A Good Business Plan:
Why and How-to Do

By Lloyd M. Gordon, restaurant consultant

The other day, I was asked, "What's so hard about making a Business Plan?"

The major importance of the business plan is to give the creator of the business an objective tool for evaluating all the factors involved in getting this business open and running successfully.

A business plan consists of some four basic parts:

1. The first part is the narrative portion, the description of the business.
2. The second part is the demographics the business or how the location selected will affect the outcome. It considers where is it going to be situated and is there really a need for this business in this marketing geographic area?
3. The third part is the Proforma, which is usually a series of first year projections from certain operating assumptions which estimate the amount of money to be taken in from sales and to budget the amount of money expended to make those sales.
4. The fourth part is the Feasibility Study which examines the results of the Proforma and attempts to take into account the greatest number of variables which can affect the profitability of the project. This procedure requires the inclusion of a degree of risk factor which can affect the anticipated results shown in the proforma.
   
   Their is a risk in making the assumptions, their is risk in the stability of the assumptions of the economy for the period, and their is a risk in the business acumen of the restaurant operator. Any or all of these can alter the variables involved and change the parameters for the feasibility of the project.

A well constructed business plan is an essential component of any strategy for adequately funding a new venture or upgrading an existing one.

What is the importance of the business plan? The major importance of the business plan is to give the creator of the business an objective tool for evaluating all the factors involved in getting this business open and running successfully. The secondary importance is the need to have such a business plan available to show outside investors or lending institutions if out side funds are needed. The business plan is their window to the world of your business. It gives the potential investor or lender a lot of criteria upon which to base their decisions taking into account all of the variables assumed and the degree of risk involved. A well constructed business plan is an essential component of any strategy for adequately funding a new venture or upgrading an existing one.

A low-cost business plan prepared by a neo-professional can seem a bargain... but in reality it could cost you your chance at entrepreneurship or growing your business.

Who should make the business plan? It should be a legitimate business document fulfilling the criteria that we mentioned previously. If you are equipped to produce a professional business plan, then by all means, go ahead and do so. If you are not, then it is absolutely a requisite that you hire professionals to do it for you. There is no substitute for a good business plan if you are serious about opening a business and securing capital to fund it. A sloppily prepared, inadequately documented and dishonest business plan can be one of the quickest ways to sway professional investors away from considering you as an investment or loan recipient.

Depending on the complexity of your business, a business plan can run $2,000 and up. A low-cost business plan prepared by a neo-professional with some-little knowledge of restaurants can seem a bargain. Such a business plan developed from a formatted guide book as a model may seem reasonable, but in reality it could cost you your chance at entrepreneurship or growing your business.

©2002 Copyright GEC Consultants, Inc. Website: http://www.GECconsultants.com