Chapter 3: Developing a Business Plan
Chapter 3: Developing a Business Plan
When you first considered starting a career as a personal chef, you might not have thought about the task of sitting down and detailing the background, vision, goals, and resources of your venture in a formalized document. However, you should formally detail all these elements in a business plan long before your first meal is ever served to a client. If you want to get your business off to a strong start and attract the support necessary to make your business a success, then a business plan is a vital first step.
Fortunately, creating a solid business plan is not nearly as difficult as it sounds, and there are plenty of resources available to help you write, organize, and present your business plan. This chapter will help you create your business plan, assist you in locating additional resources to help you refine your plan, and teach you how a good business plan can be valuable for you as a personal chef.
Why Do I Need a Business Plan?
When most people think of business plans, they think of a document that is prepared for presentation to investors or loan officers in an attempt to raise capital for the opening or expansion of a business. While you might use your plan for these purposes at some point in your career as a personal chef, there are several reasons for creating a business plan that have nothing to do with obtaining financing or investment capital. These reasons are just as important to the ultimate success of your business, if not more so, than using a business plan for financial purposes.
Here are some of the most important uses for a business plan:
You have to make sure that your particular type of personal chef business is going to work with the types of customers living in the area you want to work in and convince yourself and others that similar businesses in demographically similar areas have already been successful. If you cannot convince yourself that your business will work, then you need to reevaluate your business strategy before you invest any additional time and money into your venture.
Writing a business plan is not about talking yourself out of starting your own business; it is about forcing yourself to objectively look at the realistic potential your business has for success in your geographic area.
While optimism about your potential business success is usually good for motivating you and keeping you focused, your business plan is not the place to be optimistic. This is your opportunity to directly face the negative factors that could influence your finances and your business.
Your business plan is not immutable; it will change as your business grows and changes, but it will always contain the same basic plan you devised when you started your career as a personal chef. This can be invaluable when you encounter the inevitable frustrations that come with working with the public and managing a business.
The Elements of a Business Plan
If you review a number of existing business plans, you will see that they reflect a wide range of styles; different types of businesses call for different plans, and a business plan for a manufacturing company will look very different than a business plan for a service business, such as yours. Although the section titles and styles may vary from plan to plan, all business plans contain the same basic elements.
Here are the elements that comprise all effective business plans. You can use these elements to craft a solid business plan that will convince your investors and lenders that you have thoroughly researched your business and help you plan your personal chef venture to handle all the challenges and opportunities that will come your way.
Executive Summary
The executive summary portion of your business plan will provide a quick overview of your business and introduce your readers to your venture. This section should be designed to make investors and lenders interested in your business, tell them about the background of your venture, and highlight any significant achievements of your business.
This section should be brief – you should be able to convey all of the information in your executive summary in a half page to one page.
You should begin your executive summary with an overview of your business concept. Be specific but concise when describing your business. Writing “My business will provide meals to customers” is not a sufficient description of your business concept. Your investors will want to know what meals you will be providing, who your customers are, and why you stand to gain an advantage over other businesses providing similar services. “My business will provide healthy, low fat, ready-to-eat meals to working families in the Henderson area of Las Vegas, Nevada. Customers will be provided with complete nutritional information for each meal, which will appeal to families concerned about health and weight loss” is a much more detailed statement of a business concept and will help your readers understand that you are focused and are not trying to be all things to all people.
If you already have clients, you should provide current financial information about your personal chef business, including profits, sales figures, and the return you have received on your financial investments in the business.
You should also include information in your executive summary about your business’ legal formation, the identity of the owner or owners of your business, the date your business was formed, and the identities of key personnel, if any.
If your business is already in operation, you should describe any major achievements of your business in a paragraph or two. If you have not yet commenced operations, you should describe any major achievements in your culinary career, such as promotions, educational milestones, or successful execution of catering services for a large event.
Finally, you will want to state the financial requirements of your business – in essence, the sum of money you are asking for from investors or lenders and the capital you will provide. You should also note any collateral you intend to use to secure loans, if you plan to show your business plan to lenders.
Again, it is very important that your executive summary be as brief as possible. Potential lenders and investors will want to be able to quickly understand the nature of your business, the background of the business, and the capital that will be required to start or expand the business. It is also important because a lengthy executive summary will give you the opportunity to include information that might suggest that your business is not well thought out or that you are undecided about the direction of your business.
Business Description
This section of your business plan will give readers a clear picture of the nature of your business. When you are writing this section, it is important to assume that your business plan readers have absolutely no knowledge of the personal chef business.
The first element of this section should tell your readers about the personal chef industry – what kinds of services personal chefs provide, what the present outlook is for people doing business as personal chefs, and any possible future developments within the industry that might create challenges or opportunities for your business. You should also describe the various markets that use personal chef services, as well as the competition seeking out the same clients as you.
