Writing a business plan
A simple, clear business plan is essential for a small business. It guides you through starting and growing your new company. If you’re seeking outside funding, investors will expect to see a business plan. As mentioned previously, consider starting out with the LEAN Canvas program.
A business plan contains descriptions of your products, market, customers, and management team. It also provides financial data, cash flow, and earnings projections. The business plan brings your ideas to life for investors who may not know the food industry. Even if you don’t need funding, writing a business plan will help to plan for launching and growing your business over time.
To prepare for writing the business plan, you’ll need to answer the questions below.
Describe your product
- What are the physical characteristics of your product, and how will people use it?
- What makes your product different?
- How will it help the consumer?
- Why would someone buy your product?
- What is your value proposition? In other words, what makes your product attractive to customers?
Describe your target market
Your goal is to convince a skeptic that a strong market exists for your product and that consumers will pay your price. Market research will help you determine how much product you can sell, where you can sell it, how much you can charge for it, and how you’ll get it to the consumer.
Identify your customers
- What are your target customers' demographics and how might their identity and lifestyle impact your product and marketing?
- Where do they live and shop?
- How will you get your product to them? Is it through shipping based on online sales, selling through retail or foodservice locations, or your own store? What are the costs associated with each method?
- Why do you believe these people want to buy your product?
- How do you plan to set your price? How does it compare it to your competitor’s pricing, and your costs?
- How will you pull consumers away from what they are buying today?
- What are potential challenges in meeting this goal, and how will you deal with them?
- What are the plans for promoting your company and product?
Identify the competition
- Who are your competitors? Do you foresee additional competitors in five years?
- How does your product compare with your competition, and how can you best compete with their products?
Describe yourself and your management team
- List your data: your age, where you live, and have lived, special abilities and interests, and your reasons for starting the business.
- What’s your business background and experience that directly relates to your new company?
- Do you have managerial or production experience?
- What is your educational background?
- Will there be others on your management team? Describe their backgrounds.
- What are the responsibilities of each manager?
Describe your personnel
- What are your current and future personnel needs? How many full-time and part-time workers will you have to start and as you scale up?
- What are the skills your employees will need? Are people with those skills available?
- How much time and money will it cost to train your employees?
- What is your pay scale?
- Will you have a benefits program?
Gathering the data
You’ll gather data for your business plan through primary research and secondary research.
Primary research consists of directly interviewing suppliers, retailers, and potential customers. You can arrange focus groups of customers, interview industry experts, and perform limited test marketing. Farmers markets offer a direct sales opportunity to gather customer feedback. Consider seeking out a mentor. You can find one through SCORE, a non-profit organization dedicated to helping entrepreneurs launch small businesses. Your local community/economic development center may offer resources too.
Secondary sources of information include market research firms, college and university libraries, web research, and online market research services. Find information about your industry in trade journals, newspapers, financial publications, and magazines like Entrepreneur or Fortune.
Writing your business plan and resources
Once the data has been gathered, you’re ready to write your plan. The plan should be complete, clear, and accurate. The document will give investors a first impression of you and your business idea. Before you finalize your plan, ask a trusted friend or business mentor to read and critique it, and carefully consider their suggestions.
Many entrepreneurs starting new businesses need help beyond what lawyers, accountants, and insurance agents provide. Massachusetts provides free and low-cost resources for small businesses. Read about them in Chapter 10.
Legal structure and registering your business
- What is the legal structure of your business? The Small Business Association offers this resource: Choose a business structure.
- Select a business name and register your business to make it a distinct legal entity, including getting federal and state tax IDs. Apply for licenses and open a business bank account.
Financial considerations
- How much funding does the business need to start up? When will you need to invest more money in order to take your business to the next phase?
- What are your plans for allocating the funds (working capital, new equipment, inventory, supplies, etc.)? Where will these funds come from (source and use)?
- Put together a realistic budget, or forecast, of the revenues and expenses you expect for your business for a 3-year period. Consider not just your annual revenues, expenses, and profits, but your actual cash flow, month-by-month. Keep in mind that your expenses are likely to outpace your revenues at the beginning. If you plan to borrow money, put together a cash-flow budget that shows you can service the debt you take on.
Insurance
Insurance protects against lawsuits, accidents, and oversights to protect your business. There are many providers. Food Liability Insurance Program (FLIP) provides liability insurance for food businesses. The SBA has additional information about business insurance. In addition, Massachusetts requires food and beverage businesses with employees to purchase workers compensation insurance, to cover medical bills and lost wages after a work-related illness or injury.