Business planning is an important when it comes to starting your own business. If a business does not have a plan,, it is a challenge for the entrepreneur to know about his goals and present his business to investors.
Business plan is a symbol of a new vision used to exploit economic opportunities through different ways (Ciucescu, 2016a). In my words, it is a description of the business, its products and services, the personnel and how it operates.
It is essential to plan because it helps you “clarify your business ideas, spot potential problems, set your goals and see how you are moving forward” (Gov.uk).
In this paper, we will be talking about business planning for a local restaurant in Boston (USA) called Parla, discuss about the elements of business planning, the different perspectives on planning, its advantages, disadvantages and the possible alternatives.
3 Findings: literature review
The literature view include definitions of different terms such as business plan, management and success since they are a part of the thesis topic.
West 2000 (cited in Ciucescu, 2016b) defines business plan as “a tool of the present, developed through successive approximations using experience and the achievements of the past to design a realistic way forward”.
Sandulescu 2006 (cited in Ciucescu, 2016c) mentions that business plan is a “document which makes known the existing resources and developing prospects of a company and invites in this way the support and cooperation of potential supporters (investors)”
Longenecker, Moore and Petty 2003 (cited in Ciucescu, 2016c) show in the Small Business Management- An Entrepreneurial emphasis, that a business plan is a written document reflecting the development prospects of a newly created business.
Henri Fayo 1916 (cited in Akrani, 2011a) says that to manage is to forecast and to plan, to organise, to command, to co-ordinate and to control.
For Harold Koontz 1961 (cited in Akrani, 2011b), management is the art of creating an environment in such an organized group.
When thought of this is exactly what an entrepreneur does when running a business.
We all have different definitions of success according to Sharma (2004), business success is defined in terms of measurable aspects such as growth, sales, turnover and profit.
3.1 Elements of business planning
1. General information
There are different forms of business plan but they all contain the same exact elements. The following picture is taken from McKinsey
Source: Mckinsey&Company, 2002
According to Hormozi et al. (2002a) a plan length depends on the business but it should include all the relevant information. In their article they have identified different sections of the business plan which are:
• Executive summary: an introduction to the business. Amount, company objectives, financial information
• The business: detailed product, the management team, marketing strategy, how the business operates Industry analysis: mission statement, objectives
The industry: overview of the industry in which business enters
The company: vision and mission statement, business objectives, any partnership
Product and service offered: core competencies
• The market: Competition, target customers
Marketing plan: how to inform your customers, how to educate them
Management team which makes or breaks an organization
• Financial statement: forecast, key figures
• Appendixes: any additional information of your business, such as action plan and is optional, not everyone has it in their business plan
2. Business plan for the restaurant
i. Executive summary
Pinson (2008) outlines that the executive Summary is the abstract of business plan. It summarizes who the owner is, what the company does, where it is going, why it is going where it is going, and how it will get there.
For example the Parla restaurant will have 50 seats and 25 tables serving Italian food Pizza, Pasta, Breakfast menu and burgers will be served. This restaurant is family owned so there will be more than 2 people running the business. Only one person has over 23+ years of experience and the rest have had educational knowledge in management and culinary so they will be able to run it. It is owned by Cecile Zoungrana who started her career when she was a young adult working in a fast food and decided to get a degree in catering. Linda Compaore her daughter who earned a degree in culinary . Kimberli Elliott her sister, who has a degree in management.
A total of 150,000 Pounds (as example) has been invested in this restaurant. If we get a return on our investment, we will definitely put the money on the side, invest and open another restaurant in the future. Further financial statements will be justified in the appropriate section.
ii. The business analysis
Parla is an Italian restaurant located in the center of the city of Boston, 230 Hanover Street, 02113. The restaurant industry is a fast growing industry. This is quite important because financiers are looking to invest into high growth potential market (Hormozi et al. (2002b). How does the business operates?
iii. Operation plans
Management is key aspect because it involves management of employees, management of the cash flow and the environment. This is one of the biggest part of business planning because it’s all about the operating systems, the daily activities and also defining strategies to successfully run a business. This is what makes or breaks an organization. The failure rate of a business plan was 26.6% the first year, 19.23% the second and third year 14.35% (Parsa et al., 2005a)
In this section the entrepreneur should have a proposal about its:
• Organization structure,
• Management experience – a good educational background, CV attracts investors and banks (Rina and Basudha, 2014a)
• How he wants to manage his employees – separate kitchen staff from dining staff because customer service is key to a successful business
iv. The company analysis
Mission statement
McGinis, 1981 (cited in Rina and Basudha, 2014b) claims that a mission statement outlines the purpose, values and norms of an organization and it identifies and helps set up the business goal
Our mission can be to serve good tasty food as well as making sure the quality remains the same. Our goal is treat our customers with respect and making them want to come back because of the best service. Since health is a concern for all, we should prove a healthy and green environment to keep the business running.
