(Blogger´s Note: Every Monday we run a question from a reader looking for advice. If you would like a bit of advice email your question to firstname.lastname@example.org.)
I am in the early stages of becoming a restaurateur and came across your blog – very helpful. I have my idea and my business plan all set up, but I´m sort of stuck on the next step. Obviously money is a big and important concern, but should I go out scouting actual locations before I secure financing (rather than an estimate)? Should I register as a business with relevant governments and go through the relatively small cost of opening a business before securing the money I need to actually open it?
And much farther down the road, but still important for now, how long should I plan to be open? I’ve heard that most restaurants fail within six months, so should I plan on securing funds for that haul, or look for a longer term plan?
Gabriel, don´t ever attempt to figure out how long you will be in business. If you are looking at the big picture you should assume that this is going to be a lasting project and that it will be an overwhelming success that will launch your career into orbit. You eventually will be marketing your own products, opening locations across the country and possibly appearing on your own show. You should feel all of these are within reach- and they are- if you build your business correctly. That off course is the optimistic dream.
Your business plan must be long range otherwise your potential investors will walk away as soon as they open it. You must believe in your idea, have confidence in your concept if you are going to convince others it will be successful.
What comes first the money or the location? That is the multi-million dollar question. Unfortunately, unless you have a great track record in the industry the money will not be easily acquired. If you are heavy in personal assets, you can sign your life away, but I would wander far from this idea unless you have a proven concept developed.
The perfect scenario to the plan is to get a solid business plan together. Create a budget for opening using the average square foot lease rate in your area and increase that by 20% when calculating costs.
Begin looking for a location and at the same time speak to friends and family about investing in your concept. Get commitments from these people but do not take any money until you have a location selected. Once you have found that perfect space, negotiate with the landlord for reduced rent while you are building out the space, try to get some tenant improvement credits, and ask that a lease be drawn up.
With a lease in hand, form a corporation, go to your potential investors and begin to build your business.
At this time you are really doing research to see if the project has legs. And there is no need to spend a lot of money on corporations, permits, licenses and other expenditures until you have commitments on the needed funding.
Finally, how much money should you raise? That has o do with your business plan´s budget and the size of the restaurant, the kitchen equipment needed and the remodeling cost of the space. It is a perplexing series of events and it often seems like they may never come together. With the right planning and vision on your part, I am sure it will come to fruition. I will expect an invitation to your opening.
Good luck and enjoy the adventurous journey ahead.