Help with financials section for cafe business plan

[Ben Harrison]

Hello,

I'm not quite sure what section to post this in so I chose general.

My partner and I have a start-up cafe and need funding to launch the business so am writing a business plan to submit to investors.

I have spoken and met with various people who give business advice, but nobody has been able to offer any help with writing the financial section of the plan.

Is there someone here that can help? My partner and I would really love to open our cafe but neither of us have owned a restaurant or cafe before nor are we accountants so really need help with writing this financial section.

Many thanks,
Ben

 

[Ayush2Cents]

Hello Ben,

Some 3 years ago, I was at the same cross-roads but it involved helping my class-mate in opening his own cafe.

Before I throw light on the section, it's very important to be aware of administration demands, regulations and a healthy cash flow . So, F&B knowledge is always important.

Coming back, what we did was some assumptions about costs involvement. I have some idea (when we had brainstorming sessions) when we were trying to calculate the cost (& profit). Some steps were:

1- Initial costs (all business fees, permits, insurance, marketing, rent, equipment, and beginning inventory)

2- Operating Cost (business and legal fees, rent, payroll, and your product inventory). This needs to be paid, no matter you are profitable or not.

When the 2 sections are ready, shift to a new section for forecast.

Estimated numbers hold the key (I preferred one excel statement but you can think of creating different sheers; whatever layout you like to work on)

1. Revenue (or coffee sales)- This is the 1st step. You need and should have some idea about how many cups might be sold. For example, if you think 50 customers daily coming to your café and pay $1, the projected sale will be $50 a month (but be aware sales are subjected to season and offers also)

2. Income (or profit & loss)- Now you have made some sales, time to have some idea about the profit you going to make from your projected sales after all your expenses are paid:
Revenue (income) – Cost of Goods Sold (variable cost of selling your product)
= Gross Margin (or profit)– Operating Expenses (fixed costs) = Net Profit

3. Cash flow–The amount you have in your account at any point of time. To understand it better , Starting Cash + Cash In -Cash Out = Current Cash

4. Balance Sheet– I suggest you get in touch with a CA in this step. It would be helpful to understand how health the business financial are. (My cousin is a CA)

Assets (cash, accounts receivable, inventory, etc.) -Liabilities (debts, accounts payable, accrued expenses, etc.)= Net Worth (or capital)

5. Reach your break-even point= The 1st milestone. One basic equation you can use: BEP = (Cost of Goods Sold + Operating Costs) / Dollars Per Sale = transactions per month = the number of sales per day to cover your costs and break even

Hope it gives some direction.

Best,
Ayush

 

[Ben Harrison]

Hello Ben,

Some 3 years ago, I was at the same cross-roads but it involved helping my class-mate in opening his own cafe.

Before I throw light on the section, it's very important to be aware of administration demands, regulations and a healthy cash flow . So, F&B knowledge is always important.

Coming back, what we did was some assumptions about costs involvement. I have some idea (when we had brainstorming sessions) when we were trying to calculate the cost (& profit). Some steps were:

1- Initial costs (all business fees, permits, insurance, marketing, rent, equipment, and beginning inventory)

2- Operating Cost (business and legal fees, rent, payroll, and your product inventory). This needs to be paid, no matter you are profitable or not.

When the 2 sections are ready, shift to a new section for forecast.

Estimated numbers hold the key (I preferred one excel statement but you can think of creating different sheers; whatever layout you like to work on)

1. Revenue (or coffee sales)- This is the 1st step. You need and should have some idea about how many cups might be sold. For example, if you think 50 customers daily coming to your café and pay $1, the projected sale will be $50 a month (but be aware sales are subjected to season and offers also)

2. Income (or profit & loss)- Now you have made some sales, time to have some idea about the profit you going to make from your projected sales after all your expenses are paid:
Revenue (income) – Cost of Goods Sold (variable cost of selling your product)
= Gross Margin (or profit)– Operating Expenses (fixed costs) = Net Profit

3. Cash flow–The amount you have in your account at any point of time. To understand it better , Starting Cash + Cash In -Cash Out = Current Cash

4. Balance Sheet– I suggest you get in touch with a CA in this step. It would be helpful to understand how health the business financial are. (My cousin is a CA)

Assets (cash, accounts receivable, inventory, etc.) -Liabilities (debts, accounts payable, accrued expenses, etc.)= Net Worth (or capital)

5. Reach your break-even point= The 1st milestone. One basic equation you can use: BEP = (Cost of Goods Sold + Operating Costs) / Dollars Per Sale = transactions per month = the number of sales per day to cover your costs and break even

Hope it gives some direction.

