The Business Plan of a Pizzeria: Evaluating Costs

 You should know that every new business is born from an idea, from an intuition: the discovery of a new technology, the expansion of the demand for a product / service, changing tastes and buying habits of consumers, the success of other companies, the identification of a need and a shortage of the market.

After the intuition, an organized process of idea verification must start. This process of analysis leads to the drafting of a feasibility plan or business plan to verify if the business idea has a market and if the product / service can be purchased by the consumer and at what price.

From this business project must emerge: – the technical characteristics that the product/service must have – the technologies and equipment necessary for its realization – the type of market that you intend to serve – the image that you want to give the company – the promotional policies that you intend to activate – the pricing policies – the capital needed to start and manage the company – the partners / employees to involve – the most appropriate legal form – the bureaucratic requirements to be fulfilled.

At the end of this process of analysis and research, you must be able to start with a reasonable degree of certainty about the potential ‘of the idea and the feasibility of the project.

But why is it necessary to have a business plan?

Because the new company needs a track that indicates the main road to follow on which to direct their activities. And the business plan is precisely the document in which the main actions that will be undertaken in the first years of the company’s life are identified.

But what are the objectives of a business plan?

  1. to provide fundamental information for the start-up of the activity, (what and how many economic, financial and human resources are needed, the characteristics of the product and the market, etc. …)
  2.  to allow the entrepreneur an overview of the factors that characterize the company, providing a basis on which to plan strategies and actions;
  3.  illustrate the entrepreneurial formula (product system, market, organisational structure) and not only the description of the product/service;
  4. underline the originality of the entrepreneurial idea;
  5. verify the interest of potential customers;
  6. be a useful indicator of what objectives are intended to be achieved and how to achieve them;
  7. verify the consistency between the individual actions indicated, and in particular between the description of the activity and the consequent investment and management costs;
  8. define the legal form in relation to the characteristics of the company described;
  9. to allow reliable forecasts by simulating the various hypotheses of development of the company’s activity;
  10. to serve as a “business card” to present the company to the outside world (potential partners, lenders, banks, customers and suppliers).

The mission

– It’s a moment of reflection in which the reasons for entrepreneurship must be explained because starting any business activity involves risks and certainly the emergence of problems of various kinds (from relationships with partners to those with suppliers, defaulting customers and any lenders).

– It is therefore important to pause and think about the context in which the entrepreneurial idea was generated.

1.1 THE MISSION

– Definition of the corporate mission

1.2 THE BUSINESS IDEA

– (a) Birth of the business idea

– (b) Progress of the project

– c) Reasons for entrepreneurship

– (d) Distinctive features and possible elements of innovation

1.3 THE ENTREPRENEURIAL FORMULA

– Highlight in summary terms the entrepreneurial formula on the basis of:

– product/service system offered

– customers

– organisational structure

(resources, organisation of the activity, form of

management, etc.)

1.4 PROMOTERS

– (a) Professional characteristics of the

promoters.

– (b) Previous business experience

Who are the competitors and customers?

It often happens that people in love with their own ideas, do not see or underestimate the context in which you will operate: the market. Frequent error that sometimes can bring about serious problems for the company.

– For this reason, in order to start your own business, it is essential to know the reference market.

– This means doing in-depth analyses of potential direct competitors (those who produce the same good as me or provide the same service) and indirect competitors (those who produce a good or provide a service that can easily replace mine), and potential customers (their needs, their characteristics, their purchasing processes, etc …).

– It is the reference market that dictates the “rules of the game”: knowing them and making them your own is an advantage over the competition.

– A proper market research, an in-depth analysis of the actors that act within it offers a series of information, what prices to apply, what promotional and distribution policies (where, to whom, how to entrust the

The Commission’s proposal for a Directive on the sale and distribution of goods, products or services provided), which well used can make the winning idea.

– To understand the context in which you will operate, its rules of operation and how to fit with your product or service and ‘essential to offer the following information

– (a) Technical description of the product/service (description of the main lines of activity: functions of use (benefits to the customer), technical characteristics, production technologies, raw materials)

– (b) Description of the innovative elements of the product/service in relation to the current market

– (c) Progress in product development (idea, design, prototype, etc.)

2.1 THE PRODUCT/SERVICE

2.2 CUSTOMERS

– (a) Identification of the main types of customers: the customers they purchase (final and intermediate) and the customers they use.

– (b) Description of their characteristics: functions/aims, needs and advantages sought in relation to the type of supply of the business, geographical location, spending capacity or income, socio-economic variables, factors influencing the purchase

– (c) Quantitative estimate of the market value (number of potential customers, value of expenditure)

– (d) Geographical scope of the market to be served

– (e) Medium/long-term outlook on the basis of the data collected

– (f) Tests and market research already carried out

2.3 COMPETITION

– (a) Analysis of active and potential competition; main types of competition

competitors and their offers of products/services that compete with the company’s offer

– (b) Critical competitors, if any

– (c) Barriers to entry

– (d) Replacement products/services, if any

2.4 CONSTRUCTION AND ANALYSIS OF THE PRODUCT/CUSTOMER MATRIX

– (a) Identification of product/service lines and customer segments

– (b) Matrix analysis on the basis of: critical market success factors, demand behaviour, logic

distribution, production synergies, market synergies, main competitors

The objective of the next section is to plan, in detail, how it works and what it serves in terms of internal resources and skills for business development.

