If you want to start a business, a comprehensive business plan is crucial. With Nestlé's Toque d'Or set to challenge a new group of students, we explain how to make sure your plan has the clout to take off, and what you need to cover. Rosie Birkett reports.
We've all seen those cringe-inducing episodes of Dragon's Den. Ashen-faced would-be entrepreneurs stutter their way through a flimsy business plan presentation, stumbling across the over-optimistic figures and profit projections, only to be greeted with "I'm out" from unimpressed Dragons.
The show proves that preparation is everything when it comes to gaining investment as there are few second chances with potential backers. A plan that doesn't stand up to scrutiny will set any budding operator back to square one. And the likelihood is their confidence will have been knocked along with their business plan. This is why student catering competitions like the 2010 Nestlé Toque d'Or make sure that the teams are challenged to produce complete business plans as well as fine food and service.
Even the brightest of ideas will struggle to be taken seriously if the business plan doesn't cut the mustard, so for operators wanting to start their own business, what are the need-to-knows of writing that all-important plan? For Guy Holmes, restaurant marketing consultant at Captivate Restaurants, more is better.
"The more in-depth your business plan the better, because it shows that everything is well thought out," he says. "Most people write them to get funding, but it's also a great road map for you, as you're trying to realise your business idea, so it makes sense to make it as all-encompassing and comprehensive as possible."
As Holmes points out, aside from providing you, the operator, with a script to follow, the business plan is a crucial part of getting financial backers and investors on board and therefore needs to be watertight.
"You want to instil trust and knowledge with your business plan, so that whoever is reading it will want to invest their money and will sense a strong team," he explains.
"When it comes to your personnel section, for example, think about the best people that will slot into your business and sell them on that basis. Also consider family members with relevant expertise who could help out, perhaps in accountancy or PR and marketing.
"The more expertise you display, the more people will trust in your idea and want to give you their money. It's about showing there's a top team that knows what they're doing."
Holmes even suggests going as far as deciding on a name and branding your plan with the company logo.
"If someone's going to be lending you £150,000 they want to know where it's going, so the slicker and more polished the branding is, the better," he says.
Chef James Tanner, who runs two restaurant businesses with his brother Chris, knows a thing or two about writing a business plan, and as the head judge of the Toque d'Or competition for budding hospitality operators, is well placed to offer advice. For him, the financial nitty gritty is the most crucial thing.
"You need to be thinking about costs from day one," he says.
"First of all, when you're thinking about setting up a business and finding the site, really think about it from a financial point of view. Look at the marketplace and the current financial market, as well as the market you're catering in, then work out the average cover spend, cost per head, etc.
"When you first look at a potential site, whether it's a freehold or a rented property, work out the initial cost of the purchase, then contact the local council, which will come and measure things and give you an idea of business rates. Then include these figures in your business plan, along with rent rates, utilities - all this before you've even thought about employing anyone.
"You might be offering anything from paninis to seven-course tasting menus, so staffing costs are going to vary hugely; therefore you've really got to do your research. Go to your local butchers and suppliers - source the best produce you can for the best price and buy it seasonally, when it's abundant and cheaper."
"Then you need to break down the rest of the financial scenario, like staffing, computer systems and general running costs, which will vary depending on the outfit you're planning and the sort of space you're operating in - for example, an open plan space will generally be cheaper to run than a space with lots of different rooms. Then start compiling figures and costings for everything and break the whole thing down into monthly segments.
"You need to do it over a 12-month period because trading fluctuates. For example, December is very busy for most hospitality operators because of Christmas, and there's usually an uptake in summer too. Then there are leaner times, such as January and late autumn, and it's important that you take this into account because a bank won't take you seriously if you say you're going to be making a steady £50,000 per month."
Tanner recommends asking the local tourist information organisation for figures on visitor numbers, and asking other businesses in the area to help with these estimations.
"It's also crucial that the format you're planning suits your marketplace," he says.
"You can be the most amazing chef, but if the format doesn't suit the local area then it won't work. You have to build a business and be committed to what the customer around you wants - especially now, with the financial climate the way it is."
Holmes also advises documenting a contingency fund for emergency or unexpected expenditure.