When describing potential markets, general competition, and the present and future outlook for personal chefs, include your information sources in footnotes at the end of your business plan. Investors and lenders will want to see that you have thoroughly researched these topics. Guess work will not help you build a viable business, and it also will not convince lenders and investors to help you finance your business.
Another element of this section is the statement of the type of operation of your business and a brief reiteration of its legal form of ownership. You should also state whether your business is up and running yet.
For a personal chef, the type of operation will almost always be food service; however, if you will be teaching classes or packaging a portion of your products to be sold in local stores, the type of operation might cross over into service or manufacturing. It is permissible to state more than one type of operation, although you will want to carefully explain how the two operation types interconnect so that investors and lenders do not see your business as lacking focus.
Next, you will want to describe your target market, tell how you will distribute your products and administer services, and describe any support systems that will help your business succeed, such as advertising and marketing efforts, promotional offers, and support staff to handle schedule changes and meal requests for special occasions.
A very important element to include in the business description is a specific statement of how your business will gain and retain a competitive advantage. You can list specific competitors and tell how your business will provide service features that your competitors do not offer. Here are a few examples:
These comparisons will demonstrate to readers that you have taken the time to evaluate the competition and to identify ways that you can offer something more to your clients.
Finally, your business description should demonstrate that you have researched the financial aspects of running a personal chef business and identified the strategies you will use to make your business profitable. Lenders and investors will want to see that you know not only how to keep your business running, but how to earn a profit with your business so that you can expand your operations and provide additional services to your clients.
The length of your business description will vary according to the complexity of your personal chef business, the types of products and services you offer to your clients, the number of relevant competitors in your service area, and the number of employees you will need to manage your client base and provide efficient, reliable service to your clients. As with your executive summary, you will want to be concise yet descriptive.
Market Strategies and Analysis
The third section of your business plan will delve into the specific markets you plan to attract with your services and how you plan to reach those markets.
You will want to begin this section by defining your market. “Families in Chicago” is very broad and will not allow you to gather the information necessary to develop a focus for your business. “Two income households in the Clarendon Hills area of Chicagoland” is much more useful for defining the marketing and service strategies of your personal chef venture.
When defining your market, you should include the size of that market (in terms of both geographical area and population), the family and living structure of the market, consumer trends within that market, and the opportunities for sales and profit the market offers.
The more narrowly you can define your target market, the more accurately you can forecast sales. For example, “two income households in the Clarendon Hills area of Chicagoland with children involved in extracurricular activities” is a very useful definition of your target market, because this market segment represents families that most likely have moderately high incomes and little time to spend on the preparation of meals.
The purpose of narrowly defining your market is to give you the information you need to correctly set pricing for your services and products, identify service strategies that will appeal to clients within that market, and develop marketing strategies to effectively reach people who are receptive to your services. Using the Clarendon Hills example above, you could use this definition to identify the number of other personal chefs serving that area, the prices charged by those chefs, the services that these competitors offer to clients, and the methods they use to promote their services. Once you have this information, you can begin identifying and developing your competitive advantages so that you can begin drawing business away from your competitors and tapping into market pockets that other personal chef services have overlooked.
Next, you will need to project the market share you believe your personal chef business will be able to gain within your target market. Although an accurate representation of potential market share can be difficult to determine and is a subjective figure, you can use data such as the size of your total target market, competitor pricing, the effectiveness of your marketing efforts, and the potential of your promotional offers to attract the interest of potential clients within your target market.
To arrive at a reasonable estimate of your total projected market share over the period of time your business plan covers, you will also need to conduct research that involves projecting total industry growth over that time period. Projecting your market share through anticipated industry growth requires the exploration of a number of different growth scenarios and determining how your business will respond to each of these scenarios.
Another method of anticipating your market share involves projecting the conversion rates of members of your target market that express interest in your services. To arrive at projected conversion rates, you should use historical industry conversion rates for personal chef services in your specific geographic area over a five-year cycle.
After you state your projected market share and the rationale used to arrive at that projection, you will need to tell your readers how you plan to develop your pricing for your products and services. A sophisticated plan for developing pricing is important because the prices you charge for your products and services will have a significant impact on the success of your business.
Many business owners believe that, in order to draw market share away from competition, they must consistently underprice their products and services. Although competitive pricing can be a useful element of your overall business promotion strategy, it is not essential that you always offer the cheapest services in the area. In fact, this can be detrimental to your business for two reasons:
• First, underpricing can erode the ability of your business to generate profits. Unless you can reduce the costs of materials, ingredients, advertising, transportation, and service, underpricing will leave your business with less money for payroll, equipment maintenance, and future growth. Without sufficient profit to sustain your business model, you can easily put yourself out of business by consistently undercutting your competition.