To do this you should respond to these points:

3.1 HUMAN RESOURCES

– Briefly indicate the resources needed to carry out the activity and the technical and management skills:

– (a) members and holders (curricula and role in the business project)

– (b) number and characteristics (age, gender, qualifications, duties, etc.) of employees and collaborators

3.2 THE TANGIBLE AND INTANGIBLE “TECHNICAL” RESOURCES

– Technological skills, know-how, patents and licenses, logistics, financial (venture capital and debt), current level of introduction of the technologies described above.

3.3 ORGANISATION OF THE VARIOUS AREAS AND RELATED CRITICALITIES

– (a) Production (description of the production process, make or buy, plants and equipment, the main critical aspects) and/or service delivery (from the identification of the need to the realization of the service – ability to customize the service)

– (b) Purchases (main purchases from outside, main suppliers and related behavioural logic, financial aspects related to purchases, critical issues)

– (c) Sales (direct or through intermediaries, the sales force of the company – internal and/or external – , any commission system, …)

– (d) Accounting, fiscal aspects, economic-managerial control (outsourcing and/or internalisation, tools and control methods)

– (e) Business coordination (any functions involved)

3.4 ROLES AND RESPONSIBILITIES

– create an organization chart

How to promote yourself?

– As you well know, advertising is the soul of commerce!

– For an activity that is born is absolutely essential to make yourself known in the right way.

– Incorrect promotional activities or activities addressed indiscriminately to all is the only way to waste time and money.

– In light of the definition of the type of market in which you intend to operate, it becomes consequently easier to start a proper promotional policy.

– Your goal is to identify the possible tools to let you know and identify the right channels of promotion, the most effective ones to achieve your goal.

So, in this part of your business plan, you’re gonna have to define:

– a) The pricing policy for each product/service

– (b) The promotional policies envisaged

– c) The distribution policies envisaged

– (d) Advertising and communication

– (e) Other and possible forms of promotion

In the fifth, I’ll talk to you about a very important aspect for your business: “investments”.

– I bet you’ve already made a list of all the plants, machinery, raw materials, semi-finished products, furniture, etc… that you need to start your new business!

– But do you know exactly what you really need?

– And do you know how much it costs you?

In fact, in this chapter of the business plan must be indicated the costs that you will have to bear (or have incurred) for investment in machinery, equipment, any renovations, etc. …

– In other words, you need an expense report to plan what and how much material and economic resources you need to start your dream business.

Your job in this chapter is to:

– (a) describe the investments (made and planned) and their depreciation

– b) verify your production capacity against the competition

In this sixth lesson, I’m going to mention the budget.

– How much does it cost you and how much does it make you active?

– How soon is it possible to get back in the invested capital?

– Is the idea economically viable and therefore feasible?

To answer these questions you need a prior analysis of costs / benefits, to understand:

– at what prices to sell the products and / or services to be able to achieve a good level of income,

– since future entrepreneurs can begin to receive compensation for their work,

– which are the items of cash entry and exit, the amounts to be applied for any financing.

The previous part of the business plan has been used to provide all the information concerning the professionalism

necessary for the development of the idea, the market, the people involved, the necessary means and equipment, etc…

But now it is time to calculate and draw up, on the basis of this information, a budget.

The purpose of this part of the business plan is to verify the profitability of the business project, and to understand this it is necessary to provide the following values/data

– (a) Budget for establishment and start-up costs

– (b) Valuation of the labour costs of members who carry out their own activities in the enterprise.

– (c) Budget for fixed costs

– (d) Calculation of variable and total costs per unit of output

– (e) Break-even point

– (f) Sales budget

– g) Estimate of the Income Statement

– (h) an Estimate of income and expenditure. Financial requirements

short, medium and long term and related sources of coverage

You should know that every good business plan that you respect must be accompanied by some useful documents for

to complete the picture.

These documents are:

– (a) Members’ CVs

– (b) Documentary references/extracts

– (c) Market research including an indication of the research method, the questionnaires administered and anything else used for the survey. It should be remembered that, with respect to market research, only the quantitative elements that justify strategic choices should be extrapolated and included in the plan. This method does not make the reading of the business plan any heavier and allows the most demanding reader to find comfort from the illustrative data by consulting the complete research attached.

– d) Offers from suppliers of plant and machinery

– e) Any rental contracts or plans and metric calculation of masonry works

– f) Letters of intent, if any, with customers (if stipulated)

– g) Strategic agreements, networks between companies, individuals, structures.

FINAL CONSIDERATIONS

  • In light of the data gathered, is the idea of “stand by”? It’s the moment when the future entrepreneur has to “sum up” and evaluate his own business idea. The strengths and weaknesses of the company must be identified and the chances of success or failure assessed.
  • Any elements of inconsistency in the entrepreneurial formula must be explained in order to avoid adding unnecessary risks to the business to be set up. It ‘s the only part of the business plan that should not be given to third parties because’ serves the entrepreneur to understand if they have been complied with all the rules of the market and especially worth starting the adventure!

I suggest you a very valuable tool that can help you develop your business, your business idea of pizzeria.

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