"You don't want to have to start borrowing if something breaks down or goes wrong," he says. "Contingencies vary from anything between £10,000 and £50,000, but obviously it's great to have a multi-millionaire behind you!"
In addition to the finance, Holmes highlights the importance of outlining your marketing ideas in the business plan. As well as the obvious things like detailing your target market, any market research you've done and what the competition is like, show what marketing strategies you have in the pipeline.
"You need to tell the investor how you'll get people in initially (a launch party or pre-launch strategy) and then ongoing activity, like online marketing, building relationships with nearby hotels, doing discounts for local businesses, samples on the street outside… that sort of thing," he says.
"A marketing calendar can be a good idea - as it outlines all the marketing activities you're aiming to do throughout the year - for example, in July or August you might be starting to get Christmas menus sorted. Think about the national holidays like Valentine's Day and Easter and what you plan to do at those times of the year, as well as birthdays."
But as well as highlighting your strengths and ideas, Holmes says it's important to acknowledge your potential weaknesses and any foreseeable threats.
"Any savvy banker or investor will see what the threats are, so there's no point trying to mask them," he explains. "But if you identify them you can sometimes turn them into opportunities. For example, if one of your weaknesses is that there isn't a great deal of lunch trade because offices are a mile away, you could suggest doing deliveries to offices, and that sort of thing."
Though it's obviously tempting to want to paint a rosy picture with your business plan, Holmes warns against this, sticking firmly to the line that honesty is the best policy.
"Don't gloss over the weaknesses or over-value your figures," he says.
"If you start telling the odd lie here and there and then you get found out, the lender's trust is gone. You need to show total honesty and transparency. It's no good for anyone if you're massaging the figures. Outline short, medium and long-term objectives."
"Be realistic and be stringent and have evidence with regards to all of your costs," concludes Tanner.
"Make sure you've covered all bases and that the bank, or whoever is reading your business plan, has all the information they need in front of them. It's about the costs: running costs, gross profit you're working to - that's where you've got to show you can make the money."
WHAT TO INCLUDE IN YOUR PLAN
- Title page
- Contents page
- Summary of business
- Marketing plan
- Notes on financial statement
- Profit and loss
- Balance sheet
- Cashflow forecast
- Appendix: CVs of personnel,
- sample menus and any visuals (architect's designs, etc)
TIPS FOR WRITING A BUSINESS PLAN
Mark Mosimann, managing director of Mosimann's, gives his top tips for writing a business plan:
â- Conduct appropriate market research - Never underestimate the importance of effective market research. This is an area often overlooked when it comes to writing a solid business plan.
â- Financial information- Make sure you include your assumptions here, explaining how you reached the numbers. Not everyone will analyse pages and pages of spreadsheets, so the assumptions are vital.
NESTLÉ TOQUE D'OR 2010
The 2010 Nestlé Toque d'Or student catering competition has a new format for its 21st year. Teams will have to prepare initial paper entries, then take part in intensive regional heats. Five colleges will go on to compete in the grand finals, where they will create their own restaurant for a day at the BBC Good Food Show in Birmingham in June. They will serve 100 covers for paying guests with the support and mentorship of some of the UK's top Michelin-starred chefs.
The main challenge for the students will be to embrace and explore key principles, regardless of their restaurant concept. Nutrition, health and wellness are foremost, as is sustainability. Reflecting the diverse needs of today's hospitality industry and the growing focus on contract catering, teams will be asked to complete two scenarios.
In Scenario One teams have to imagine they are running the food service element of a conference centre. They will be responsible for all elements of staff and visitor feeding, along with sourcing and purchasing policies, and their written entry will need to provide imaginative and creative solutions. From these entries, heat finalists will be chosen and teams will be invited to present their concepts and menus to the judges in situ at their own colleges.
In Scenario Two the five finalist teams will be asked to create their own restaurant concept and bring it alive at the BBC Good Food Show. Each team will be given access to a mentor - including Alan Murchison (L'Ortolan), Will Holland (La Becasse), and Chris Horridge (Cliveden). Additional support will also be available in the form of a bursary from the National Skills Academy for Hospitality.
Finalists will have the opportunity to take the Nestlé Professional City and Guilds Nestlé Toque d'Or qualification, newly launched this year - that will add significant value to each contestant's CV.
This year's lucky heat finalists will be announced next week.