• Second, underpricing can give potential clients the impression that your products and services are inferior to those of other personal chefs serving the same area. Your meals might be just as good as, or even better than, the meals offered by your competition, but if you set your prices too low, you can create the impression that you give your clients less than they demand.
Arriving at a pricing structure for your products and services can be a complicated exercise. You want to offer clients excellent value for their money without appearing as though you are undercharging them. A thorough analysis of your costs and of the current pricing in the market as compared to the quality of the services offered by your competition will give you the basis for arriving at an optimal pricing structure.
After your complete the portion of your market strategies and analysis that outlines your chosen pricing structure, you should include a short subsection that identifies your product distribution channels. If your personal chef business operates on the simple business model of taking ingredients to a client’s home, preparing the meals in the client’s kitchen, and packaging the meals for refrigeration, the distribution analysis will be relatively brief and straightforward. If you use a more complicated business model that involves the cooperation of several junior chefs to assist with preparation and delivery, you might need to devote more space within your business plan to describing the distribution process.
The next element of the marketing analysis and strategies section should include an outline of your promotion plan for your personal chef business. Here, you will tell your readers how you plan to make members of your target market aware of your services and how you will convince them to hire you as a personal chef. You may identify the methods of advertising you will use, the introductory promotions you will offer, and the strategies you will employ to gain referrals from existing clients.
The final element of this section is an analysis of potential revenue from sales. In order to arrive at a projected revenue from your personal chef business, you will need to multiply the total projected market share you identified earlier in your market analysis and strategies section by the total dollar sales for each client over the period of time that the business plan covers. You can determine your total dollar sales per client by reviewing your pricing structure and estimating the number of meals or services that each client will purchase over the time period contemplated in the business plan.
Competitive Analysis
The competitive analysis section of your business plan will compare the position and business strategy of your personal chef business with the positions of your competitors. This will give your readers an idea of whether your business will be a viable competitor within your target market.
The first step in building a competitive analysis is to identify the competitors. You can either do this by simply identifying all the other personal chef services in your area that compete for the same clients or by identifying personal chef services in the same geographic area with similar competitive strategies. Although most people only consider businesses that compete for the same dollars, grouping businesses by competitive strategies can help you more accurately identify true competitors (personal chef services operating in your target market that have similar strategies and motivations) and incidental competitors (personal chef services operating in your target market that employ different strategies).
Once you have identified your business’ true competitors, you can begin to analyze their business strategies to identify potential weaknesses that you can capitalize on. For example, suppose that Joe Smith’s Personal Chef Service, like your own business, serves “two-income households in the Clarendon Hills area of Chicagoland with children involved in extracurricular activities.” However, you notice that Joe Smith’s Personal Chef Service only delivers meals to clients’ homes on weekday afternoons.
Joe Smith is probably doing fine with his personal chef service because his clients have come to expect that he will deliver meals on weekday afternoons and will adjust their schedules to make sure someone is at the home to take delivery. You might wonder, however, how many people within your shared target market have not hired Joe Smith as a personal chef because they are unable or unwilling to arrange their schedules to accommodate Joe’s delivery hours.
Joe Smith’s limited delivery hours, coupled with the fact that he only delivers meals to clients’ homes, might be a weakness in his business strategy. You might capitalize on this weakness by offering delivery hours until 7 p.m. or by offering delivery not only to clients’ homes but to their workplaces as well. Both of these strategies serve to make using a personal chef service easier for clients and might attract a portion of your shared target market that Joe has inadvertently excluded in his business strategy.
When conducting a competitive analysis, you will want to make a list of your business’ strengths and weaknesses in key business areas, such as the quality and variety of your products; the competitiveness of your pricing structure; the effectiveness, efficiency, and convenience of your product distribution methods; the ability of your promotional strategies to attract and retain clients, and the marketing strategies you will use to raise awareness of your products and services within your target market.
As in all sections of your business plan, it is crucial that you look at your business and the businesses owned by your competitors with a sense of objectivity and honesty. It will not do you or your lenders any good to trivialize your weaknesses or overstate the strengths of your business. In the long term, an inaccurate analysis of your competitive position can significantly impair your chances of success as a personal chef.
Business Development
The next section of your business plan is the business development section. In this part of your business plan, you will outline how your business will develop its products, its market, and its organization.
When describing development of your products, think about what products you will offer initially and what products you will introduce later in your personal chef career. For example, you might only provide a menu of 20 entrees in the beginning stages of your business but, as you expand your operations, you might plan to offer 50 entrees within a few years. You should describe how you will choose and develop your products and give your readers an idea of what objectives you plan to meet by offering additional products through your business.
Even if you are simply creating new meals to offer to your clients, product development will require financial resources. Your plan should detail how you will cover the costs of development, even if these costs are limited to purchasing additional cookware and ingredients to refine your new recipes at home.
