Tag: Business plan

How to Write a Business Plan for Success

December is National Write a Business Plan Month! So it’s appropriate that we offer an article on how to write a business plan for success.

how to write a business plan for successYou might ask, why do I need a business plan?

The real purpose of a business plan is to create a well thought-out document that states, in detail, your business dream and how you plan to develop and finance this business. Your business plan is, in fact, the roadmap to your future.

Additionally, investors and lenders usually require a written business plan. Just as important, stakeholders such as suppliers, customers and potential key employees want to know who you are and what you are all about.

A Written Business Plan also Serves as a Guide for You and Your Team.

The Real Value of Business Planning lies in the Process Itself.

This focuses your thinking and keeps you on track. In other words, the key to success is going through the process. Thus, it’s the process itself that leads you to issues that are required for their resolution and your ultimate success. Planning is the structure by which you determine the key steps needed to find the information required to develop your successful business. In fact, for many situations, the planning process is actually more important then actually writing the plan.

Currently, leading experts in business planning such as Alexander Osterwalder and Steve Blank suggest the development of the Business Model Canvas (BMC) as the key to the process. From their point of view a BMC is actually a prelude, a precursor to the creation of your Business Plan.

Here is an example of a simplified BMC:

how to write a business plan for success

Fully understanding each of these questions and developing appropriate responses will lead you to a clearer, better understanding of all of the elements essential for the success of your enterprise. Note the importance of starting with the value proposition and matching this with the customer segment. Once that benefit fit has been established all else follows.

As an example, let’s create answers for a hypothetical BMC for MacDonald’s as developed by Manasota Score:

  • Value proposition -> quick, inexpensive meal
  • Customer segment -> public / seniors / families
  • Customer relationship -> personal face to face service
  • Distribution channels (paths to customers) -> in store / drive through
  • Revenue stream -> company store sales / royalties / franchise fees
  • Key activities -> training staff / marketing
  • Key resources -> employees / locations
  • Key partners -> franchisees
  • Cost structure -> staff / locations / supplies /marketing

In conclusion, the BMC guides you to focus on all the key factors necessary to create the roadmap to the attainment your dream.

Note, developing a BMC is not something done all at once. It is an iterative process by which you are systematically testing out your ideas.

A SCORE mentor can help your through this process FREE! Click here to schedule a mentoring session.

Here is a list of Free Resources with Business Plan Templates from SCORE and the SBA.

Greater Phoenix SCORE also has classes and workshops on how to write a business plan. Click here for the schedule.

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

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How to Know When to Change Your Business Plan 10 Oct

How to Know When to Change Your Business Plan

Sometimes you need to stick to your business plan to make it work. Even a mediocre strategy consistently executed over time is better than a series of brilliant strategies that keep going off in different directions. Strategy often takes time.

On the other hand, there is no virtue in sticking to a plan, just for having stuck to a plan. We live with constant change.

Which brings me to the dilemma that many business owners face:

Do I stick to my plan, or change it? If I change it, then is my plan vs. actual (reality) valid? Doesn’t it take consistent execution to make strategy work?

To which I’ll add;

“It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward.”
– Chinese proverb

I’ve been dealing with this dilemma for years, as a business owner, entrepreneur, and consultant. I want to suggest some guidelines to help you decide whether to change the plan midstream, or not.

A Good Planning Process

It starts with having a plan that includes priorities, milestones, and expected results. Also, you have to track results and compare them to what you had planned or expected to see. And also, as you developed those expectations, you should have included assumptions.

Ideally you have that process going on already. Without it, there’s no plan to change, and you are managing reactively. If you don’t have a process of planning in place, start it immediately in order that you have a better planning process later on.

The best time to plant a tree is 20 years ago. The second best time is today. – African proverb

Stay the Course or Revise the Plan?

Take some time each month to review your plan and its results. Once you have the process established, it doesn’t take more than an hour or two to get team members together.

Start that monthly meeting with a good hard look at your underlying assumptions. Identify the key assumptions and whether or not they’ve changed. When assumptions have changed, there is no virtue whatsoever in sticking to the plan you built on top of them. Revise your plan, automatically, when key assumptions have changed.

Then look at the differences between what you planned and what actually happened. Identify key differences between the plan and actual results. Some will be better than planned, and some worse.

For each key difference you discover, and all of them combined, use your best judgment and common sense to determine whether the differences were caused by false expectations or unexpected good or bad execution. Also, consider external and internal factors that may have influenced the results.

