Starting any type of business requires a strong business plan, but it is especially critical for restaurants. There is a good chance that you have heard that restaurants are difficult to keep open. You have probably also heard lots of statistics about how many restaurants make it and how many don’t have more than six months. The truth is that these stats must be taken with a grain of salt, but what you shouldn’t take lightly is the fact that you need a plan of action. This will include an action plan for how you intend on getting the start up capital to open your restaurant and exit strategies if things don’t go as planned. Here are five reasons why you need a restaurant business plan.
- To secure financing. To open a restaurant, you will need money – there is no way around this simple fact. You will need money to lease a space, you will need money for permits and licenses, you will need money for equipment, and you will need money for PR. A business plan will help you secure financing with backers or land a loan.
- To make sure you are on the right path. It is also important to have a business plan for the sake of making sure you stick to the planned path. If you veer off this path, you could wind up making a major mistake that could compromise the success of your restaurant. In a sense, your business plan is like a map that will allow you to see the total picture – a picture that can be hard to see when you close your eyes and concentrate.
- To manage cash flow. Cash flow is the lifeblood – the oil – that helps a restaurant keep going. Cash flow will be important to cover expenses, overhead and daily inventory – an inventory that will simply get eaten or tossed away. With your business plan, you will have a much better idea for how to manage and balance your cash flow. Let’s say you need a new range – if it is not in your business plan, you may need to wait until you have the ideal cash flow to pick up new equipment.
- To work with a consultancy firm. Many new restaurants will work with a restaurant consultancy firm. If you don’t have a business plan, it will be hard for the consultancy group to properly evaluate the needs of your business. With a business plan, a consultancy group will be able to create a much better strategy that could further the success of your business.
- To avoid pitfalls. On top of everything, your business plan will also be a pitfall avoider. When you create your business plan, you will have to brainstorm all the different things that could take your restaurant down. As you run your business, you will want to refer to these pitfalls. In the end, avoiding these pitfalls efficiently will be the key to the longevity of your restaurant.
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