To describe the development of your market, you will detail your promotions, your advertising strategies, and your plans for retaining clients and gaining client referrals. Like the product development subsection, your description of market development might reflect a plan with multiple phases, which you will implement as your business grows and you have more resources available.
If you do not plan to employ other people in your personal chef business, your description of your organizational development will be quite brief. If you plan to use staff members to handle some of the business functions, though, you will want to describe the hierarchy of your business and note how your business will generate sufficient revenue to cover payroll expenses.
The final part of this section addresses risks associated with developing your products, your market, and your organization. Each type of development carries inherent risks – for example, when you develop a new meal to add to your personal chef menu, you incur several distinct risks:
When addressing the risks associated with the development of your business, you should document how you will handle these risks. Your business plan should show your readers how you will minimize each risk and how you will deal with the effects of these risks if they occur.
Operations and Management Plan
The “Operations and Management Plan” section of your business plan will address your organizational and operations structure. Essentially, this section will give your readers a picture of how your business functions on a day-to-day basis.
Your operations and management plan will detail what management and staff positions exist within your business and what tasks each team member is responsible for.
Of course, if you work by yourself and never plan to expand your business to the point where you require support staff and management to continue your operations, this section will be brief. However, if you do anticipate expanding your business, it is very likely that you will need to hire talented professionals to assume various roles within your business. Your business plan will help you streamline the functions of each position so that you can create an efficient business that does not place a disproportionate share of responsibility on any one individual.
If you do not yet know how many staff members you will need to effectively manage your business and carry out its functions, a good way to determine this is to look at the tasks themselves. First, you will need to define the tasks your business will need to carry out to operate efficiently and profitably.
Defining tasks in this section requires a broad focus, rather than a detailed, narrow one. For example, some of the broad tasks that might be requirements of a personal chef business are:
After you have broadly defined the tasks required to operate your personal chef business, you will need to identify the types of personnel you will need to handle each of these tasks and determine the number of each type of professional you will need to meet the goals of your business. Then, conduct research to determine the prevailing wages for each type of professional. You can use a Web site, such as www.salary.com, to help you determine wages for different types of professionals in your area. This will help you determine your overall expenses for payroll.
Once you have determined and stated your payroll expenses in your business plan, you will need to calculate your overhead expenses. This includes expenses for items such as transportation, advertising and promotion, equipment, product packaging, unrecoverable fees for services provided to your clients, liability and property damage insurance, and loan payments.
Your payroll and overhead expense calculations will allow you to determine and state your capital requirements for starting, operating, and expanding your business. Your capital requirements calculation represents the total amount of money necessary to keep your business running. With most businesses, a portion of the capital requirements will come from investments and loans and the remainder from capital provided by the business owner or owners.
The final element of this section is a calculation of the cost of goods – that is, the amount that each sale will cost you, in terms of the sum of materials used (such as ingredients), the payroll expenses for the employees required to operate and manage your business, and the overhead costs that you will incur as a function of operating your personal chef service.
Determining the cost of goods is easier for a personal chef business than for retail or wholesale businesses. This is because many types of retail and wholesale businesses must consider not only the costs of goods that are already sold, but also the costs of goods that remain in inventory. A personal chef business will most likely not have meals that remain in inventory, because you will purchase ingredients and prepare meals based on orders made by your clients.
Financial Components
The final section of your business plan is the financial components section, which contains a series of three statements that your investors and lenders will want to see: the income statement, the cash flow statement, and the balance sheet.
The income statement gives your investors, lenders, and other readers a clear picture of the ability of your business to generate cash. It should be stated on a monthly basis for the first year, a quarterly basis for the second year, and a yearly basis for subsequent years.
Your income statement will include the following elements:
The cash flow statement shows how much cash your business will require to meet its financial obligations. It also shows when that cash will be available to you, and where it will come from. Based on the costs incurred and the cash available to meet those costs, your business will either show a profit or a loss at the end of each month. This is important because if your projections show a loss, it is an indication that you have not accounted for everything.
When drafting your cash flow statement, it is important that you prepare your statement on a monthly basis for the first year of operations, then on a quarterly basis for the second year. This is because you will incur the majority of your expenses for equipment and other nonrecurring expenses during the first two years, and much of your revenue during this period will go toward purchasing additional supplies to build your business and make sure that you are able to meet increasing customer demand for your services.
Here are the items you will need to include in your cash flow statement:
Your balance sheet will use information derived from the financial section to develop an overall picture of your business’ finances on an annual basis. The balance sheet will contain summarized information broken down into assets, liabilities, and equity.
Your assets will include cash available from the previous period, accounts receivable, inventory, and total current assets (the sum of cash, accounts receivable, supplies, and inventory). It will also include long-term assets, such as investments, equipment, and real estate. Any calculations for equipment and owned real estate will factor in depreciation of the property.