Best,
Ayush

Hi Ayush,

Thanks very much for taking the time to reply, lots of information there which is great and I really appreciate you taking the time.

My problem is that I don't know where to start with doing all that as I've never owned a restaurant before.

I don't know what F&B means, don't know what a CA is, don't know what BEP is.

I have no idea what all business fees there might be, what insurance I might need and where to get it, no idea what equipment I would need past the obvious coffee machine, juicer, blender etc, and how do I know how much beginning inventory I need.

I don't know how and where I find out about business and legal fees, payroll is a mystery as I'm not an HR manager or accountant.

I really am starting from a place of ignorance about the restaurant business - but everyone starts somewhere right?

I feel what I am asking is for someone here who has worked on or in the restaurant business in the UK to offer a meeting whether paid or not so we can sit down and go through all of these things.

Thanks again,
Ben

 

[Ayush2Cents]

Hello Ben,

F & B means Food and beverage. So, please be 100% sure as you start this business. It's like you giving me keys of your car but I do not know how to drive a car (want to drive though).

CA means Chartered Accountant. Ben, ignorance is bliss but yup, everything starts from somewhere. And it is always good to have some homework done before you meet someone in the UK (in restaurant business). When my friend was setting up this restaurant (cafe included), he had no idea but reaching out to 'right' people is extremely important.

I suggest you read startups(dot)co(dot)uk/how-to-start-a-cafe-or-coffee-shop.

Please type this on Google search bar as I don't want to be banned by placing links (as I have just started here).

Thanks,

 

[ethical PR]

The only way you will find this information is by doing your own market research. Some of the terms mentioned in the previous post are not relevant as they relate to the US rather than the UK market.

Why are you looking to open up a cafe if you have no experience or running one or of running a business? What skills and experience are you going to bring to the table which will make it a viable business for you to run?

Even if you find someone who has experience of running a cafe to help you, you will still need to do your own research.

Start by looking at the many previous threads on here that talking about running a cafe which have advice on where you can go to buy products and equipment for your cafe.

Identify two or three premises based on where your target market is likely to pass by and where there is not too much competition from other cafes and restaurants which would be of interest to your target market.

You can then obtain, rent, rate and utility costs.

Get quotes from insurance companies, accountants, lawyers etc for these costs.

You will also need to identify a marketing strategy and budget to promote your business.

Once you have all your costs, you need to do market research on likely footfall for your cafe, what people are likely to buy and when and at how much.

Only once you know your likely set up and ongoing costs and income will you know if you have a viable business model.

Do remember most businesses of this type will take 6 - 12 months before you break even, so you will need money in the bank to cover your operating costs and income for yourselves during this period.

 

[Ben Harrison]

Hello Ben,

F & B means Food and beverage. So, please be 100% sure as you start this business. It's like you giving me keys of your car but I do not know how to drive a car (want to drive though).

CA means Chartered Accountant. Ben, ignorance is bliss but yup, everything starts from somewhere. And it is always good to have some homework done before you meet someone in the UK (in restaurant business). When my friend was setting up this restaurant (cafe included), he had no idea but reaching out to 'right' people is extremely important.

I suggest you read startups(dot)co(dot)uk/how-to-start-a-cafe-or-coffee-shop.

Please type this on Google search bar as I don't want to be banned by placing links (as I have just started here).

Thanks,

I see, well I guess I could have worked that out, just not heard it abbreviated before as I've not spoken to people online so maybe people sent to say the words face to face.

