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Many people believe that a business plan is helpful but not necessary. This is true in the sense that business plans are helpful but, in fact, they are vital if you are serious about success in both short and long term. The aim of this paper is to evaluate and critically assess the “Room for dessert” business plan.
The remainder of the paper is organized as follows: Section 2 will try to analyze who is the audience for the plan, what are their needs, and how well does the business plan meet those needs.
Section 3 will discuss about the strengths and the weaknesses of the business idea, while the final section will present a personal opinion on the critical issues that might require further investigation before investing in this venture and the way the information might be acquired.
Who, What, How well? Many would think that business plans it’s all about formulating the concept and clarifying the details of the proposed business but, first of all, it’s about raising the money to start-up and implement the idea in the real world.
When we talk about raising the funds, we implicitly talk about the investors who are looking for the best investment opportunity out of thousands of business plans sitting on their desk, making the business plan the core and probably the most decisive document of the business.
It is the case of RFD as well; their business plan audience is the investors. As Sahlam (1997) recommends, in order to speak the language of the investors it is essential to assess the four interdependent factors critical to every new venture: the people, the opportunity, the context and the risk and reward.
When discussing about the people behind the business, the investor values the managers who posses insight and experience and he is interested to see how familiar the team members are with the industry and its dynamics. In our case, RFD’s board of directors is represented by accomplished industry experts. Along with their summaries the short presentation of the management makes the assessment of the people clear and easy.
Focusing not on the individuals, but on the team, it is noticeable that the team members complete each others, having various educational backgrounds and work experience in different fields covering all the departments of the business. The team members have good insight of the industry, even more suggesting as future potential members of the board professionals from the relevant industry to the business. It deserves full marks.
In terms of opportunity, Sahlam suggests that the investor should look in the business plan at the size of the market, the possibility of rapid growth and the number of competitors for that specific business. After the industry examination, RDF business plan describes the way they will build and launch the product and it’s economically viability, checking at the same time the costs, prices and period of time for payment and collecting. Moreover, the data is realistic, presenting the promises for expansion, the drawbacks (variables) and the actions available in case of bias.
RDF business plan covers very well the opportunity issue, defining the target customers with high precision (age ranges 25-35 and 35-54, with median household income of $52,100 and their preferences), providing in a clear manner the concept of their product, the operations and facilities and their marketing strategy. Furthermore, a comparison with the competitors is provided along with a description of the potential entrants. Both market and financial analysis are included and presented in both descriptive and graphical ways. It deserves full marks.
According to Sahlam, The context presented in the business plan must include the macroeconomic environment, the government regulations and other factors that define the limits of what a business or its competitors can accomplish. The business plan for RDF presents the context for their business proposal. It describes in detail the food trends, the psychology of the customers due to the work environment, the needs of the customers and their new preferences. The business plan seizes opportunities available in this context defining their target customers.
It deserves 5 marks. In terms of risk and reward, the RFD plan presents clearly certain negative events can cause a fall in their performance. They state in a realistic manner that the assumptions may be biased or not precisely estimated. A scenario analysis is provided as well, stating that actions will be undertaken by the company in case the first unit performs under the expectations. The management team along with the board of directors assume the responsibility to respond to the risk presented in the plan.
The plan contains graphs and visual aid along with financial predictions for the return of the business making the analysis of risk and return easier. Moreover, the plan includes the exit strategy and the predictions of the company evaluation. As the risks have no solutions provided, it deserves 4 marks. Strengths and Weaknesses One of the strengths of RFD business plan is that there is desirability for the product/service, serving a need in a market place.
The idea of a quality fine dining restaurant serving desserts and beverages, delivered with unpretentious elegance, as a social alternative to consumers at reasonable prices represents a good idea that fills a gap in the market. On the other hand, the demand for the product wasn’t tested, no survey or trials being delivered, leading to 4 marks A second strength of the plan is that it states clearly the target market, defining the product and its consumers. They define both their customer segments, providing a detailed description of them.
Unfortunately, the industry is not a new one, being based on food and beverages. Even the product is a social alternative for consumers, it is not revolutionary. It deserves 4 marks. A third strength of the business plan is the management prowess, RFD providing a good description of the management team and their skills. They offer their resumes and their management plan in a clear way. At the same time they provide a good description of the resources they need to use and the way of acquire them, obtaining full marks.
In terms of financial feasibility, the business plan presents all the figures necessary, stating the total start-up cash needed and a description of its use. Moreover it presents its financial performances in comparison with other businesses similar in the industry. The fact that the salaries and the rewards for the board of management are not mentioned might be a drawback and at the same time the shares of the companies are not stated clear among the equity. For this the mark is only 4. What does it miss?
In my personal opinion, as an investor I would like to know what are the suppliers that they would like to negotiate with and if these suppliers have a good reputation or not. Moreover, it would be easier and faster to have a list of the firms that the business is willing to collaborate with. Finally, I consider that the plan presents the risks that the business might be exposed to, but it doesn’t provide any solutions for them, even if the management already knows them. I would like to know that the management is thinking ahead for the solutions and not that they will respond promptly to the risks that may occur.