Maybe your expectations were too conservative, or too optimistic. In that case, you revise your plan. Use your common sense. Were you wrong about the whole thing, or just about timing? Has something else happened, like market problems or disruptive technology, or competition, to change your basic assumptions?

Maybe you discover you and your team have executed better than expected, or results were better than expected. Hooray. Stick to the plan. It’s working.

And maybe you discover that your execution was wrong, poor, or flawed. If any of those reasons are the case, work on executing better and change the plan.

Do not revise your plan glibly. Remember that some of the best strategies take longer to implement. Remember also that you’re living with it every day; it is naturally going to seem old to you, and boring, long before the target audience gets it.

About the Author:Tim Berry

Tim Berry, Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as @Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, ‘Lean Business Planning,’ 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

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Restaurant Management Success Tips 1 Aug

9 Restaurant Management Success Tips

Poor management and lack of expertise account for more than half of new restaurant failures!

Here are some operational tips that are essential to your restaurant’s success.

  1. Office Procedures. A simple, user-friendly manual based on Federal and State laws should define the management policy on sexual harassment and discrimination, dealing with customers or suppliers, employee performance reviews, terminations, and standards for operation of the business in a “real world” environment. Research on applicable Federal and State requirements are a must. Also included should be procedures or process flows on key work activities (budgeting, invoicing, accounts payable, credit and collection, purchasing and maintenance, etc.), employee benefits, training, disciplinary actions, records retention, and training. This manual should be developed early on, given to each employee and a signed receipt kept in company files.
  2. Profitability Through Financial Controls. Develop a progressing 12-month flexible budget defining estimated revenue streams and expenses.  As applicable, include a revenue projection based on prior year’s performance.   This exercise will provide a formula for projecting profit and loss based on expected revenue for the year and identifies trends and areas for management concern and corrective action.
  3. Restaurant Management Success TipsDevelop a Cash Flow Analysis. Show the break even point at which all costs and expenses have been absorbed and the business starts making money. This analysis will help you decide if projected yearly revenue and expenses will meet expectations and identify cost categories where improvements are necessary should a profit shortfall occur. Develop credit lines or other sources of capital to be available during potential negative cash flow periods.
  4. Develop Standard Budget Categories. Track sales and expenses, daily/weekly and quarterly/annual management variance reports. Review order slips versus register tapes to determine accuracy of reporting receipts and make recommendations for improvements. This will provide a level of management visibility and profit accountability in order to predetermine whether profit objectives are being met and form the basis for future reporting. Your accountant can help you here.
  5. Cash Flow Accountability. Implement cash controls that catch discrepancies in what is collected each night and what is deposited. All cash funds collected must go into the bank as soon as possible.  If there is a difference it must be identified and resolved by the manager on duty before they go home. The designated financial employee must then track down and resolve any difference in what is reported to be taken in for the week and what was deposited. Continually review daily and weekly register tapes by time and sales to determine an optimum operating schedule. Review cost of sales figures from prior years, if available.
  6. Training of Key Personnel and Management on a Flexible Operating Budget. The current operating budget will have the necessary operational relationships defined in order to calculate possible excursions in revenue or expenses and allow for timely management adjustments to meet year-end profit targets.
  7. Prepare Procedures and Flow Charts. These will become a reference source for all restaurant personnel on implementing and maintaining the financial and management control process. These procedures and charts are designed to be dynamic in nature and be changed or improved to fit the restaurants changing work environment.
  8. Functional Organizational Chart. Unlike a typical block organizational chart, this is a chart to graphically portray the added flow of responsibilities top to bottom throughout the entire business structure. This should be the foundation for complete understanding on work responsibilities and relationships between the owner and the restaurant team — and used in the development of job descriptions, management team development and controls.
  9. Financial and Management Reporting System. Design a financial and management reporting format that includes the required managerial controls. An efficient automated system that is designed specifically for the restaurant industry is required for updating and maintaining the financial data mandatory for professional and timely profit and expense control and reporting. An accountant with experience in restaurant financial controls could recommend a system suitable to fit the size of your business with the necessary accountability.

This is part of a series for new restaurant startups by Roger Robinson, Phd.

If you’re thinking of start a restaurant or any type of business, get FREE Business Mentoring at a convenient location in the Phoenix Valley.