Anyway, I really appreciate your help, and yes I've been trying to reach out to good people. I know someone who runs 3 restaurants but he's so busy has no time to get back to me. Someone else is actually a specialist food and beverage consultant who helps startups but again he's super busy so perhaps I just have to drop him another message to get his attention.

I will definitely look at the "link" you've given me for help.

Many thanks,
Ben

 

[Ayush2Cents]

You are welcome, Ben
Let me know if you want any help with online marketing (once you make your mind ).

Meet real people in your network and try to understand whatever they say. Dont hurry. Start slow n learn first

 

[Chris Ashdown]

Your best bet is to go into any book shop and buy a copy of any book called something like "starting in business" there are normally half a dozen in the reference section and always some in every library. they explain everything you need to do to get started

After that if you go to your bank and tell them you would like to talk to the business manager they will give you free advice and some spreadsheets to work out your budget and cashflow

 

[Mark T Jones]

Some good advice above

Whilst it can be useful to employ a professional to tidy up and challenge your numbers, it is vitally important tha5 the real content of your plan comes from you, based on intelligent assumptions and research.

Otherwise at best you are paying good money for a work of fiction, at worst you will be walking blind into financial ruin, something which many cafe / restaurant start ups unfortunately do.

Out of interest, what type / level are f funding you are looking for?

 

[Financial-Modeller]

Ben, you seem to be saying that you haven't worked in a cafe or restaurant, haven't owned one, and don't know how to run one.

Why do you expect anyone to invest in your business venture?

Get a job working in a cafe or restaurant, learn how the business works, decide if you can run one better than your employer does, and THEN consider opening your own one.

 

[mattk]

Another route is to look on businessesforsale.com or Dalton's Weekly and you'll see hundreds of cafes for sale. Enquire about those businesses their turnover, costs, details of leases and so on. This is a treasure trove of information.

While you're there you might want to ask yourself why so many people are selling up and the cost of buying an established cafe is little more than the value or it's equipment and stock.

 

[Mr D]

While buying a minimum wage (or lower wage than that) job may appeal to some, its not what everyone wants.
As owners you are the only ones able to work long hours and for the lowest pay. Your staff need to be paid whether you get paid or not.

Its not for everyone. Some can and do make money at it, some sadly put time and money into it to slowly go under.

 

[Clinton]

My partner and I have a start-up cafe and need funding to launch the business ...

Your choice of words suggests you've already started the cafe and are now seeking the cash to run it (ie to cover the losses till some point in the future where you hope it'll make a profit).

Bit horse before the cart there, surely?

Given your lack of experience, lack of understanding of accounts etc., I suggest it'll be near impossible for you to borrow money from the markets. "Investors" generally aren't looking to invest in cafes!

Rely on FFF - family, friends and fools. If they won't fund you, just close the blooming thing down and accept you've made a mistake.

 

[The Byre]

Ben, you seem to be saying that you haven't worked in a cafe or restaurant, haven't owned one, and don't know how to run one.
Why do you expect anyone to invest in your business venture?
Get a job working in a cafe or restaurant, learn how the business works, decide if you can run one better than your employer does, and THEN consider opening your own one.

This!

Nobody (except FFFs of course!) will ever invest in an owner-operator cafe, even one run by someone with decades of experience. I can say that with certainty, because there just would never be any chance, not even a remote chance of any return on investment.

There are two possibilities with an owner-operator cafe, bar, pub, etc. Either the person really knows what they are doing and any spare cash left over from the turnover turns magically into trouser money - or - they don't know what they are doing!

I really am starting from a place of ignorance about the restaurant business - but everyone starts somewhere right?

Wrong!

They start by working in a restaurant and learning the ropes and the tricks of the trade. Why is the girl at the till counting straws? Why doesn't she close the till drawer properly? Why does she come to work early? Why are there two identical bottles of the same stuff on the shelves? Why are some staff entering the orders into their tablets away from the tables? Why do they use so much crushed ice in the soft drinks?

