There is much truth to the adage, “if you fail to plan, you plan to fail”.
Annually, 60% of restaurants shut business after one and a half years due their inability to recover initial capital or to generate profitability. Many small business owners reported not having sufficient financial planning, or assuming their restaurant business would succeed simply because “customers said our food was delicious”.
Because of this, having a business plan is crucial, to ensure that execution of setting up a restaurant transitions smoothly and to also guide a business owner through the entire process.
The Purpose of a Business Plan
A systematic business plan gives you room to consider all how your capital will be allocated to cover the various costs of setting up a restaurant. This includes rental, annual budget, projected sales.
Mapping your business plan requires much research into running a restaurant and even learning trends within the F&B industry. You can use your business plan to also reduce risk and cost, for example you may find out that it’s cheaper to buy in bulk, or uncover a rare food supplier. You may even find out after allocating and planning your budget that it may more efficient to hire less staff.
Because you found out in the early stages, you can make the necessary changes without spending any money.
Facing the Economy
New restaurant owners should be aware of economic factors facing a restaurant business. Such factors include inflation, which directly affects the purchasing powers of consumers. This will affect the sales of a restaurant negatively and knowing this will allow restaurant owners to alter their menu and prices to suit the current economic environment.
Many first-time business owners sometimes fail to estimate just how costly it can get to set up and operate a restaurant. There are various aspects to consider, including getting licenses and permits, registering the company, setting up a tax file, organizing inventory, hiring and training staff and more. These can lead to new business owners feeling overwhelmed and sometimes even demotivated.
Therefore, it is crucial to have a business plan for a restaurant given the market uncertainties.
Drawing up a solid business plan is quite similar to how you may have done a school project or writing an assignment.
A business plan does require time and effort, but the end result can provide you with clarity on how to operate your restaurant for success.
One of the other reasons of having a business plan is to aid in getting bank loans.
Presenting a clear business plan demonstrates that you have given your business much thought and that you know what you are doing. Going to a bank and demanding for a loan with no real business plan mapped out will result in an immediate rejection. Being prepared pays well.
Having tailor made a plan that is unique to the industry is of particular importance for new entrants in the market. The newcomers will be able to see risks and gains before pitching the idea forth.
Interested in writing a business plan but don’t know how to? There are tons of business plans templates on the internet to refer to!