Liabilities include accounts payable, accrued liabilities such as overhead and payroll, and taxes. It also includes long-term liabilities such as mortgage and loan payments.
Equity is simply the difference between assets and liabilities. The equity that you own in your business is one of the key determining factors that investors and lenders use to calculate the amount of capital they are willing to contribute to your business.
Now that you have learned the elements of a business plan and how they are used to build a blueprint for your business and attract capital from investors and lenders, it might be helpful for you to see a sample business plan tailored to a personal chef business so you can see how these elements look in a practical application.
The following pages contain a sample business plan that incorporates all the elements outlined in this chapter.
Business Plan: Dinner in a Flash, LLC
I. Executive Summary
Introduction
Dinner in a Flash is a mobile personal chef service serving busy families in Westerville, Ohio, an upscale suburb of Columbus that is primarily populated by two-income households. Dinner in a Flash intends to capture the interest of Westerville families by providing ready-to-eat meals that are healthy, made with premium ingredients, and derived from a variety of regional cuisines. The company expects to quickly build a strong business presence in the Westerville area, due to the industry experience of the company owners and the limited competition operating in this area.
Dinner in a Flash intends to offer high quality meals at competitive prices to meet the needs of middle- to high-income families living and working in the Westerville area.
The Company
Dinner in a Flash is a limited liability company licensed in the state of Ohio. It is equally owned and managed by the company’s two partners, Joe and Jan Smith.
Mr. Joe Smith has over ten years experience in the food service industry, having worked as the head chef of Estrella Restaurante, an upscale Mexican restaurant in Columbus, Ohio, and La Italia, an exclusive Italian restaurant in Philadelphia. Mrs. Jan Smith has also worked in the food service industry for over a decade, having held the position of Marketing Director for Le Boehme, a full service restaurant and catering business in Columbus’ German Village area.
The company intends to hire a sous chef, a full-time delivery driver, and a promotions director to attract new clients and provide meal preparation support for the company’s day-to-day operations.
Products and Services
The company plans to initially offer 40 meals that derive influences from cuisines, such as traditional American, Italian, Mexican, South Indian, and Japanese. The company will cater to its clients by devising meal plans tailored to each client’s personal preferences, dietary needs, and religious food restrictions.
Dinner in a Flash will give clients the option of having fully prepared meals delivered to their home or office or having the meals prepared in the clients’ own kitchens.
The company will focus on using fresh, healthy ingredients, limiting use of oils and fats during preparation, and minimizing use of freezing to ensure that clients receive high quality, nutritious, and delicious meals to encourage client retention and referrals.
The Market
The demand for personal chef services has increased exponentially over the past decade, both nationally and in the Columbus, Ohio area. The rise in two-income households with children, coupled with an increased consumer focus on dietary health, stimulates consumer demand for quick, nutritious meals that can easily be heated and served within the constraints of clients’ busy schedules.
Dinner in a Flash intends to establish a large repeat client base and will concentrate its marketing efforts in the Westerville area to attract long-term clients. In addition to Westerville area residents, Dinner in a Flash expects to derive approximately 15 percent of its sales from business travelers staying in Westerville’s many hotels and business suites. High-visibility marketing and attractive promotions are essential to capturing the interest of the company’s target market.
Financial Considerations
Dinner in a Flash intends to raise $75,000 of its own capital and borrow $75,000 in the form of an SBA approved loan. This provides all the financing required to start the business and complete its first year in business.
Dinner in a Flash should break even by the sixth month of its operations as sales and long-term clients steadily increase. The company anticipates sales of $140,000 the first year, $220,000 the second year, and $300,000 the third year of operations. Profits for this period are expected to be $17,000 for the first year, $25,000 for the second year, and $45,000 for the third year.
II. Business Description
Industry Summary
The personal chef industry provides meals that are easy to heat and serve for busy working adults, senior citizens, and other people who lack the time or ability to prepare healthy, delicious meals. Personal chefs deliver already prepared meals to clients’ homes or offices or travel to clients’ homes to prepare the meals.
Presently, the personal chef industry is enjoying a significant increase in demand, fueled by the growing number of two-income households with children to care for and by the increase of senior citizens that choose to live independently.
The primary challenge faced by personal chefs is serving multiple clients during the same working hours. Because clients typically request meals for dinner rather than lunch or breakfast, the necessary peak delivery hours for personal chefs is between 5:30 p.m. and 7:30 p.m. on weekdays.
