Assignment 4: Final Business Plan
BUS313 – Introduction to Entrepreneurship
This is the business plan for Lomati’S, a new bistro in Ashland, Virginia. Ashland is a small Main Street Community that has proven to be a viable location to start new and different eateries. Of the seven restaurants, not counting fast food restaurants, six of the restaurants in Ashland are local, stand alone, unique eateries. The business model for Lomati’S fits perfectly with the demographics in Ashland. Target market and startup funds have also been addressed in this business plan. Finally, the two favorable exit strategy options have been explored.
Lomati’S bistro is going to be a unique concept in the Ashland area. We are going to keep the front of the house limited to 10-15 tables so that we can focus first and foremost on customer service. Our wait staff and hostesses will be trained on our vision of how to provide superior customer service. Courtesy will be at the forefront of their contact with all customers along with prompt and attentive service.
Our menu will be unique as well in that we are going to put our twist on classic foods such as the Reuben sandwich and potato salad for examples. Our concept is to create and name the foods for people that are close to our hearts or have impacted our lives in positive ways. An example of this is the German-style potato salad that Christine makes from a recipe she learned from her Grandmother. We have tweaked the original recipe but, at the heart of it, it will always be Nanny’s Potato Salad and like this will be named that accordingly.
Another concept we intend to propose is a key-holder status to our first customers and VIP’s that we know. We are going to locate 100 antique door keys and hand them out to our key-holders. Every time they come in to eat, they will receive a special reward whether it be a percentage off their check, a free appetizer or dessert or maybe a bottle of wine. It will hopefully keep them guessing and coming back to see what we have in store for them that night. We also know that people will share their keys with others and we are happy for that. Not only will we have repeat customers based on our key-holder system but also new customers who want to experience Lomati’S.
Last but not least is our unique name. We have several dear friends and family members who are photographers, and we plan to use some of their photographs in our décor. The name Lomati’S is a combination of the photographer’s names: Lorraine, Mary Sue, and Tina. We have incorporated the first two letters of each of their names and the S from Street to make Lomati’S: Lo (Lorraine) Ma (Mary Sue) Ti (Tina)’ S (Street). The photographs will be a nice addition to the ambiance and will feature the name of and contact information of each photographer so that people will know their works and styles. The photographs will also be for sale to anyone that would like to purchase them, and ones that are sold will be replaced by that photographer’s work.
The business model that works for Lomati’S is the Bistro Restaurant model. The essential pieces of bistro or restaurant model are the unique value that the business will bring to the area, the menu selection, and a thorough appraisal of competing restaurants. While the dictionary defines a bistro as merely a small restaurant, the name has become synonymous with warm and quaint atmosphere, strong support of the local community and distributors and delicious, yet, out of the box menu selections. The goals of Lomati’S tie perfectly with Smith’s definition of a bistro, we wish to partner with local farmers and suppliers and our local town is very supportive of new and quaint businesses with menus inspired from seasonal items. The directions in the article also helped lay a more solid foundation for the research we need to invest our time to more completely tie up the “business end” or our Lomati’S dream.
Primary Target Market
The primary target market for a bistro type restaurant would be people between the ages of 28 to 60 years old and either single or married without children or having older children would be our ideal target market. The reasons for this target market are:
Secondary Target Market
- Teenagers and people in their lower twenties are less likely to enjoy the upscale, relaxed atmosphere of the bistro environment.
- Single people or married people with no children or older children are more likely to eat out more often and not be in such a hurry to get home to maintain children’s schedules.
- The ideal age range does not segment by gender, people of either gender like to go out and enjoy a relaxing, upscale, and grown-up dining experience without the need for televisions and other distractions like sports bars offer.
The secondary target market for a bistro type restaurant would be people with an average to high income with education experience including some college. This portion of the age group mentioned above is ideal because:
Below are a couple of charts detailing the most common demographics in Ashland, Virginia. These demographics do not include surrounding areas. (Ashland, 2016)
- While the menu prices planned for Lomati’S is not overly expensive, the rates are higher than the average fast food or typical restaurant chain prices so an average to high income would allow a higher level of discretionary funds accommodate the slightly higher menu prices.
- The higher the education level usually indicates a higher than average income level so this demographic would allow for more financial flexibility.
- A higher education level generally leads to occupations that pay higher salaries than minimum wage type employment. Higher wages offer more opportunities to go out and spend money.
START UP FUNDS
Government grants have been set up to aid veterans to start their small business. The main appeal of a government grant is that the money does not need to be paid back and it is not necessary to give up any equity in the business to obtain a grant. The most significant drawback to the government grants is the slow reward time and the extent of information required to receive the grant (Nicastro, 2018). Since Lomati’S has five to seven years before opening there is plenty of time to navigate the government red tape required for grants making this the most favorable option.
Small Business Loan from Community Banks
Obtaining a loan from a bank for a small business can be a difficult task due to the high failure rate of new businesses. A few options make it easier to obtain the loan; they include; initial capital invested by the owner, a few years in business showing a profit and a solid business plan. This method is the second most preferred method to obtain the funds to open Lomati’S because of the low-interest rates and not having to give up equity in the company (Pofeldt, 2015). See Figure 2 on page 7 for more information.
Investors are people or organizations that offer financial assistance to business owners for a share of the equity in the business or a percentage of future profits. The best feature of investors is that they usually share their experience, contacts, and wisdom along with the capital they are investing. The investor receives a portion of the company or the profits for their money. While they are invested in the success of the company it can be hard to adjust to having input on decisions made for the business. Some investors are silent partners, meaning they allow the owner to continue daily operations autonomously, while other require equal say in business affairs (Pefeldt, 2015). This is the last option Lomati’S will explore for startup and capital funding since giving up equity is not very desirable.
Sell to employees
The ideal exit strategy for Lomati’S would be to sell to the employees. The model includes empowering employees and treating them with more dignity and respect usually shown to the workers in that industry. Lomati’S employees will be empowered to help customers and resolve issues, to offer little extras that make customers happy and increase gratuities and they will be paid at higher pay than usual. In many circumstances employees can be motived to take over ownership and continue the established business model. An Employee Stock Ownership Plan (ESOP) can lay the groundwork for getting employees invested in the success and future of the business. Finally, selling to employees will allow the current owners to have more say in the direction of the business after the sale is final. For this strategy to be viable, there must be a solid foundation of leadership even when the owner is not involved. (Smith, 2012).
Sell to a third party
The other appealing exit strategy for Lomati’S would be to sell to a third party seller. This strategy may take more time than selling to employees, but it can leave the owner with a substantial amount of capital at the end of the deal. This strategy is like, and normal sale of real estate, with the right buyer and the proper timing, can be a very successful option for all involved parties. The biggest drawback to this method would be that once the business is sold the new owners have absolute control over the business. They are free to change anything and everything to suit their tastes, ideas, and concepts. If this strategy becomes the exit strategy, it is beneficial to use a commercial broker to manage the deal; this will ensure that the owner’s interests are protected while providing a buffer to manage the emotions of relinquishing control of the business that the owner started from a dream.
How It Works (Example):
Using the working capital formula and the information above from Figure 1, we can calculate that XYZ Company’s working capital is:
$160,000 – $65,000 = $95,000
[InvestingAnswers Feature: Financial Statement Analysis For Beginners]
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