business plan for a small cafe, what would it need?

ally101

hi
I'm new to this particular forum but have been on a few others for a while now.
iv had a search through other peoples posts about starting up a cafe but haven't really found an answer, but I have founds some very good advice.

ill give a little background:
me and my partner are looking to set up our own cafe and at the moment we are in the 'get all the info we can' stage. he has been a chef in many different catering sectors for over 12 years now and can run the kitchen side of things with his eyes shut :-) we have both ran a cafe before for someone else, although he took care of the business side of things and this is where we seem to be coming unstuck!
we live in a tourist area and have done our whole lives and so we know that keeping the locals is key to the success here, there is a very hostile response towards most businesses in the area and rightfully so, many grossly over charge as in the summer the tourists are often deemed 'easy targets' and so the locals end up suffering too.

iv been on every business website going and my head is spinning with all the bits of information I have been given! and most of it seems to be for larger businesses than ours will be or for those on-line.

and so, enough rambling, my question is what do I need to put in my business plan?

any advice will be greatly appreciated, both on the subject and on anything else you can think of :-)

thank you for taking the time to read

paddyrg

In simplest terms - can you sell enough at lower prices to pay the ingredient cost, rent, rates, overheads and salaries? It is a lot of 50p cups of tea to get ahead. Do the sums - how many covers a day do you require in order to cover ALL costs - if you can get that number through the door, and the shop is big enough, hoorah! If the footage isn't enough, it's a guaranteed fail. Can you get a premises big enough and cheap enough but in a good enough location? Sorry for the vague response, but the question is quite unfocussed!

ally101

lol actually that makes the most sense out of everything iv read so far :-). my parter is brill with numbers and can actually do all that in his head with ease. sorry it was quite vauge, as youve probably guessed we're pretty new to the business side of all this, weve been lucky enough that a family member is giving us some financial backing but now we are having to start looking at the banks and its a bit daunting tbh

paddyrg

Try businesslink for some 'getting started' courses/sessions/advice!

Do not rely on whatever the modern equivalent of the back-of-the-fag-packet calculations are, it is crucial you get this right. Cashflow WILL be your biggest problem, it is cashflow, not profit margins/etc that kills companies. Spend as little and late as you can. Haggle for everything. Buy secondhand/minimal cafe fittings for starters - if you're successful then you can upgrade later, but there's nothing so sad as an expensively-fitted shop/cafe with no trade. I have seen shops and cafes come and go within their minimum lease periods, there's one place nearby but each year it is let to a different dreamy startup, and then fail. Make sure you have enough cashflow to be able to stand still whilst you grow to a viable size. Don't pay staff when you can work yourself. What happens if you get pregnant/ill in the next 3 years? What hours will your cafe open? Will you ever have a holiday? How? You're planning a wedding from your sig - that will not work with a new business as it'll soak up all your time and cash.

So many questions/points/ideas all I can say is really think this through thoroughly first. You might be onto a winner, you might be onto a lemon. There might be a good reason the other cafe's charge more for the tourist trade over the locals!

Pennywise

You need to create a financial model spreadsheet where you can do unlimited "what ifs" for:-

1.Average spend per customer
2.Number of covers
3.Average cover turnover per session

So you can do a "bottom up" forecast starting with realistic sales figures, which you can then use to estimate food costs, which gives gross margin, then you can estimate overheads to arrive at net profit.

Too many businesses work the other way, starting with profit they want and working backwards to find the sales figure they need.

I've seen a fair few forecasts/budgets where far too little effort has been applied to sales forecasts, many of which turned out that sales could never be high enough simply because of the limitations of the business, i.e. not enough covers, not enough average spend, etc.

As said above, cash flow is paramount, so don't just do a forecast profit and loss, it needs to be automatically linked to a cash flow forecast.

freezspirit

This website will give you more information: http://www.businesslink.gov.uk/bdotg/action/home?r.l1=1073858805&r.s=l

I remember doing a college project and remember a bank had a business start up plan that basically you could fill all the details to get finance - could of been hsbc but it was 8 years ago

dottygirl

I wish you well. You can get some excellent books from the library and if you want to keep the book you can normally get it from Amazon. You will also get excellent advice from people on here. Good luck x

trailingspouse

I prefer a 'top-down' business plan - how much do you need to make? I don't mean 'We want to be millionaires in 10 years', but rather what's the minimum you could live on? The absolute minimum. That's how much profit you need to make (and be very very sure that you know the difference between profit and turnover). Then start crunching the numbers. How many cups of tea at £x.xx do you need to sell to make enough turnover so that the profit (after paying all your business costs) reaches this absolute minimum? Is it actually possible to sell that many cups of tea? What if you charged £y.yy per cup? Bearing in mind that you might sell fewer cups of tea if you charge more for them. And so on.
Do some research around the place - go and have a cup of tea and a scone at every local cafe, and make notes - how much do they charge, were they busy, did they look like they were making money, or did things look a bit down at heel?
At the end of the day, the model you choose for your business plan matters little - what is vital is that your figures are realistic. Be brutal.

paulwf

There's so many threads about business plans and cafes and others make good points so I'll try and just answer a few specifics.

You need to work out how to make as much money as possible from the tourists without upsetting the locals but this doesn't mean carving up your prices, you have to make as much money as possible in the summer...without fleecing anyone of course! There are ways to do this, an obvious example is loyalty cards where customers collect 10 stamps for a freebie. No use to daytrippers and people staying a week but it keeps the locals loyal. Local business discount is another. Student discount for specific colleges is yet another (most colleges and unis have their own ID cards now). You can give every paying customer a discount voucher to use on their next purchase. Or how about Monday to Friday discounts if the tourists come mainly at weekends and bank holidays? These days you can even do vouchers on your Facebook group for your regulars.

Location is everything with tourists, they generally stick to the well beaten tracks. A prime location means high rent, but a little trick is try and get somewhere small but with a lot of forecourt space. It's very important to check you can use this for outside seating. If the previous occupant wasn't a cafe and they didn't use the forecourt space this is essentially a rent free space. Pack in the outside seating when the weather is nice in the summer so you have the capacity. In the winter when it is quiet and you don't need the capacity you won't care that it is too cold and wet to use the outside seating.

Of course the above tip doesn't apply for 2012 when we've had record levels of rainfall You could try and get an awning though, and outside seating is important to attract smokers these days. Make sure you are on the sunny side of the street, I reckon this could influence your turnover by 25% in the summer.

Mistral001

Are you able to do it without borrowing from the bank? If you are then a business plan would seem to be unnecessary as far as I can see. However, you need to be able to try to assess the costs as best as you can before making the decision to open. Insurance, compliance with local regulations for hygiene etc. as well as other sundry buiness costs. Also, I think, you always need spare cacacity in a business to allow for the unexpected when finding yoour way in business. Even the most experienced buisnessperson gets the unexpected.

s_b

a biggie to bare in mind when doing costings
who do you pay your utilities to?
ie a landlord that puts a mark up on each unit of electric and gas
or direct
it can make a big difference to costings
oh and dont fall into the trap of cheap sausages or people like me never return to give you a second chance

good luck