Little competition exists locally for personal chefs serving the Westerville area. At present, there are only two personal chefs targeting Westerville’s 60,000 residents. Roger Hammerstein’s Personal Chef Service offers preparation of meals in clients’ homes, but does not offer office delivery of meals. Gilbert Sullivan’s Personal Chef Service offers both home and office delivery of meals, but offers only traditional American cuisine with minimal emphasis on low fat ingredients. Dinner in a Flash intends to offer low fat meals, varied cuisines, and both home and office delivery to capture a majority of the market share in this area.
Company Summary
Dinner in a Flash is a personal chef service owned and managed by two partners. It is primarily engaged in the food service business. These partners represent the food preparation and delivery functions and the sales and marketing functions, respectively. The partners will provide funding from their own savings and investments, which will cover start-up expenses and provide a financial cushion for the first year of business operations. A ten-year SBA loan will provide the remainder of the capital for the first year of operations. The owners expect to build a strong presence in the Westerville area, due to the owner’s experience in the food service industry and the low level of competition in the area.
The company’s target market is two-income households in the Westerville area. The company will focus its marketing efforts on middle- to upper-income families, and plans to reach its target market through the distribution of flyers, local online message board banners, a dedicated Web site, and community newspaper advertisements. After the initial startup, Dinner in a Flash expects to receive referral clients by providing discounts to existing clients in exchange for the referrals.
Company Ownership
Dinner in a Flash is licensed as a limited liability company in the state of Ohio and is equally owned by its two partners, Joe and Jan Smith.
Company History
Dinner in a Flash is a startup company, which will be financed by the owners’ own capital and a ten-year SBA loan.
Products
Dinner in a Flash will prepare and deliver ready-to-heat meals from a variety of regional cuisines. The ingredients in 34 of the 40 meals available can be adapted to meet dietary restrictions, such as kosher, vegetarian, and vegan diets.
The meals are delivered for refrigeration at the clients’ homes and offices in disposable foil containers with vented plastic lids to allow for easy microwave preparation.
III. Marketing Strategies and Analysis
Target Market
Dinner in a Flash has established middle- to high-income, two-income households living and working in the Westerville area as its target market.
The geographic area of this target market, Westerville, Ohio, consists of approximately 40 square miles occupying the northeast section of Columbus, a city with a metropolitan area of approximately 1.5 million residents. Of Westerville’s 60,000 residents, approximately 16,000 residents comprise the target market sought by the company.
Historically, the target market has relied heavily on fast food and casual restaurants to provide meals between work and family activities. Members of the target market often have difficulty finding time to plan meals, visit a grocer, or prepare and serve meals. Dinner in a Flash plans to offer a healthy alternative to fast food and casual restaurant meals that are often high in fat and low in nutrients.
Over a three-year period, Dinner in a Flash intends to capture 30 percent of the target market. Although meals provided by the other two personal chef services in the area, Roger Hammerstein’s Personal Chef Service and Gilbert Sullivan’s Personal Chef Service, are sold at prices nearly identical to those that will be sold by Dinner in a Flash, the company intends to capture market share by providing healthy, fresh meals that can be delivered to either the home or office.
The company also intends to capture market share through extensive use of its client referral program, which provides significant discounts to existing clients for referring friends, family, and business associates to the company.
The projected market share over a three-year period is supported by nationwide industry information, which shows that personal chef services in similar demographic areas with less than five competing services are able to capture 20 to 40 percent of the available market share by using marketing techniques similar to those contemplated by Dinner in a Flash.
Product Pricing
The company has established pricing by analyzing the pricing structures of personal chef services operating in the Columbus metropolitan area and personal chef services operating in metropolitan areas of similar size. Entrees will sell for prices between $7.99 and $11.99, and full meals will sell for prices between $9.99 and $14.99. These prices are similar to those charged by Roger Hammerstein’s Personal Chef Service and Gilbert Sullivan’s Personal Chef Service.
Distribution
The company’s business model provides two primary channels of distribution. First, the meals may be prepared in Dinner in a Flash’s production facility in Westerville, Ohio, and transported to clients’ homes and offices for refrigeration. Second, the clients may elect to have the ingredients transported to their homes so that the meals can be prepared in their own kitchens. The first distribution method allows for ease of delivery and minimizes the time the clients need to spend at home to obtain the meals; the second distribution method gives clients the peace of mind of knowing where the food is being prepared, so they can have direct control over the condition of the preparation facility.
For the first six months, all meal deliveries will be handled by Joe Smith. After that period, Dinner in a Flash intends to hire a full-time delivery driver to distribute approximately 75 percent of the meals not being prepared in the clients’ own homes, which will allow the company to take on more clients and significantly expand sales.
Competitive Analysis
There are two personal chef services currently serving the Westerville area: Roger Hammerstein’s Personal Chef Service and Gilbert Sullivan’s Personal Chef Service. Both companies advertise and cater to the same target market as Dinner in a Flash.
