Why Do You Want a Business Plan?
Not too long ago, a couple starting a restaurant approached me. They had to have a business plan and they had to have it now. I asked what the hurry was and they indicated that their future landlord was insisting on it. I thought good for the landlord. Eighty percent of restaurants fail in the first two years so it might save everyone involved a whole lot of trouble by insisting that they think through and document what they intended to do.
From the perspective of the couple, they were about to enter into an agreement that would have an all in value of several hundred thousand dollars backed up by their business and guaranteed by everything they had personally. Despite all of this, they were only interested in getting a document to the landlord so they could get the lease. The first phone call gave me the impression that they thought that I should simply pull a business plan off the shelf, slap their name on it and send it to them. I suggested that there was a little more involved than that and they ought to come in and tell me what they had in mind for their business.
I have never consulted with anyone in the restaurant business. I have never consulted with anyone that has been in an industry with which I have had any prior experience to my knowledge. I simply understand business and can apply that knowledge to the industry knowledge of the business owner. Even so, I was quite certain that spending some of the best years of my life watching Gordon Ramsay, Anthony Bourdain and Andrew Zimmern made me more than qualified to appear reasonably well informed.
The next day I met with the couple. They showed me what the landlord was looking for and it was a comprehensive analysis of their business. Nothing unreasonable and actually a very good summary of what any business plan should contain. It was obvious the landlord was serious about tenants having a clue.
They looked totally bewildered so I started the conversation. The wife had experience running a restaurant, so I was told. The restaurant would have a Mediterranean theme, evidently a nondescript portion of the Mediterranean. I then probed a little deeper. Do you have a menu? Yes. Have you priced the food? Yes. Do you know how much it will cost? No. Things started to go downhill quickly. How many tables will there be? We don’t know. Will there be a bar? Yes, no and then we don’t know. Will you be serving breakfast? Probably not. Will you be serving lunch? Yes. Will you be serving dinner? We don’t know.
It was obvious that I knew more about the restaurant business than they did. I was in pain listening to this and wanted to scream, but kept on trying to help. I tried to explain that it would be difficult to create a business plan around a restaurant that had no defined capacity. That without knowing how many meals a day they would be serving and how many seats there would be, that sizing the space required, the staff needed and the equipment and furnishings could be a challenge.
I then asked them a little about the market. The facility was to be in a strip mall. I asked if there were any other restaurants in the mall. They didn’t know. Any other restaurants within three or four blocks? Don’t know. Any population centers nearby like apartment building and condos? Don’t know. Any office buildings? Don’t know.
There was a brief discussion about having me meet with the landlord with them. I said I would be happy to do that thinking the entertainment value of that meeting would somehow compensate me for this free introductory session.
I never heard from them again. I don’t know if they realized they had no idea what they were doing and scrapped the whole concept. Maybe they went on to find someone that wasn’t such a stickler for detail and would just give them a damned business plan. Then again, maybe they thought the pained look on my face indicated I was afflicted with something they best not expose themselves to again.
A similar call came in a couple of days ago. Someone wanted a business plan for a childcare facility. She wanted to know what it would cost. I explained that was a function of how detailed she wanted the plan, how much work she had already put into it and how much of her own time she was willing to devote to it. It was soon clear that this was another case of just give me a damn plan and stop asking me your ridiculous questions. I asked why she wanted a business plan and she responded it was for an SBA loan. She didn’t want it; the SBA wanted it.
She said she would try to find someone that had childcare experience that could get her a business plan fast. I wanted to suggest that she call McKinsey, that they probably have an entire global initiative covering home-based childcare centers. I bit my tongue.
This happens frequently. People consumed by the entrepreneurial spirit only to have the full force and effect of their unlimited passion thwarted by some jerk that expects them to know what they’re doing. They call and want a piece of paper that will make these people go away and stop bothering them. I could suggest they go online, find a fill in the blank form and have at it. The problem is that you have to know how to fill in the blanks. Curse this lust for knowledge that the people with the money say they need to have.
I am convinced that the best reason for an entrepreneur to start a business plan before spending a lot of time and money is to begin to discover what they do not know. I am sure that half of those people would give up their plans before they even started. It is not that I do not like entrepreneurs, I consider myself one. I do not like failure. I would rather see someone call it quits before they even get started than to crash and burn after they put their heart and soul into a business venture.
Richard Gabel
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