yourself
who you want as your customers, what you wish their experience to be, the hours
and days you want to be open, and what activities you wish to engage in.
4. Now
you are ready to define your menu. The menu will dictate the equipment you need.
After listing the equipment, you can do a rough sketch of the shop design and
equipment layout. (See "Menu Planning" on page 26 and "Design and Build-Out" on
page 28 for more information.)
5. Many health departments require you to
submit an operating plan for review. This plan consists of a menu, a complete
equipment list, a floor drawing with equipment layout, and a narrative describing
how you will operate. Creating this operating plan before going to a professional
design firm for final drawings can save several thousands of dollars. We keep
formats in our computer to help clients avoid delays and reduce their costs. Often
a professional design is essential and ultimately saves more money than it costs.
6.
Having completed all of the above, you are ready to work on the numbers of the
business plan. The first numbers page is your capital budget. This is a list of
all the money you will spend before you open for business, plus a reserve to carry
the business until income exceeds outflow. Remember, first you need to make sure
you include everything and are realistic about costs. Later you will address how
to finance the things you need. We have had clients start a business with as little
as $6000 on a credit card and as much as $150,000, but most spend between $40,000
and $80,000.
After the capital budget is finished, move on to an operating budget. Using the
menu and the actual prices and expenses of others in this business, we help clients
develop a clear picture of how many transactions are needed daily to break even,
assuming the owner is paid the same wages as a manager would be paid. Now you
know the number of customers needed daily to not go broke. Next we calculate the
break-even point if the owner is paid enough that he or she could not be tempted
to leave the business. This means you won't quit. Third, we compute break-even
assuming you need to put 10 percent of sales into a reserve for the future or
into your own pocket as profit, which means you are building equity and value
if you ever wish to sell. When you know exactly how many customers it takes to
be happy and make a profit over and above being paid for the job you will be doing,
you know more about your business than most people do.
7.
Finally, you need to address how you will grow this business successfully. This
is called marketing. What are you selling? Who will you sell to? How will you
gain their attention? How long will it take to grow your business to the daily
volume needed to be satisfactorily profitable? Who are your competitors and how
will they react?
8.
When you know how long it will take to become profitable, you can go back to the
operating budget and profit-and-loss projections to create a cash flow analysis.
We keep these formats in our computer on a spreadsheet, so most of the work is
eliminated for clients.
When the business plan is complete, it is time to create
what I call a back planning chart. We divide the opening of a business into six
categories: administration, construction, equipment, supplies, staffing, and marketing.
List these down the left side of a sheet of graph paper. Moving left to right,
draw a vertical line every fourth line. Each line represents one week of a month.
Next, list all the duties you need to complete between today and the day you open
in each category. Every morning devote five minutes per category to planning your
day. This will result in a clear implementation schedule and improved priority
setting. The more orderly your implementation, the less money you will waste.
Planning back from the end is the most effective way to avoid wasted time, energy
and money.
Steven Covey, author of The Seven Habits of Highly Successful People,
says, "Start with the end in mind." He also reminds us that successful people
seek first to understand. This planning approach is the best way I know to help
you understand your priorities and to also help others help you most efficiently.
My favorite quote is, "Buy and sell quality. Only the rich can afford to buy cheap,
because they can afford to buy it twice." No one can afford to compete on cost
rather than quality. Someone can always last longer, and there is not much fun
or pride in trying every day to hurt others. This business is supposed to be exciting
and fun.
As a final note, remember, once you are open, continue using your business
plan as a guide. Many people forget that it is a tool to be used over time. It
will tell you if you are on track or if you have spent too much in one area or
overestimated in another. Remember also that business plans can be rewritten as
you and your business change.
David Evert is founder and business partner
of Caffe Amore, a seven-location coffee cart company, and partner and founder
of Espresso Midwest, a specialty coffee equipment, consulting, service, supply,
and training company in Minneapolis. He can be reached at 800/900-3992 or 612/825-4167.
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