Price point will not be a primary consideration for gaining market share. The prices charged by Dinner in a Flash will be comparable to those charged by the other personal chef services in the Westerville area. Instead, Dinner in a Flash intends to focus on benefits not offered by competing services.
The company intends to compete with Roger Hammerstein’s Personal Chef Service by offering a distribution model not offered by that competitor: delivery of ready made meals to both homes and workplaces in the Westerville area. This will gain interest from clients who need personal chef services, but are not comfortable with allowing a personal chef to spend several hours each week in their homes.
The company intends to compete with Gilbert Sullivan’s Personal Chef Service by focusing on providing meals from varied regional cuisines and using fresh, low fat ingredients that will be attractive to clients focused on weight loss and improved dietary health.
The company’s primary challenge in competing with the existing personal chef services in the Westerville area will be initial name recognition. Both services have been doing business in the Westerville area for approximately five years and have built a significant presence in the community. Dinner in a Flash intends to gain market visibility by utilizing targeted, aggressive advertising; implementing promotions to gain referrals; and sponsoring community activities, such as Westerville’s little league baseball team.
IV. Business Development
Strategy and Implementation
Dinner in a Flash will succeed by providing healthy, low fat meals to suit a variety of tastes and preferences and by offering delivery of ready-to-heat meals to both homes and offices in the Westerville area.
Competitive Edge
The company’s competitive edge lies in the low level of competition doing business in the Westerville area and the enhanced services offered to clients.
Sales Strategy
As the chart below indicates, Dinner in a Flash anticipates sales of $140,000 in its first year of operations, $220,000 in its second year, and $300,000 in its third year.
|
Unit Sales |
2008 |
2009 |
2010 |
|
Ready Made Meals |
$94,000 |
$168,000 |
$240,000 |
|
Meals Prepared in Clients’ Homes |
$46,000 |
$52,000 |
$60,000 |
|
Total Unit Sales |
$140,000 |
$220,000 |
$300,000 |
|
Direct Cost of Sales |
2008 |
2009 |
2010 |
|
Ready Made Meals |
$85,000 |
$149,500 |
$204,000 |
|
Meals Prepared in Clients’ Homes |
$38,000 |
$41,000 |
$51,000 |
|
Total Direct Cost of Sales |
$123,000 |
$190,500 |
$255,000 |
Product Development
Initially, Dinner in a Flash will offer approximately 40 meals that clients can choose from. These meals will reflect a number of regional cuisines, and most can be altered to suit a particular client’s dietary needs or personal preferences.
The company plans to develop an additional ten meals during its first year of operations. The selection of these meals will be based on responses on comment cards distributed to existing clients. The owners’ contributed capital, along with capital derived from a ten-year SBA loan, will cover the cost of purchasing additional cookware and developing the new meals.
Organizational Structure
The two owners will equally own Dinner in a Flash. Initially, the two owners will also be the sole employees of the company. After six months of operations, the company intends to hire a full-time delivery driver, a promotions director, and a sous chef to facilitate expansion of the business.
The sous chef and promotions director will be paid a yearly salary, and the delivery driver will be paid a flat fee per delivery. In addition, all employees will be paid a profit-sharing bonus each March, based on profit for the preceding year.
Business Development Risks
The primary risks associated with the planned operations of the company are personal and professional liability and reduction of the final quality of meals delivered to clients’ homes and offices due to freezing or refrigeration time.
Dinner in a Flash will address the risks associated with personal and professional liability to clients by purchasing a business liability policy with a low deductible and a liability limit of $2,000,000. In addition, it will purchase business automobile insurance with liability limits of $100,000 per person and $300,000 per accident to cover incidents occurring during delivery of the meals.
The company plans to address the potential reduction of meal quality through refrigeration and freezing by conducting extensive testing before any marketing efforts begin. The use of fresh ingredients and minimal use of oils will minimize any reduction in quality that might occur due to refrigeration. Also, meal plans will be designed with refrigeration time in mind, so that meals that can withstand freezing or longer refrigeration times will be scheduled at the end of the clients’ weekly purchasing cycle.
V. Operations and Management Plan
Dinner in a Flash intends to remain a small company, requiring few employees to carry out the company’s day-to-day operations.
Initially, Joe Smith will serve as the company’s sole chef and delivery person. Jan Smith will serve as the company’s advertising and promotions director while handling administrative functions, such as client calls and accounting.
Dinner in a Flash anticipates that, after six months of operation, sales will require the company to add additional staff. At that time, the company intends to hire professionals for the following positions:
• Sous chef: This person will be responsible for the preparation of soups and stews included in the meals. This person might also handle some of the other meal preparations as necessary to keep pace with consumer demand.
• Promotions director: This person will be responsible for developing and implementing promotions to attract new clients and to retain existing clientele. This includes implementation of discounts and incentives, as well as sponsoring community events that will help the company gain visibility in the Westerville area.