Vision
Our vision is to open up a second restaurant in another part of the city.
Goals/Objectives
1. One of the best family run business restaurant
2. Provide quality foods at an affordable price to reach lots of people
3. Build loyalty and keep a good reputation
v. Market analysis
The restaurant industry is a big one and consists of snack bars, clubs, food cart vendors, cafeterias diners and we can conclude that it is a diverse and large business. So this section needs to be deeply analyzed.
• Market size : 782 billions US$ and the number of restaurant is 660 755 in the USA (statista, 2016)
• Customer target: age of 18- 40 years old, active population working downtown
• Key success factors: hiring top notch chefs, variety of menu, offering trainings
Example of key success of an Asian restaurant: Hashi
Source: Cayenne Consulting, p4
vi. Competitive analysis
As competitor, you’ve got to do your research to know how many restaurants are next to you, what you offer that makes you different and who has the biggest market share. Furthermore, due the market growing by 219 percent to 3,287 units the failure rate rises to 30% (Parsa et al., 2005b); meaning that competitive analysis of your surroundings are very important.
The Local competitors (obtained from google maps)
Neptune Oyster – Sea food specialty
Boston Sail Loft – another sea food restaurant
Mamma Maria – Italian restaurant
We can also notice that competitively there are lots of restaurant around us that serves other types of food except us Mamma Maria who is also an Italian restaurant. So we have to be vigilant and come up with strategies that will differentiate us from them.
Although the three competitors do not offer the same exact food as we do, they target the same families and people so we still be in an indirect competition with them.
Source: Cayenne Consulting, p20
vii. Marketing plan
Since the restaurant industry is a large industry, more restaurants are opening, it is better to find ways to communicate, educate and attract customers. Do you choose to advertise through traditional advertising or through media in order to target the most customers. This section is not just about advertising your business but it’s a way to analyse the internal and external factors related to your business (SWOT analysis). The SWOT analysis which stands for Strengths, Weaknesses, Opportunities and Threats is a useful tool to strategically determine directions, goals for a business (Simoneaux & Stroud, 2011). Once you have gone through your SWOT analysis, it will then help you in your marketing and communication efforts.
Source: Cayenne Consulting, p18
viii. Financing plan
This part is very critical. Since we do not have numbers we will mention what needs to be said and done in this section.
Financial is about your funding: savings, love money and external resources such as Bank loans. It also regroups forecast such as: cash-flow, profit, Budget. Not to forget that positive forecast attract investors and partners. Forecasting allows the entrepreneur to have an idea on the projected sales in short term and can be used as a tool to control the business flow (Schmidgall & Defranco, 1998).
Some businesses include the appendices at the end the business plan; which is basically additional information, supporting documents needed for in depth understanding. Deloitte suggests that the appendices should include organization charts, CV’s of key managers, financial forecasts and so on (Deloitte and Touche LLP 2019)
3.2 Advantages
Durden (2018) in small business, states that the benefits of business planning are:
• The bigger picture- clear idea of the whole business and upcoming resources you may need. It gives you direction on how to survive in the market but thrive.
• Strategic focus – allows small business to focus on their target markets, products/services,
• Raise capitals: getting the finances – shows investors that your business is viable and the abilities to make it successful
3.3 Disadvantages
As much as business plans have advantages they also have drawback which are:
Time and Expenses: most small businesses do not have the money nor the expertise to write a business plan so what they do is they hire a professional who spends time making the research and then write the plan for you which ends up being costly (Parikh, 2017a)
Loss of Flexibility: people tend to stick to their plans which can be harmful to their business (Parikh, 2017b)
Changes in the market happens fast enough, it leads to outdated documents making the strategic and management planning meaningless.
3.4 Alternatives
An explorational approach
Bridge and Hegarty in Alternative to business plan (2012a) mention that some people believe that the first stage of entrepreneurship is more so of an exploration of the subject rather than running the business. It takes into account the fact that there is uncertainty and that the future is unpredictable so it is best to explore.. As explorers do, they look for promising path but remain open to opportunities and switch paths if necessary. Ten principles have been drawn out from the Sarasvathy, 2008 and Reid et al. (2011) to give guidance as a basis of the exploration approach.
A business plan based approach
This approach also takes into account uncertainty but mentions that it can be reduced through investigation and planning. It suggests that uncertainty can be transformed into risks and that a risk-benefit assessment can be made. Once the venture has been undertaken it can be modified to fit the plan (Bridge and Hegarty, 2012c).
We believe that writing a business is crucial since it gives guidance on the formation of the enterprise. However it cannot guarantee that the customers will like the food, product and service a company provides as well as unexpected situations may arise as well. As much as we plan and research, if we encounter something that we did not think of; the plan becomes less worthy. To support my critic: it has been revealed that 56% of successful businesses have written plans therefore 44% have not the benefit is marginal (Hannon and Atherton, 1998).