A SAMPLE BUSINESS PLAN FOR

SMALL FOOD BUSINESSES

Rodney B. Holcomb
Associate Professor, Dept. of Agricultural Economics
Browning Endowed Professor of Food Science, Food Agricultural Products !enter
P"ilip #en$el
Professor, Dept. of Agricultural Economics
Bill Fit%water Endowed !"air for !ooperati&e Studies
'inda Blan(Byford
)Former* Business Planning and +ar$eting Associate
Food Agricultural Products !enter
,$la"oma State -ni&ersity
.anuary /001
Why Develop a Business Plan?
2n t"e boo$ The Entrepreneurs Manual, Ric"ard +. 3"ite, .r. states t"at
business plans are 4road maps5 for business creation6 47ou identify your origin, select a
destination, and plot t"e s"ortest distance between t"e two points.5
8rue, a business plan is essentially a blueprint for a business. Howe&er, it also
ser&es many ot"er purposes6
A business plan is a detailed blueprint for t"e acti&ities needed to establis" a business
)i.e. t"e details of a product or ser&ice, t"e mar$et for t"at product or ser&ice, and t"e
management of t"e business pro&iding t"at product or ser&ice*.
A business plan is also t"e 9yardstic$: by w"ic" a business owner measures success in
meeting stated goals and ob;ecti&es.
Also, a business plan is a tool for obtaining a loan from a lending agency, or for
attracting &enture capital.
What Does a Business Plan Look Like?
8"ere is no standard format for a business plan, but t"ere are many common
components of a business plan6
E<ecuti&e Summary )pro&iding a general o&er&iew of t"e plan:s main points*
8able of !ontents
)Brief* Bac$ground and History
Business =oals and ,b;ecti&es
Description of Products>Ser&ices
+ar$et Description>Assessment
!ompetition Assessment
+ar$eting Strategies
+anufacturing Plans
Pro Forma Financial Analysis
!ontingency Plans
+any business plans will also include appendi<es wit" additional information
related to t"e business, its operations, its owners>managers, mar$eting>promotional plans,
etc.
,f course, t"e best way to illustrate a business plan is to pro&ide one. 8"e
following plan for a completely fictional business is used for a mont"ly entrepreneur
wor$s"op at ,$la"oma State -ni&ersity:s Food Agricultural Products !enter, entitled
Foo! Business Basi"s# A $ui!e to Sta%tin& 'ou% O(n Foo! Business)* 8"is moc$
business plan focuses on a w"ipped topping business, but t"e format is appropriate for
any small food business.
Business Plan
Fancy:s Foods, ''!.
/?0@ ,a$ Hollow Dri&e
Antlers, ,# A?B/C
)BD0* /@D(//C?
#eit" Bean
+arianne Bean
December E, E@@D
E<ecuti&e Summary
+arianne and #eit" Bean "a&e been in&ol&ed wit" t"e food industry for se&eral
years. 8"ey opened t"eir first restaurant in Antlers, ,$la"oma in E@DE, and t"eir second
in Hugo in E@DD. Alt"oug" praised for t"e Fuality of many of t"e items on t"eir menu,
t"ey "a&e attained a special notoriety for t"eir desserts. After years of reFuests for t"eir
fla&ored w"ipped cream toppings, t"ey "a&e decided to pursue mar$eting t"ese products
separately from t"e restaurants.
+arianne and #eit" Bean "a&e de&eloped se&eral recipes for fla&ored w"ipped
cream topping. 8"ey include c"ocolate, raspberry, cinnamon almond, and strawberry.
8"ese fla&ored dessert toppings "a&e been used in t"e setting of t"eir two restaurants o&er
t"e past ED years, and "a&e been produced in large Fuantities. 8"e estimated s"elf life of
t"e product is /E days at refrigeration temperatures and up to si< mont"s w"en fro%en.
8"e Beans intend to mar$et t"is product in its fro%en state in D and E/(ounce plastic tubs.
8"ey also intend to "a&e t"e products a&ailable in si< ounce pressuri%ed cans. Special
attention "as been gi&en to de&eloping an attracti&e label t"at will stress t"e
gourmet>specialty nature of t"e products.