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

 

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The Challenges in Opening Your Own Restaurant

Obstacles in Opening Your Own Restaurant

The Challenges of Opening Your Own RestaurantThe single biggest problem in the first year is a lower sales volume than expected, due either to fewer customers or customers spending less money than estimated. Do not overlook seasonality. In the Phoenix area in the summer breaking even is a challenge.

Owners seem to have the idea that they can just open the doors for a grand opening and customers will come flocking in. Increased marketing in the restaurant’s immediate vicinity often cures weak initial sales – but be cautious about offering coupon specials as they are costly and often have a low rate of generating repeat business. Also, talk to other restaurant owners outside your competitive area for lessons they learned in developing their businesses.

Funding Your Business

Money needed to start depends on the type of business, the facility, how much equipment you need, whether you buy or lease new or used, your inventory, marketing, and necessary operating capital. Banks seldom loan more hen 50% of required funds. Depending on how much money you have to

invest in your food-service business and the particular type of business you choose, you can spend over one million on a facility.

  • Your own resources. Inventory of your assets. You may have more assets than you realize, including savings accounts, retirement accounts, equity in real estate, recreation equipment, vehicles, collections and other investments. You may opt to sell assets for cash or use them as collateral for a loan.
  • Family and friends. Friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are with the person, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk.
  • You may choose someone who has financial resources and wants to work side by side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations. And choose your partners carefully–especially when it comes to family members.
  • Government programs. Make your first stop the SBA, but be sure to investigate various other programs. SBA programs generally work through banks and require a complete business plan. The business section of your local library is a good place to begin your research.

Regulatory Requirements

Food operations are strictly regulated and subject to inspection. Fail to meet regulations, and you could be subject to fines or be shut down by authorities. And if the violations involve tainted food, you could be responsible for your patrons’ illnesses and even death. Issues such as sanitation and fire safety are critical. Provide a safe environment in which your employees can work and your guests can dine, follow the laws of your state on sales of alcohol and tobacco products, and handle tax issues accurately, including sales, beverage, payroll and more.

Most regulatory agencies will work with new operators to let them know what they must do to meet the necessary legal requirements. Investigate the governmental regulatory requirements, city, county and state, starting with the Arizona Environmental Services Department as well as county health departments. Prepare for an excess of paperwork, including complex codes with regulations covering everything from kitchen exhaust systems to sinks, storage devices and all interior finishes.

Qualified Labor – one of your biggest challenges.

The Challenges of Opening Your Own RestaurantFinding qualified workers and rising labor costs are two key concerns for food-service business owners. The supply of workers age16-24, the primary pool for restaurant employees, has been declining. Develop a comprehensive HR program and a personnel manual. The job description needs to clearly outline the job’s duties and responsibilities. It should also list any special skills or other required credentials, such as a valid driver’s license and clean driving record for someone who is going to make deliveries for you.

Next, establish a pay scale. Research the pay rates in your area. Establish a minimum and maximum rate for each position. You’ll pay more even at the start for better qualified and more experienced workers. Of course, the pay scale is affected by whether or not the position is one that is regularly tipped.

  • Hire right. Every prospective employee should fill out an application even if they submit a resume. A resume is not a signed, sworn statement acknowledging that you can fire the person if he or she lies about his or her background; the application, which includes a truth affidavit, is. Thoroughly screen applicants. Do background checks. If you can’t do this yourself, contract with a HR consultant to do it for you on an as-needed basis.
  • Detailed Job Descriptions. Don’t make your employees guess about their responsibilities. Be sure they understand what you expect of them. Interview key personnel to determine their perception of their roles and responsibilities. A written description for the owner and all personnel providing position title, qualifications required, basic functions, reporting relationships, authority, responsibilities, and measurements of performance can then be used for training and compensation purposes.
  • Formal Personnel Evaluations. A process that will communicate performance results to company employees on an ongoing basis – and is a fair – is an objective way to provide recommendations for improvement in behavior and performance. After documentation, establish a baseline for developing practical recommendations for improvement. Again, have the employee sign the evaluation form after discussions and a copy kept in company files.
  • Motivational and Compensation Process. Incorporate a profit-motivated employee incentive plan with a bonus weighted according to the employee’s contribution towards achieving both the company profit and individual growth goals as specified in the job descriptions. A new owner should consider profit sharing to provide incentives, reduce turnover, promote teamwork, and improve overall employee operational efficiency.
  • Understand wage-and-hour and child labor laws. Check with your own state’s Department of Labor to be sure you comply with regulations on issues such as minimum wage (which can vary depending on the age of the workers and whether they’re eligible for tips), and when teenagers can work and what tasks they’re allowed to do.
  • Report tips properly. The IRS is very specific about how tips are to be reported; for details, check with your accountant or contact the IRS (or see your local telephone directory for the number).
  • Provide initial and ongoing training. Even experienced workers need to know how things are done in your restaurant. Well-trained employees are happier, more confident and more effective. Plus, ongoing training builds loyalty and reduces turnover. The NRA can help you develop appropriate employee training programs.