You need to be able to answer those and other similar questions, before you go anywhere near a cafe, restaurant or greasy spoon!

 

[Mr D]

This!

Nobody (except FFFs of course!) will ever invest in an owner-operator cafe, even one run by someone with decades of experience. I can say that with certainty, because there just would never be any chance, not even a remote chance of any return on investment.

There are two possibilities with an owner-operator cafe, bar, pub, etc. Either the person really knows what they are doing and any spare cash left over from the turnover turns magically into trouser money - or - they don't know what they are doing!


Wrong!

They start by working in a restaurant and learning the ropes and the tricks of the trade. Why is the girl at the till counting straws? Why doesn't she close the till drawer properly? Why does she come to work early? Why are there two identical bottles of the same stuff on the shelves? Why are some staff entering the orders into their tablets away from the tables? Why do they use so much crushed ice in the soft drinks?

You need to be able to answer those and other similar questions, before you go anywhere near a cafe, restaurant or greasy spoon!

Learning to cook multiple items for timed delivery works well too.

Even if not the chef.

 

[Ben Harrison]

Hello,

Whilst there have been some very helpful people here (Ayush, Chris Ashdown)...Wow, there is certainly lots of very unhelpful and negative posts here making assumptions about me and the industry as a whole, "nobody will ever...", "never a chance", "never a remote chance", stating that everyone starts by working in a cafe or restaurant, and no, I haven't opened or started the business Clinton, clearly you have not actually read my posts so thats wrong.

I was hoping to come here for support and help, looks like I've been met by some rather sour and bitter people looking to project their problems on to someone who wants to be successful.

So that those few here know, as it happens I know several people who have very successful business in restaurants, cafes and the food industry who had absolutely no experience at all - and they did'n't work there previously either. So it really would be best if negative assumptions and sweeping statements were kept to yourselves.

To end, I was apprehensive about using an online forum for the reasons I've mentioned above, looks like my suspicions were right. Very disappointing and sad to see so many people who just seem to want others to fail.

Goodbye.

 

[Mr D]

And you also looked at reasons why even experienced owners of such places also shut down?
Besides the common result of going in without knowing what to do? Learning on the job in a business can be a very expensive lesson.

 

[The Byre]

I believe it is known as Dunning-Kruger syndrome.

I hope that you are able to return and tell us how you have beaten the odds and are succeeding - but sadly, I have seen hundreds and dealt with dozens of outsiders trying to get 'into' the restaurant trade without learning the ropes first, who have not just failed, but have even lost their homes and are destitute.

Please do not become another one!

 

[Clinton]

I was hoping to come here for support and help...

Lots of people get support and help here. Take a gander through a few threads. But if you were looking for a cuddle and for someone to pat you on the back and encourage you to do what's in your heart (rather than telling you when you're out of your league) you've come to the wrong place.

The people who are able to assist with drawing up your financial plans are telling you, based on what you've shared here, not to waste your time on seeking finance. But, hey, what do they know?

...someone who wants to be successful...

Er, it is precisely because people want you to be successful that they're telling you to get the hell out of jumping into something you know absolutely nothing about (by your own admission). You've been advised to go learn the business first, do some hard graft, put in some hours at the coal face. But, no, like several other wannabe entrepreneurs we get here you want to dive straight in and "become successful". It doesn't work like that. But all the best anyway.

 

[Financial-Modeller]

...I know several people who have very successful business in restaurants, cafes and the food industry who had absolutely no experience at all - and they did'n't work there previously either...

So, the OP knows many experts who are "too busy to get back to him" rather than embracing his enthusiasm and offering to invest in his new venture.

FWIW, (and my username probably gives a huge clue, but the OP didn't think to ask me) I built a financial forecast 18 months ago, for a fast-food start-up, initially based out of one retail unit, specifically for fundraising purposes. That entrepreneur's intelligence, unrelated experience, and attitude made his venture investable, even though he had no direct experience working in a cafe.

That the OP chose not to respond to my question "Why do you expect anyone to invest in your business venture?" probably demonstrates that he is not ready to persuade investors to invest in his business yet.

