Business Plan Diner

I live in a small town. We do not have too many stores in the main street because of the out-of-town shopping including two large supermarkets ten minutes drive away. We have a successful baker who has been there a long time and has built a fine reputation so people are prepared to travel for their bread. We have a family-run hardware store who can be relied to sell anything from a light bulb through a saucepan to a thing for unblocking drains.

Last year we were sorry when the local town butcher shop closed. I knew the owners and they told me the rent was too high and they wanted to concentrate their shop at their own farm a couple of miles away where they sell meat from mostly locally-raised animals.

I was surprised to see that another butcher took over the shop six months ago, though pleased as they were convenient and had a good range. The new man seemed eager and helpful and their standard of fare was good. The shop did not always seem busy though as their predecessors had found. The proprietor’s stepdaughter helped in the shop and I supposed that keeping the business in the family helped control costs by allowing flexibility in staffing the counter.

Last week the shop was closed and locked and there was a notice in the window from the landlord explaining that no rent had been paid for several months and the tenants had been evicted. It was a sad epitaph for a young business started with such enthusiasm.

As I said, I had been surprised to see a new butcher take over a shop the previous and popular occupants had been unable to sustain with sufficient turnover. Small shops selling food items need to move a lot of stock to pay the rents and overheads, and floor space and footfall limit the achievable profit.

A few years ago I was asked by the proprietors of a cafe-diner in a nearby seaside town to help them make their business profitable. Looking at the rent they had signed to pay and the overheads from cooking, refrigeration and heating, it was clear that even if the partners never employed staff they could never make a profit from twelve tables and given the competition from other cafes in better locations. My clients had always wanted their own cafe but they had simply not calculated their expenses properly and had not had any sort of financial strategy or business plan. They closed the cafe.

It was evidently a similar scenario with the recent and short-lived butcher business in our town. The business owner had not done his “homework”, probably had not done any research as to how much his predecessor might have been making, and had not added up his outgoings. He had had no plan either.

The only time start-up business owners tend to come to me for a business plan is when they want my help with raising finance. Few seem to realise that even if they think they can have their dream business they must keep their feet on the ground to the extent of researching whether they can have a viable enterprise with or without finance. Writing a business plan is not just an exercise for the bank manager. It is essential to ensure our business dream does not turn into a nightmare with possibly a financial millstone long after the business is gone.

© Jon Stow 2009

Jon Stow, the author is a businessman living in South East England with his wife, Gloria and three cats. He is an accidental entrepreneur, owns a tax practice, and is also a business adviser and management consultant. He is a director of Exemplary Consulting Limited, which provides hands-on help to small businesses and their owners in meeting the challenges they face.

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