When your restaurant is still new, some employees’ duties may cross over from one category to another. For example, your manager may double as the host, and servers may also bus tables. Be sure to hire people who are willing to be flexible in their duties. Your payroll costs, including all taxes and benefits, your own salary and that of your managers, should be about 25 to 30 percent of your total gross sales.

  • Your most important employee. Your best candidate will have already managed a restaurant or restaurants in your area and will be familiar with local buying sources, suppliers and methods. You’ll also want leadership skills and the ability to supervise personnel while reflecting the style and character of your restaurant.

Quality of manager are paid well. Depending on your location, expect to pay a seasoned manager $30,000 to $40,000 a year, plus a percentage of sales. An entry-level manager will earn $22,000 to$26,000 but won’t have the skills of a more experienced candidate. If you can’t offer a high salary, work out a profit-sharing arrangement-it’s an excellent way to hire good people and motivate them to build a successful restaurant. Hire your manager at least a month before you open so he or she can help you set up your restaurant.

  • Chefs and cooks. When you start out, you’ll probably need three cooks–two full time and one part time. Restaurant workers typically work shifts from 10 a.m. to 4 p.m. or 4 p.m. to closing. But one lead cook may need to arrive early in the morning to begin preparing soups, bread and other items to be served that day. One full-time cook should work days, and the other evenings. The part-time cook will help during peak hours, such as weekend rushes, and can work as a line cook during slower periods, doing simple preparation.
  • Salaries for chefs and cooks vary according to their experience and your menu. Chefs command salaries significantly higher than cooks, averaging $600 to $700 a week. You may also find chefs who are willing to work under profit-sharing plans. If you have a fairly complex menu that requires a cook with lots of experience, you may have to pay anywhere from $400 to $500 a week. Pay part-time cooks on an hourly basis.
  • Your servers will have the most interaction with customers, so they need to make a favorable impression and work well under pressure, meeting the demands of customers at several tables while maintaining a pleasant demeanor. There are two times of day for wait staff: very slow and very busy. Schedule your employees accordingly. The lunch rush, for example, starts around 11:30 a.m. and continues until 1:30 or 2 p.m. Restaurants are often slow again until the dinner crowd arrives around 5:30 to 6 p.m.

Servers who earn a good portion of their income from tips are usually paid minimum wage or just slightly more. When your restaurant is new, you may hire only experienced servers so you don’t have to provide extensive training. As you become established, however, you should develop training systems to help both new, inexperienced employees and veteran servers understand your philosophy and the image you want to project.

This is part of a series on Starting Your Own Restaurant

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

 

 

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What’s your Exit Strategy for your Business?

Exit Strategy for your businessYou’ve started a business, it’s going OK, but you’re nearing retirement age. Do you want to keep doing what you’re doing forever? Probably not. What’s your Exit Strategy? Even if you’re just starting, this is something that should be included in your business plan.

The article, “Exit Strategies for Your Business” originally appeared on Entrepreneur Magazine.

If you’re thinking ahead to the day when you’ll no longer run your business, think about these five exit strategies now so you’ll be prepared for your future.

Entrepreneurs live for the struggle of launching their businesses. But one thing they often forget is that decisions made on day one can have huge implications down the road. You see, it’s not enough to build a business worth a fortune; you have to make sure you have an exit strategy, a way to get the money back out.

For those of you who like to plan ahead–and for those of you who don’t but should–here are the five primary exit strategies available to most entrepreneurs:

The Modified Nike Maneuver: Just Take It. One favorite exit strategy of some forward-thinking business owners is simply to bleed the company dry on a daily basis. I don’t mean run it in the red–I mean pay yourself a huge salary, reward yourself with a gigantic bonus regardless of actual company performance, and issue a special class of shares that only you own that gives you ten times the dividends the other shareholders receive. Although we frown upon these practices in public companies, in private companies, this actually isn’t such a bad idea. It’s called a “lifestyle company.”

