Unless you are self-funding your food business, you will need to find investors. To woo investors, you will need a business plan that outlines the essentials of your food business. Time spent creating your business plan more than pays you back by making your idea easy to understand by people who can help you launch your dream.
Here's what you need to know about creating a food business plan.
The 7 elements of a Business Plan
Business plans follow a template, which means you don't need to reinvent the wheel to come up with your business plan for a food concept. All you need to do is understand what is expected in each aspect of the business plan and then pull together the information that will help you complete the section correctly.
While you can include more elements to make your case, as long as your plan covers these seven topics, you're in good shape.
1. Executive Summary
The point of the executive summary is to give context to the rest of your business plan with a high-level overview -- essentially an elevator pitch. Entrepreneurs frequently complete the executive summary last, because it sums up what's in the rest of the business plan.
Business owners often talk about the mission of their business idea, as well as the history of the business founders. A value proposition is usually found in the executive summary as well, which explains how the new business idea differs from other companies on the market, which could be competing for the same audience.
For instance, someone who wants to open a coffee shop might talk about their experience as a barista, their connections with coffee farmers in a given region, and what sets their coffee shop apart from others, such as a line of vegan breakfast pastries or a planned coffee educational component for customers.
2. Business Description
While you want to tease out your business in the Executive Summary, the Business Description section lets you go into full detail on your food business concept.
No two business descriptions are exactly alike, since no businesses are quite the same. Questions to guide your thinking in writing this section include:
- Where are you located?
- What products will you sell?
- Who are your target customers?
- What is your projected growth?
- What opportunities does your business have?
- Who are the principal partners in your business?
- What factors give you a competitive advantage vis-a-vis your concept?
The Business Description can be a powerful motivator for you as you hustle to open your business. Read it over anytime you need to remember the end goal of all your hard work!
3. Market Analysis
To succeed in business, you need to know who your competitors are and where you fit in the market. In a Market Analysis, you'll need to outline where your business fits in the market, for instance whether your coffee shop targets college students who need a late-night study hangout or the morning commuter crowd, who want healthy breakfast items and strong coffee.
As you describe your target market, you might include profiles or personas of your ideal customers.
- Who are they?
- what else do they like to do?
- why would they choose your new coffee shop over others in the same neighborhood?
You might also include a SWOT analysis, in which you discuss the strengths, weaknesses, opportunities, and threats affecting your business. An opportunity might be a trending neighborhood location where there are no other coffee shops, where a threat might be a neighborhood saturated with cafes. A strength could be your coffee education; a weakness might be the lack of a coffee education, to be overcome with smart hiring.
Going into depth this way will show investors that you understand your customer and have anticipated their needs within your business model. If you have customer testimonials -- for instance, if you tested out your concept with a coffee cart and gained a following -- you can include this information here.
The last section of the market analysis includes research, which looks at the chief trends within the industry and geographic area. For instance, third wave coffee is a major trend, thus a new coffee shop would want to offer high-quality beans sourced directly from coffee farmers. Wellness foods are another major trend, thus vegan pastries with superfoods could be a hit.
4. Organization and Management Structure
You're not starting your business alone. This section of the business plan lets you show off the superstar talent who are going to help you launch your new cafe.
Perhaps you've heard the saying "it's not what you know, it's who you know."
Well, that holds true in many pitch rooms, because funders value your management and leadership connections more than, say, your connections to the best Nicaraguan coffee farmers (although they'll want to hear about that, too).
Funders place such a high value on management, because they know that an effective management team has the experience to weather tough storms. A good manager can help you pivot your concept if there's something that's not working -- say, your vegan pastries aren't a hit.
Spend time talking about the different players on your team, highlighting the qualifications, experience, and education of everyone who plays a role in your venture.
5. Sales Strategies
Your idea won't be a hit unless you hit your sales goals. That means funders won't bite unless you show them how you've got creative ideas to push your product.
Start by discussing your price point.
- How much will your beverages and food cost?
- How does the price point relate to everything else you're doing?
- How does it relate to the competition?
If your coffee drinks cost more than others in the neighborhood, be prepared to explain why you're charging more money.
After you situate your products on the market, you should talk about the promotional strategies you're using while launching the business and any great ideas you want to try later. While you're not open yet, perhaps you're teasing your coffee company on social media or writing a press release to announce that you've secured a location. Detail these strategies along with anything you're planning for your grand opening and beyond.
Don't forget to talk about your business website, including your SEO (search engine optimization) strategy, or any customer loyalty strategies, like a student discount.
Finally, the money you need to open your business comes into play. In this section, you talk about how much money you need to open your business.
This section can be stressful for business owners, but as long as you are being realistic and backing up your ask with data, you will be in good shape. Look for funding data on the type of business you want to open to guide your thinking. Coffee shops cost anywhere from $200,000 to $500,000 to open and can enjoy a profit margin as high as 25 percent. After three years in operation, a successful coffee shop can earn annual revenues of $1 million.
If you're not 100 percent sure how much money you need, a range is acceptable. If you are giving a range rather than a precise figure, make sure to include best-case and worst-case scenarios that explain why your maximum and minimum are set where they are.
Along with financials, you'll want to include a timeline, so anyone who invests understands when you plan to open and what needs to happen between now and then. In the timeline, you can talk about your location, build-out, licenses and permits, business insurance, inventory sourcing, hiring, employee training, and more.
The more detail you include in this section, the more impressed funders will be. When they see that you know your stuff and have thought through everything that needs to happen, they'll be more likely to sign on.
7. Financial Projections
You may have thought the last section covered all your financials, but there's one more thing you need to cover: projections for the future.
Draw on market trends and projected revenue growth to talk about how profitable your business will be. Point out when investors would be repaid. Talk about the cash flow you will develop, then paint a picture of how your cash flow will help you grow.
To ace this section, you'll need to connect the dots between all the other information in your business plan, from your sales strategies to trends in the market to revenue growth. If you've had any earlier successes, such as a well-received trial run with a coffee cart, describe these here.
If you have a small food business and are seeking expansion funds, you'll also want to dwell on your successful track record, pointing out things like profitability, repeat customers, media attention, and more.