The advice on here that he interpreted as 'sour' and "bitter" has saved him, his partner, and their advisers a lot of time and money, but he won't appreciate it, and is sulking in his room now!

 

[Lynn10]

Hello,

Whilst there have been some very helpful people here (Ayush, Chris Ashdown)...Wow, there is certainly lots of very unhelpful and negative posts here making assumptions about me and the industry as a whole, "nobody will ever...", "never a chance", "never a remote chance", stating that everyone starts by working in a cafe or restaurant, and no, I haven't opened or started the business Clinton, clearly you have not actually read my posts so thats wrong.

I was hoping to come here for support and help, looks like I've been met by some rather sour and bitter people looking to project their problems on to someone who wants to be successful.

So that those few here know, as it happens I know several people who have very successful business in restaurants, cafes and the food industry who had absolutely no experience at all - and they did'n't work there previously either. So it really would be best if negative assumptions and sweeping statements were kept to yourselves.

To end, I was apprehensive about using an online forum for the reasons I've mentioned above, looks like my suspicions were right. Very disappointing and sad to see so many people who just seem to want others to fail.

Goodbye.

Hi Ben,

I just wanted to say, please don't be disheartened by some of the comments on here. I am in a similar position to yourself, just starting out and am here for advice, and I too was quite surprised at the tone of some of the replies I received and the negativity. When I teach students about my profession, I go about it in a different way. After all, even though we are new to business, on the whole, we are not idiots. Having said that, the people on here know their stuff and have been doing it for years. Take the advice they give and ignore the digs. I would definitely try and get some work in a cafe, I did it for 6 months and it really opens your eyes to the smaller details involved in keeping the public happy. Good luck with our business.

 

[The Byre]

I too was quite surprised at the tone of some of the replies I received and the negativity.

It's not that - but it seems that on the hour, every hour, every man and his dog is either launching a gateway website (about 20 years after that boat left the harbour) or yet another restaurant.

And they all seem to have two qualities in common - no money (of their own!) and little or no experience! They are therefore predestined to failure.

Or as Warren Buffet put it "The market, like the Lord, helps those who help themselves. But unlike the Lord it does not forgive those who know not what they do!"

 

[Lynn10]

It's not that - but it seems that on the hour, every hour, every man and his dog is either launching a gateway website (about 20 years after that boat left the harbour) or yet another restaurant.

And they all seem to have two qualities in common - no money (of their own!) and little or no experience! They are therefore predestined to failure.

Or as Warren Buffet put it "The market, like the Lord, helps those who help themselves. But unlike the Lord it does not forgive those who know not what they do!"

I appreciate that there are lots of us out here with the dream of opening a cafe/restaurant, and I agree that most of us are probably ill prepared for the reality of it. That's why we turn to people on here for advice and support which is much appreciated. However, sometimes I think the replies from some users can be a bit harsh, and I don't think it's necessary.

 

[Mark T Jones]

I appreciate that there are lots of us out here with the dream of opening a cafe/restaurant, and I agree that most of us are probably ill prepared for the reality of it. That's why we turn to people on here for advice and support which is much appreciated. However, sometimes I think the replies from some users can be a bit harsh, and I don't think it's necessary.

I agree it can turn a bit attacking. Exacerbated in this case because the OP didn’t return for a while so people made lots of assumptions to comment negatively on

That said, I do face-palm a bit at many of the pub / restaurant start up threads particularly, I’m afraid when they involve the term ‘dream’

The only time ‘dream’ and restaurant should appear in the same sentence is when there s a table, wine and food being served to you ,

I do have significant insight to the sector as I finance start up restaurants. I have my own rules - rules that come from my conscience, not firm the lending market

1. There needs to be a significant slug of equity alongside borrowing requirement
2. The business plan need to talk to me in terms of business, not in terms of restaurant dreams. I don’t care about menus or floor plans, I do care about the business model, the marketing strategy and business detail such as recruitment, training and retention of key personnel

On the other hand, I couldn’t care less if they’ve worked in the industry as there is no evidence that this impacts on success

 

[Clinton]

However, sometimes I think the replies from some users can be a bit harsh, and I don't think it's necessary.