Rather than reinvesting money in growing your business, in lifestyle companies, you keep things small, take out a comfortable chunk, and simply live on the income. In one of my most memorable Harvard Business School moments, my fellow classmates and I asked the owner of a small, fabulously profitable manufacturing company why he didn’t grow the business bigger and sell it for a gazillion dollars. His response: “Excuse me? You’ve had way too much schooling. What part of 30-hour work weeks and a $5 million personal income don’t you understand?”

Remember, money in the wallet is no longer money in the business. If you’re in a business that must invest to grow, taking out too much money can hurt you down the road. Also, if you have other investors, taking too much can upset them. Imagine their surprise when investors in a small business I once worked for received the company’s internal loan repayment spreadsheet, showing that the business owner was pulling out bucks by paying his family exorbitant interest on loans while investor loans were repaid at rock-bottom rates over as long a time period as possible.

If you think you’re in business for the lifestyle, minimize your dependence on other investors and structure the business to allow you to draw out cash as needed.

Pros

  • Who doesn’t like seven figures of take-home pay?
  • Private jets are fun.
  • There’s no need to think hard about getting out: Just pull out the money when you need it.

Cons

  • The way you pull the money out may have negative tax implications. For example, a high salary is taxed as ordinary income, while an acquisition could bring money in the form of capital gains.
  • Without careful long-term planning, you may end up pulling out money now you’ll need later.

The Liquidation. Even lifestyle entrepreneurs can decide that enough is enough. One often-overlooked exit strategy is simply to call it quits, close the business doors, and call it a day. I don’t know anyone who’s founded a business planning to liquidate it someday, but it happens all the time. If you liquidate, however, any proceeds from the assets must be used to repay creditors. The remainder gets divided among the shareholders–if there are other shareholders, you want to make sure they get their due.

Pros

  • It’s easy and it’s natural. Everything comes to an end.
  • There’s no negotiations involved.
  • There’s no worrying about transfer of control.

Cons

  • Get real; it’s a waste! At most, you get the market value of your company’s assets.
  • Things like client lists, your reputation, and your business relationships may be very valuable, and liquidation just destroys them without an opportunity to recover their value.
  • Other shareholders may be less than thrilled at how much you’re leaving on the table.

My favorite piano bar in Boston simply vanished one day when the owner decided he was tired of show tunes. His regular patrons were crushed, but then, he didn’t consult with us first….

Selling to a Friendly Buyer. If my neighborhood piano bar owner had asked, we might have wanted to buy the business ourselves. You see, if you’ve become emotionally attached to what you’ve built, even easier than liquidating your business is the option of passing ownership to another true believer who will preserve your legacy. Interested parties might include customers, employees, children or other family members.

The fictional Willy Wonka handed off his chocolate empire to a little boy who was a loyal Wonka customer, someone who was chosen with great care through a selection process designed to weed out all but the most dedicated Wonka devotees. Wonka was able to choose his heir apparent and ride off into the sunset a happier entrepreneur.

Of course, the buyer needn’t come from outside. You can also sell your business to current employees or managers. Often in this kind of sale, the seller finances the sale and lets the buyer pay it off over time. A hair stylist I knew learned a local salon owner was shutting his doors and decided to propose a low-money-down deal to acquire the salon. The owner still makes more this way than he would by closing, and the stylist gets to earn his way into owning a business. It’s a win-win for everyone involved.

The purest friendly buyout occurs when the business is passed down to the family. But remember, the key to “family business” is the word “family.” Is yours functional? No sooner than you leave the family business to the kids, it’s likely they’ll end up fighting over who got the larger share, who does or doesn’t deserve the ownership they got, and who gets the final word. They’ll finger-point for a decade while the business slowly declines into ruin, then blame you for not leaving clearer instructions. If you decide to go this route, you’ve got a lot of planning to do before getting out.

Pros

  • You know them. They know you. There’s less due diligence required.
  • Your buyer will most likely preserve what’s important to you about the business.
  • If management buys the business, they have a commitment to making it work.
  • Selling to family makes good on that regrettable offhand promise made 30 years ago, “Someday, son/daughter, all this will be yours.”

