Creating a business plan is essential for any business, but it can be especially helpful for catering businesses that want to improve their strategy and/or raise funding. This begs a question: what elements appropriately belong in your catering business plan.
A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.
This article provides an overview of the key elements that every catering business owner should include in his or her business plan.
What is a Catering Business Plan?
A catering business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.
Why Write a Catering Business Plan?
A catering business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.
Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.
Writing an Effective Catering Business Plan
The following are the key components of a successful catering business plan:
The executive summary of a catering business plan is a one to two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan. Follow these tips:
- Start with a one-line description of your catering company
- Provide a short summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast among others.
- Form a line-up of evaluators to whom you will give your catering business plan and have them be heartless in their criticism.
This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.
If you are just starting your catering business, you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your catering firm, mention this.
You will also include information about your chosen catering business model and how, if applicable, it is different from other companies in your industry.
The industry or market analysis is an important component of a catering business plan. Conduct thorough market research to determine industry trends and document the size of your market.
Questions to answer in the catering business plan include:
- What part of the catering industry are you targeting?
- How big is the market?
- What trends are happening in the industry right now (and if applicable, how do these trends support the success of your company)?
You should also include sources for the information you provide, such as published research reports and expert opinions.
This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.
For example, a catering business’ customers may include:
- Wedding receptions
- Corporate luncheons and events
- Private parties
- Cocktail parties
This information will help you determine your marketing strategy later on. It is important to remember that your target market may not always be the same as your actual customer base. In other words, you may have to market to a different audience in your catering business plan than the one you eventually want to sell your services to.
You can include information about how your customers make the decision to buy from you as well as what keeps them buying from you.
Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or catering services with the right marketing.
The competitive analysis helps you determine how your product or service will be different from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.
For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation and/or advantage; that is, in what ways are you different from and ideally better than your competitors.
This part of the business plan is where you determine and document your marketing strategy. Your plan should be clearly laid out, including the following 4 Ps.
- Product/Service: Detail your product/service offerings here. Document their features and benefits.
- Price: Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
- Place: Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
- Promotion: How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, launch a direct mail campaign. Or you may promote your catering business via word-of-mouth.
This part of your catering business plan should include the following information:
- How will you deliver your product/service to customers? For example, will you do it in person or over the phone only?
- What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?
The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.
Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next three-to-five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for a catering business include reaching $X in sales. Other examples include:
Hiring a certain number of new employees
Opening a second location
Rolling out a new product or service line
List your team members here including their names and titles, as well as their expertise and experience relevant to your specific catering industry. Include brief biography sketches for each team member.
Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.
Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix).
This includes the following three financial statements:
Your income statement should include:
- Revenue: how much revenue you generate.
- Cost of Goods Sold: These are your direct costs associated with generating revenue. This includes labor costs, as well as the cost of any equipment and supplies used to deliver the product/service offering.
- Net Income (or loss): Once expenses and revenue are totaled and deducted from each other, this is the net income or loss
Sample Income Statement for a Startup Catering Business
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Revenues||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Total Revenue||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|Total Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|GROSS PROFIT||$ 268,880||$ 360,750||$ 484,000||$ 649,390||$ 871,280|
|Salaries||$ 96,000||$ 99,840||$ 105,371||$ 110,639||$ 116,171|
|Marketing Expenses||$ 61,200||$ 64,400||$ 67,600||$ 71,000||$ 74,600|
|Rent/Utility Expenses||$ 36,400||$ 37,500||$ 38,700||$ 39,800||$ 41,000|
|Other Expenses||$ 9,200||$ 9,200||$ 9,200||$ 9,400||$ 9,500|
|Total Other Expenses||$ 202,800||$ 210,940||$ 220,871||$ 230,839||$ 241,271|
|EBITDA||$ 66,080||$ 149,810||$ 263,129||$ 418,551||$ 630,009|
|Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|EBIT||$ 60,880||$ 144,610||$ 257,929||$ 413,351||$ 625,809|
|Interest Expense||$ 7,600||$ 7,600||$ 7,600||$ 7,600||$ 7,600|
|PRETAX INCOME||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Taxable Income||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Income Tax Expense||$ 18,700||$ 47,900||$ 87,600||$ 142,000||$ 216,400|
|NET INCOME||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Net Profit Margin (%)||10%||20%||27%||32%||37%|
Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:
- Assets: All of the things you own (including cash).
- Liabilities: This is what you owe against your company’s assets, such as accounts payable or loans.
- Equity: The worth of your business after all liabilities and assets are totaled and deducted from each other.
Sample Balance Sheet for a Startup Catering Business
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Cash||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
|Other Current Assets||$ 41,600||$ 55,800||$ 74,800||$ 90,200||$ 121,000|
|Total Current Assets||$ 146,942||$ 244,052||$ 415,681||$ 687,631||$ 990,278|
|Fixed Assets||$ 25,000||$ 25,000||$ 25,000||$ 25,000||$ 25,000|
|Accum Depreciation||$ 5,200||$ 10,400||$ 15,600||$ 20,800||$ 25,000|
|Net fixed assets||$ 19,800||$ 14,600||$ 9,400||$ 4,200||$ 0|
|TOTAL ASSETS||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
|LIABILITIES & EQUITY|
|Current Liabilities||$ 23,300||$ 26,100||$ 29,800||$ 32,800||$ 38,300|
|Debt outstanding||$ 108,862||$ 108,862||$ 108,862||$ 108,862||$ 0|
|Total Liabilities||$ 132,162||$ 134,962||$ 138,662||$ 141,662||$ 38,300|
|Share Capital||$ 0||$ 0||$ 0||$ 0||$ 0|
|Retained earnings||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|Total Equity||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|TOTAL LIABILITIES & EQUITY||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
Cash Flow Statement
Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:
- Cash Flow From Operations
- Cash Flow From Investments
- Cash Flow From Financing
Below is a sample of a projected cash flow statement for a startup catering business.
Sample Cash Flow Statement for a Startup Catering Business
|Year 1||Year 2||Year 3||Year 4||Year 5|
|CASH FLOW FROM OPERATIONS|
|Net Income (Loss)||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Change in Working Capital||$ (18,300)||$ (11,400)||$ (15,300)||$ (12,400)||$ (25,300)|
|Plus Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|Net Cash Flow from Operations||$ 21,480||$ 82,910||$ 152,629||$ 256,551||$ 380,709|
|CASH FLOW FROM INVESTMENTS|
|Fixed Assets||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|Net Cash Flow from Investments||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|CASH FLOW FROM FINANCING|
|Cash from Equity||$ 0||$ 0||$ 0||$ 0||$ 0|
|Cash from Debt financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow from Financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow||$ 105,342||$ 82,910||$ 152,629||$ 256,551||$ 271,847|
|Cash at Beginning of Period||$ 0||$ 105,342||$ 188,252||$ 340,881||$ 597,431|
|Cash at End of Period||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
You will also want to include an appendix section which will include:
- Your complete financial projections
- A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
- Any other documentation which supports what you included in the body of your business plan.
Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your catering company. It not only outlines your business vision but also provides a step-by-step process of how you are going to accomplish it.
A well-written business plan is critical for any catering business looking to start or grow. In addition, be sure to include a detailed financial plan and supporting documentation in your appendix. This will give investors and lenders the confidence they need to believe in your company’s long-term success.
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