Distribution of Fancy:s Foods 3"ipped Dream product will begin in t"e local
sout"eastern ,$la"oma area. 8"e Beans "a&e an establis"ed name and reputation in t"is
area, and product introduction s"ould encounter little resistance.
Financial analyses s"ow t"at t"e company will "a&e bot" a positi&e cas" flow and
profit in t"e first year. 8"e e<pected return on eFuity in t"e first year is E0.DDG
+a,le o- .ontents
E<ecuti&e Summary
/
Bac$ground and History
?
Description of Products
?
+ar$et Description
?
!ompetition
B
+ar$eting Strategies
B
+anufacturing Plans
1
Financial Pro;ections
1
2ncome Statement
A
!as" Flow Analysis
EE
Balance S"eet
E/
Financial Ratios
EC
!ontingency Plans
E?
Appendices
EB
'etters of Endorsement
EB
Resumes of +anagement
EB
Product 'abels
EB
Bac$ground and History
+arianne and #eit" Bean "a&e been in&ol&ed wit" t"e food industry for se&eral
years. 8"ey opened t"eir first restaurant in Antlers, ,$la"oma in E@DE, and t"eir second
in Hugo in E@DD. Alt"oug" praised for t"e Fuality of many of t"e items on t"eir menu,
t"ey "a&e attained a special notoriety for t"eir desserts. After years of reFuests for t"eir
fla&ored w"ipped cream toppings, t"ey "a&e decided to pursue mar$eting t"ese products
separately from t"e restaurants.
Description of Products
+arianne and #eit" Bean "a&e de&eloped se&eral recipes for fla&ored w"ipped
cream topping. 8"ey include c"ocolate, raspberry, cinnamon almond, and strawberry.
8"ese fla&ored dessert toppings "a&e been used in t"e setting of t"eir two restaurants o&er
t"e past ED years, and "a&e been produced in large Fuantities. 8"e estimated s"elf life of
t"e product is /E days at refrigeration temperatures and up to si< mont"s w"en fro%en.
8"e Beans intend to mar$et t"is product in its fro%en state in D and E/(ounce
plastic tubs. 8"ey also intend to "a&e t"e products a&ailable in si< ounce pressuri%ed
cans.
+ar$et Description
8"e fla&ored w"ipped toppings t"at Fancy:s Foods will mar$et will fall into two
distinct categories6 Dairy products and gourmet>specialty foods. 8"is business plan will
loo$ at t"ese two mar$ets separately.
Dai%y P%o!u"ts# 3"ile t"e o&erall consumption of dairy products in t"e -nited
States declined from E@A/ to E@@?, t"e mar$et "as seen a slig"t increase in t"e past four
years )!ensus of Agricultural Products, E@@D, -SDA*. Dr. .o"n +oore of t"e -ni&ersity
of Florida e<pects t"e consumption of dairy product in t"e -nited States to continue a
modest increase of E.B(/G per year, w"ic" is significant in t"is H/1D billion annual
mar$et. 8"is is attributed in part to more sop"isticated processing tec"niFues w"ic" "a&e
increased t"e &ariety of dairy products a&ailable, as well as t"e increased awareness of
t"e benefits of a calcium ric" diet )+oore et al, E@@D*.
$ou%/et0Spe"ialty P%o!u"ts# #alorama 2nformation ''!, a mar$et researc"
firm based in Iew 7or$, indicates t"at t"e gourmet>specialty foods mar$et will continue a
fast paced growt" well into t"e ne<t decade. 8"is HC@(billion domestic industry "as
doubled since E@@/, and is e<pected to continue double(digit growt" t"roug" /00/.
3"ile demograp"ic information indicates t"at t"is sector of t"e industry is strongest in
metropolitan areas, t"ere are also growt" opportunities in smaller communities.
Pac$aging and point of purc"ase mar$eting efforts are especially important in t"is
mar$et, and special attention will be gi&en to t"ese aspects of 3"ipped Dream.
!ompetition
8"ere are se&eral brands of w"ipped topping a&ailable in mainstream retail
outlets. 2n t"e grocery stores in t"e Antlers and Hugo area, all of t"e ready(to(eat &arieties
are produced by large players, specifically #raft and Sara 'ee. 8"ere are also dry mi<es
a&ailable, but t"ese are not direct competition for 3"ipped Dream. According to sales
figures at grocery outlets in Antlers and Hugo, appro<imately 1BG of t"e national brand
prepared w"ipped topping is sold in fro%en tub form, w"ile t"e remaining CBG is in
pressuri%ed can form.