Cons

  • You can get so attached to being bought by someone nice that you leave too much money on the table.
  • If you sell to a friend, they’ll be peeved when they discover they just bought the liability for that decade’s worth of taxes you forgot to pay.
  • Selling to family can tear the company apart with jealousies and promotions that put emotion way ahead of business needs.

The Acquisition. The acquisition was invented so you can sell your business and leave the kids money, still spoiling them rotten, but at least sparing the business from second-generation ruin. Acquisition is one of the most common exit strategies: You find another business that wants to buy yours and sell, sell, sell.

In an acquisition, you negotiate price. This is good. Public markets value you relative to your industry. Who wants that? In an acquisition, the sky’s the limit on your perceived value. You see, the person making the acquisition decision is rarely the owner of the acquiring company, so they don’t feel the pain of acquisition cost. Convince them you’re worth a billion dollars, and they’ll gladly break out their employer’s checkbook.

If you choose the right acquirer, your value can far exceed what would be reasonable based on your income. How do you select the right company? Look for strategic fit: Which acquirer can buy you to expand into a new market, or offer a new product to their existing customers? I recently read that a classmate of mine started a company that was acquired during the Internet boom for $500 million when it was just 18 months old. He commanded a huge price because his acquirer thought the acquisition gave them critical capabilities faster than they could develop those capabilities on their own.

But acquisition has its dark side. If there’s a bad fit between the acquirer and acquiree, the combined companies can self-destruct. The acquired management team can end up locked into working for the combined company, and if things head south, they get to watch their baby implode from within. Time Warner recently announced that they’re thinking of spinning off AOL, almost exactly five years after the two companies merged. What, exactly, did the merger accomplish? It made two CEOs very wealthy–and destroyed years’ worth of work and billions of dollars. I’m sure the AOL employees who stuck it out enjoyed that particular ride!

If you’re thinking of acquisition as your exist strategy, make yourself attractive to acquisition candidates, but don’t go so far as to you cut off your other options. One software company knew exactly whom they wanted to sell to, so they developed their product in a way that meshed perfectly with the prospective suitor’s products. Too bad the suitor had no interest in the acquisition. The software company was left with a product so specialized that no one else wanted to buy them either.

Pros

  • If you have strategic value to an acquirer, they may pay far more than you’re worth to anyone else.
  • If you get multiple acquirers involved in a bidding war, you can ratchet your price to the stratosphere.

Cons

  • If you organize your company around a specific be-acquired target, that may prevent you from becoming attractive to other acquirers.
  • Acquisitions are messy and often difficult when cultures and systems clash in the merged company.
  • Acquisitions can come with non-compete agreements and other strings that can make you rich, but make your life unpleasant for a time.

The IPO. I’ve saved IPOs for last, because they’re sexy, they’re flashy, and they get all the press. Too bad they make the lottery look good by comparison. There are millions of companies in the U.S., and only about 7,000 of those are public. And many public companies weren’t even founded by entrepreneurs but rather were spun out from existing companies. Heck, AT&T and its spin-offs are almost a significant fraction of the listed exchanges!

If you’re funded by professional investors with a track record of taking companies public, you might be able to do it. Of course, the professional investors will also have diluted you down to the point where you only own a tiny fraction of your company anyway. The investors will make out great. And maybe, if you’re the principle entrepreneur and have done a great job protecting your equity, you’ll make some money, too.

But if you’re a bootstrapper, believing in a fair IPO is a touchingly na?ve act of faith. Besides, do you have any idea what’s actually involved in an IPO?

You start by spending millions just preparing for the road show, where you grovel to convince investors your stock should be worth as much as possible. (You even do a “reverse split,” if necessary, to drive up the share price.) Unlike an acquisition, where you craft a good fit with a single suitor, here you romancing hundreds of Wall Street analysts. If the romance fails, you’ve blown millions. And if you succeed, you end up married to analysts. You call that a life?

Once public, you bow and scrape to the analysts. These earnest 28-year-olds–who haven’t produced anything of value since winning their fifth grade limerick contest–will study your every move, soberly declaring your utter incompetence at running the business you’ve built over decades. It’s one thing to receive this treatment from your loving spouse. It’s quite another to receive it from Smith Barney.

