Your Business PlanPossessing a plan of attack
By Kris Larson
A comprehensive business plan can help you secure a great location and acquire financing for your dream coffee or tea business. But as critical as these elements are to your success, the most important functions of your business plan are to help you clearly define what your business is, where you want it to go in the future and exactly how you plan to get it there. In addition, a good business plan is a document you can refer to in later years to check your progress, make sure you are on track to achieve your goals, and update periodically to reflect changes in your vision or logistics.
If you don’t thoroughly understand the business you want to own before you open the doors, you could make critical errors when obtaining financing or signing a lease. And until you know how much it will cost to open, you can’t be assured that the loan you apply for will cover your startup costs, let alone provide you with the operating capital you will need to stay open until you start turning a profit. You also can’t be sure that the location you lease will be appropriate until you have a detailed understanding of your concept and what kind of space you will need to bring it to fruition.
When writing your business plan, consider every detail of your concept and then put a dollar value on the cost of making it a reality. This may be emotionally difficult. After much analysis, you may find the cost of opening your dream café is far more than you thought and that you do not have enough money to contribute the percentage of the total project cost demanded by your lender in order to obtain a loan. As hard as it may be, you may need to scale back your project—but it’s better to do that now than later. You don’t want to run out of capital implementing a plan that had you completely understood before starting, you would not have begun without first modifying it.
For these reasons, a well-written, well-thought-out business plan is crucial to your success. Because of it, you will understand your concept and know approximately how much money you will need to open your doors and to stay in business until you’ve turned the corner to profitability.
There are two types of business plans. The first is the concept presentation plan, which you will use in your search for a location. The second is a full financial business plan, which you will use when you approach lenders or investors for funding.
Concept presentation plan: This should include a complete description of your business idea, including your mission statement and the products you plan to sell. It should also include information about you and your management team, an analysis of your target market and competition, your service philosophy, marketing techniques, a sample menu, and a market trend analysis. This business plan will contain no financial information because its primary purpose is to explain your unique concept and to convince a landlord to rent to you. If you include financial statements in this plan, a landlord may see how lucrative your concept is and increase the rent for the location.
Remember, opening a specialty beverage business is a hot entrepreneurial trend, and you may have competition when trying to lease a location. Your concept presentation plan needs to convince leasing agents that your operation will be more interesting than other independent coffeehouses and that it also can compete with the large chains. In writing a persuasive plan, it is a good idea to invest in the talents of a skilled graphic designer to enhance your presentation with photographs and images, which will explain your concept visually while showing a leasing agent an artistic flair to complement your business moxie.
Full financial business plan: The full financial business plan usually contains the information from your presentation plan and an analysis of the total cost of your project, including estimated startup costs, estimated per-customer ticket average based on your menu and other items and services you may offer, expected customer counts, a labor schedule with monthly wage costs, cost-of-goods-sold percentages, and monthly profit and loss statements for the first 12 months, and then for years two and three. It also will include a personal financial statement.
USING YOUR BUSINESS PLAN
Once you have your concept down on paper—having calculated how much money you will need to make it happen—and are comfortable with the kind of business you intend to open, it’s time to share your business plan with those whose help you need: the lenders and the leasers.
Remember, you have read your business plan 100 times and understand it intimately. However, it must speak clearly and concisely to those who read it for the first time. When you approach a property manager about leasing a space or a potential lender or investor about financing your business, you want your business plan to clearly tell them who you are, what your vision is and why it is in their best interest to help you achieve your goals. As an added bonus, you will find it is much easier to articulate your concept to these individuals after you have committed the specifics of your vision to paper.
Kris Larson is vice president of Bellissimo Coffee InfoGroup in Portland, Ore. She is the editor of the company’s newsletter and its online magazine, virtualcoffee.com.
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