And they seem even more harsh when people don't read properly.

The OP wasn't asking for advice on starting a cafe. The OP was about putting together the financial section of the plan.

He may well make a success of running a cafe, but the bulk of the replies have been about the finances / funding - giving advice about getting the numbers, understanding the numbers, sourcing other advice on the numbers.

And the people who are know about finances, financial projections, raising finance etc., have told him not that he's useless but that he's got a near 0% chance of getting funding. Why would @Financial-Modeller , for example, spend time helping with projections if the OP hasn't got a chance in hell of actually raising the money from the market?

If there was someone trying to empty the ocean one cup at a time and he wanted help would you help him? No, sometimes a hopeless cause is just a hopeless cause.

The experts the OP knows didn't get back to him for the same reason - they figure that trying to raise finance for this project is a waste of time. But they didn't do the kind thing and tell him to his face. We did.

And it doesn't help the OP's case that he doesn't want to take advice (like mine on using FFF) or answer questions, like the one about why people should invest in his business. Or take @Chris Ashdown 's tip on where he could get free spreadsheets and help.

 

[Lynn10]

And they seem even more harsh when people don't read properly.

The OP wasn't asking for advice on starting a cafe. The OP was about putting together the financial section of the plan.

He may well make a success of running a cafe, but the bulk of the replies have been about the finances / funding - giving advice about getting the numbers, understanding the numbers, sourcing other advice on the numbers.

And the people who are know about finances, financial projections, raising finance etc., have told him not that he's useless but that he's got a near 0% chance of getting funding. Why would @Financial-Modeller , for example, spend time helping with projections if the OP hasn't got a chance in hell of actually raising the money from the market?

If there was someone trying to empty the ocean one cup at a time and he wanted help would you help him? No, sometimes a hopeless cause is just a hopeless cause.

The experts the OP knows didn't get back to him for the same reason - they figure that trying to raise finance for this project is a waste of time. But they didn't do the kind thing and tell him to his face. We did.

And it doesn't help the OP's case that he doesn't want to take advice (like mine on using FFF) or answer questions, like the one about why people should invest in his business. Or take @Chris Ashdown 's tip on where he could get free spreadsheets and help.

My point isn't about the quality of the advice anyone gives, or the subject matter, more so the nature in which it's sometimes given. You've answered my questions before and I'm grateful for that. It feels positive when someone knowledgeable spares the time to share their experience in an encouraging way. It's a shame Ben didn't stick around for more advice. As Warren Buffett also said, "lets just all get along" (and save animals), or was that Miss World 1976?☺

 

[Ayush2Cents]

Hello,

Whilst there have been some very helpful people here (Ayush, Chris Ashdown)...Wow, there is certainly lots of very unhelpful and negative posts here making assumptions about me and the industry as a whole, "nobody will ever...", "never a chance", "never a remote chance", stating that everyone starts by working in a cafe or restaurant, and no, I haven't opened or started the business Clinton, clearly you have not actually read my posts so thats wrong.

I was hoping to come here for support and help, looks like I've been met by some rather sour and bitter people looking to project their problems on to someone who wants to be successful.

So that those few here know, as it happens I know several people who have very successful business in restaurants, cafes and the food industry who had absolutely no experience at all - and they did'n't work there previously either. So it really would be best if negative assumptions and sweeping statements were kept to yourselves.

To end, I was apprehensive about using an online forum for the reasons I've mentioned above, looks like my suspicions were right. Very disappointing and sad to see so many people who just seem to want others to fail.

Goodbye.

Ben,

Thanks for your appreciation. Never say never.. Just go for it.. You know...every step taken in a step towards the goal. Distance is lesser with every baby step.

My best wishes to you.. Let me know whenever you want to share your effort(s). It depends on the width of the mind and not how wide a wallet is Go for your goal.

Best,