We won’t even talk about the need to conform to Sarbanes-Oxley, or the 6 percent underwriting fees you’ll pay to investment bankers, or lockout periods, or how down markets can tank your wealth despite having a healthy business, or how IPO-raised funds distort your income statement, or …

In short, IPOs are not only rare, they’re a pain in the backside. They make the headlines in the very, very rare cases that they produce 20-year-old billionaires. But when you’re founding your company, consider them just one of many exit strategies. Realize that there are a lot of ways to skin a cat, and just as many ways to get value out of your company. Think ahead, surely, but do it with sanity and gravitas. And if you find yourself tempted to start looking for more office space in preparation for your IPO in 18 months, call me first. I’ll talk you down until the paramedics arrive.

Pros

  • You’ll be on the cover of Newsweek.
  • Your stock will be worth in the tens–or maybe even hundreds–of millions of dollars.
  • Your VCs will finally stop bugging you as they frantically try to insure their shares will retain value even when the lockout period expires (Warning: they won’t necessarily be looking out for your shares, too.)

Cons

  • Only a very few number of small businesses actually have this option available to them since there are very few IPOs completed annually in the United States.
  • You need financial and accounting rigor from day one far above what many entrepreneurs generally put in place.
  • Some forms of corporation–S-corps, for example–will require a reorganization before they can be taken public.
  • You’ll spend your time selling the company, not running it.
  • Investment bankers take 6 percent off the top, and the transaction costs on an IPO can run in the millions.
  • When your lockout restrictions expire, your stock will be worth as much as a third world hovel.

Need help with your Exit Strategy or Business Plan? A SCORE Mentor can help for FREE! Click here to schedule a mentoring session.

 

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Elements of a Restaurant Startup Business Plan

Any new business needs a plan. Here are the key elements of a strong Restaurant Startup Business Plan. This is part 2 of the series for Restaurants Startups. Read part 1.

Concept:

Restaurant startup business planPortraying an unambiguous clear-cut concept lets the customer know what to expect. Examples are Mexican, Seafood, Asian, Cowboy, Diner, etc. Items that are influenced by the concept:

  • Image
  • Name
  • Exterior Design
  • Interior Design
  • Employee Uniforms
  • Menu Design
  • Menu Choices
  • Menu Changes
  • Type of Entertainment
  • Production
  • Consistency
  • Service
  • Future Opportunities

Category

  • Quick-service
  • Midscale
  • Upscale

Market Customers

  • Colleges and Universities
  • Local Population
  • Tourism
  • Local Businesses
  • Market trends

Market Locations

  • Access
  • Visibility
  • Parking

Market Competition

  • Competition
  • Competitor’s Profile
  • Competitive Strategy
  • Competing categories of food providers.
  • Distinct Competitive Advantage

Marketing Strategy

  • Unique Selling Proposal
  • Digital Media – website, social media, videos, search engines
  • Print Media- local newspapers, magazines and student publications
  • Broadcast Media- local programming and special interest shows
  • Hotel Guides- concierge relations, Chamber of Commerce brochures
  • Direct Mail – subscriber lists, offices for delivery
  • – yellow pages, charity events, community involvement
  • Public Relations – special events – print and broadcast coverage, especially at the start up
  • Point of Sale
  • Advertising – online and offline
  • Mobile Marketing – SMS text messaging, mobile app, mobile listing, Google Maps
  • Promotion
  • Customer lists
  • Target Market Location
  • E Mail

Operations

  • Facilities & Offices
  • Hours of Operation
  • Employee Training & Education
  • Systems & Controls
  • Food Production
  • Delivery & Catering

Management & Organization

  • Key employees & Principals
  • Compensation & Incentives
  • Staffing
  • Job responsibilities
  • Selection
  • Training
  • Perks incl. meals
  • Compensation
  • Motivation
  • Board of Directors (if warranted)
  • Consultants & Professional Support Resources
  • Management Structure & Style
  • Ownership

Management

  • Controls
  • Shrinkage
  • Waste issues
  • Delivery issues
  • Bar costs
  • Start-up costs
  • Operating costs
  • Food costs
  • How to grow business
  • How to raise capital
  • Seasonality
  • Franchise
  • Independent
  • Resources (NRA ARA ASBA Local Colleges etc)
  • Service standards
  • Hours of operation
  • Distinct Competitive Advantage
  • Leases / rents
  • Licenses / permits
  • Health dept. issues

Legal Structure

  • Sole Proprietorship
  • Partnership (General or Limited)
  • Corporation (C or S)
  • Limited Liability Company

If you need help with your Restaurant Startup Business Plan – a SCORE mentor can help you for free! Click here to schedule an appointment.

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

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