Question: “I’ve been working as a Sous chef at a restaurant for nearly 10 years. I have some money saved up to start my own restaurant but I’m not sure how to go about gathering investors. What kind of business plan would I need to entice future investors? How can I make myself stand out?”
Susan-Says: Having money saved is a good first step toward your goal of launching your own restaurant. Whether you are seeking debt financing – meaning a traditional bank loan – or equity financing from investors, you must have your own funds to invest in the business. Additionally, a good personal credit rating is imperative. Lenders and investors will review your past financial history as an indication of your creditworthiness and ability to make your enterprise a success. If you haven’t been able to handle your personal finances well, then there is an assumption that you won’t handle the finances of your business responsibly either.
Now, let’s talk about your business plan. You are correct about the need to create a solid business plan to attract investors. Certainly, a decade of experience as a sous chef is a good starting point. Investors expect to see relevant experience and expertise as one element of the business plan. But as you have noted in your question, you need to make the plan sizzle so as to entice potential investments.
Investors are primarily looking at a few key items. First, they want to know what void in the market your restaurant is going to fill. In other words, how are your culinary creations and delectable dishes going to differ from the thousands offered by competing restaurants? Prospective investors expect to see a plan reflecting extensive research regarding the marketing opportunity.
Secondly, your business plan needs to specifically state how much money you are looking to raise and precisely how you plan to use it. This requires a considerable amount of preparation on your part. Vague estimates aren’t going to cut it. The investors need to know you have researched your start-up costs and that you have a clear picture of what it is going to take to get the business up and running. You don’t want to miscalculate your costs and run out of money before you get the doors open. And don’t forget to include working capital into your start-up costs. Once the doors open, you’ll need working capital to run the business until it begins generating enough revenue to sustain itself.
Finally, and most importantly, investors look at financial projections. How much revenue do you expect the business to generate over the next few years? Your financials should indicate an approximate timeframe for repayment of the investment. Most investors expect to see a return on their investment of 20 percent or higher over some period of time. However, each investor is different so make sure you get good professional advice.
Don’t be intimated by the business plan process. The shorter and more concise your plan is the better. Investors don’t want to spend a long time digging to get the information they need to determine whether investing in your culinary dream will pan out in profits for them.
I don’t want to rain on your parade, but I will caution you that finding investors for a start-up restaurant can be a struggle. As a rookie to restaurateurs it may be easier to look for several investors who invest smaller amounts than searching for one major investor. One of the best ways to being your search for funds is to start with current customers, family and friends. Attorneys and accountants may also be helpful in identifying potential investors.
Once you have identified some serious potential investors serve up a few of the signature dishes you are planning for the new restaurant’s menu. Before desert your guests may be reaching for their checkbooks. Consider Chef Timothy Dean who tried to open his own eatery. His attorney put together a small gathering of potential investors and Dean brought the food, his laptop and business plans. Dean set up shop with hotplates and he cooked in front of the group. The young chef kept the small group entertained describing each dish he was preparing, the food costs and projections described in the business plans they had in their hands. Dean wasn’t empty handed when the cooking was over; he walked away with the dough. The one demonstration raised $75,000 for Dean’s first restaurant! Use your connections and culinary skills to get to know investors; but make sure you have a solid business plan investors can easily digest.