• Delivery driver: This person will be responsible for delivering meals prepared at the company’s production facility to the homes and offices of clients. Expected delivery hours will be from 11 a.m. to 6:30 p.m. on weekdays and from 8 a.m. to 12 p.m. on Saturdays.
Payroll Expenses
Dinner in a Flash anticipates that the addition of these three positions will increase payroll expenses by $85,000 annually; however, the projected sales increases will support the addition of these employees.
Overhead Expenses
Dinner in a Flash expects to incur the majority of its overhead expenses at startup. The production facility is wholly owned by Joe and Jan Smith, with no mortgage or other loan on the property.
The capital required for purchasing cookware, a delivery van, and other startup equipment will be derived from the owners’ contributed capital and a ten-year SBA loan. The company expects to incur startup overhead expenses of approximately $120,000.
Additional expenses, such as those for packaging, ingredients, and vehicle maintenance, will be realized over the life of the business. Dinner in a Flash uses a unique business model under which products are sold and paid for before they are produced. This puts the company in the unique position of having no significant storage or inventory expenses.
Cost of Goods
Dinner in a Flash has negotiated contracts with several wholesalers to purchase the majority of the ingredients used in meal preparation directly. The company expects the cost of producing each meal to be between $4 and $7, with an overall first year cost of goods of approximately $123,000, which includes approximately $52,000 for ingredients and $71,000 for advertising, promotion, overhead expenses, and employee salaries.
VI. Financial Components
|
Income Statement |
||||||
|
|
Jan 08 |
Feb 08 |
Mar 08 |
Apr 08 |
May 08 |
Jun 08 |
|
Income |
$5,000 |
$5,500 |
$7,000 |
$7,500 |
$7,500 |
$8,000 |
|
Cost of Goods |
$4,500 |
$4,700 |
$5,200 |
$5,500 |
$5,500 |
$5,800 |
|
Gross Profit Margin |
$700 |
$750 |
$800 |
$850 |
$850 |
$900 |
|
Operating Expenses |
$4,500 |
$4,700 |
$5,200 |
$5,500 |
$5,500 |
$5,800 |
|
Total Expenses |
$4,500 |
$4,700 |
$5,200 |
$5,500 |
$5,500 |
$5,800 |
|
Net Profit |
$700 |
$750 |
$800 |
$850 |
$850 |
$900 |
|
Depreciation |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
|
Net Profit Before Interest |
$600 |
$650 |
$700 |
$750 |
$750 |
$800 |
|
Interest |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
|
Net Profit Before Taxes |
$500 |
$550 |
$600 |
$650 |
$650 |
$700 |
|
Income Statement |
||||||
|
Taxes |
$200 |
$200 |
$200 |
$200 |
$200 |
$200 |
|
Profit after Taxes |
$300 |
$350 |
$400 |
$450 |
$450 |
$500 |
|
Cash Flow Statement |
||||||
|
Jan 08 |
Feb 08 |
Mar 08 |
Apr 08 |
May 08 |
Jun 08 |
|
|
Cash Sales |
$5,000 |
$5,500 |
$7,000 |
$7,500 |
$7,500 |
$8,000 |
|
Receivables |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
Other Income |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
Total Income |
$5,000 |
$5,500 |
$7,000 |
$7,500 |
$7,500 |
$8,000 |
|
Materials |
$2,000 |
$2,200 |
$4,500 |
$4,700 |
$4,700 |
$5,000 |
|
Production |
$200 |
$220 |
$450 |
$4,700 |
$470 |
$500 |
|
Overhead |
$2,000 |
$2,200 |
$2,200 |
$2,200 |
$2,200 |
$2,200 |
|
Marketing |
$500 |
$500 |
$500 |
$500 |
$500 |
$500 |
|
Research and Development |
$0 |
$0 |
$0 |
$100 |
$100 |
$100 |
|
Administration |
$300 |
$300 |
$300 |
$300 |
$300 |
$300 |
|
Taxes |
$200 |
$200 |
$200 |
$200 |
$200 |
$200 |
|
Capital Requirements |
$6,000 |
$6,500 |
$6,700 |
$7,000 |
$7,500 |
$8,000 |
|
Loan Payments |
$400 |
$400 |
$400 |
$400 |
$400 |
$400 |
|
Total Expenses |
$4,500 |
$4,700 |
$5,200 |
$5,500 |
$5,500 |
$5,800 |
|
Cash Flow |
$300 |
$350 |
$400 |
$450 |
$450 |
$500 |
|
Cumulative Cash Flow |
$300 |
$650 |
$1,050 |
$1,500 |
$1,950 |
$2,450 |
|
Balance Sheet |
|
Assets: $140,000 Liabilities: $123,000 Equity: $17,000 |