8"e strengt"s of t"ese products are t"eir mar$et s"ares and distribution c"annels.
8"ey are a&ailable in &irtually any retail grocery outlet, and "a&e gained strong mar$et
acceptance. 8"ey are also distributed wit" ot"er refrigerated and fro%en dairy products.
Finally, t"ey are priced at HE./@(E.D@ per D(ounce tub or 1(ounce pressuri%ed can, an
ad&antage w"en compared to t"e suggested retail price of 3"ipped Dream.
8"e wea$ness of t"ese products is in t"e lac$ of &ariety. Ione of t"ese companies
produce or mar$et a fla&ored topping. Se&eral of t"e products are also classified as
9w"ipped topping:, but are actually not dairy based.
+ar$eting Strategies
Distribution of Fancy:s Foods 3"ipped Dream product will begin in t"e local
sout"eastern ,$la"oma area. 8"e Beans "a&e an establis"ed name and reputation in t"is
area, and product introduction s"ould encounter little resistance. 8"e managers of
Pruett:s 2=A and =ardiner:s =rocery in Antlers, as well as Pruett:s in Hugo, "a&e
indicated t"at t"ey are willing to carry t"e products. 8"eir letters of intent and
endorsement are included in t"e Appendi< section. 2t is also important to note t"at
=ardiner:s =rocery puts an emp"asis on specialty food products in addition to standard
grocery items.
After 3"ipped Dream:s debut in Antlers, Hugo, and surrounding towns, Fancy:s
Foods intends to participate in t"e 4+ade in ,$la"oma5 Demonstration Program
administered by t"e ,$la"oma Department of Agriculture and Pratt:s Foods in ,$la"oma
!ity. 8"is program will enable t"e Beans to introduce 3"ipped Dream into t"e
,$la"oma !ity metropolitan area under more fa&orable mar$et conditions. Fancy:s
Foods also intends to enter t"e grocery and specialty mar$ets in t"e 8ulsa area in /000.
8"e Beans will rely "ea&ily on in(store displays and demonstrations in sout"eastern
,$la"oma stores, as well as t"ose in 8ulsa and ,$la"oma !ity. 8"ey will demonstrate
t"e fla&ored topping in con;unction wit" fres" fruit during warmer mont"s, and as a
topping on gourmet coffee and "ot c"ocolate in t"e cooler mont"s.
Special attention "as been gi&en to de&eloping an attracti&e label t"at will stress
t"e gourmet>specialty nature of t"e products. A copy of t"e label is attac"ed in t"e
appendices. 'inda Byford, a business planning and mar$eting specialist at t"e ,$la"oma
Food and Agricultural Products Researc" and 8ec"nology !enter at ,$la"oma State
-ni&ersity assisted wit" de&eloping t"e label, and conducted a focus group study to
e&aluate t"e image pro;ected by t"e label as well as t"e pac$aging.
+anufacturing Plans
Because Fancy:s Foods owns and operates two restaurants, t"ey "a&e facilities
a&ailable to t"em for a certain amount of t"e production. Robert Battles, t"e Pus"mata"a
!ounty inspector for t"e ,$la"oma Healt" Department, indicates t"at 8"e Beans can use
t"ese facilities to manufacture food a&ailable for retail sale pro&ided t"at t"e production
occurs w"ile t"e restaurant is not open to t"e public.
Fancy:s Foods "as a B0(gallon "ig" speed mi<er, a pressuri%ed tan$ in w"ic" t"e
product can be gassed wit" nitrous o<ide, and a E0(foot by E0(foot wal$(in free%er,
enabling t"em to bot" produce and store fro%en tubs of 3"ipped Dream. 8"is process is
already establis"ed on a commercial scale. 8"ey are in fact already ma$ing 3"ipped
Dream for use in t"eir restaurant, and storing it in t"e free%er.
#eit" and +arianne feel t"at t"e specialty nature of t"e product will lend itself
well to t"e pressuri%ed can, and t"is was confirmed by t"e focus group conducted at
,$la"oma State -ni&ersity. 8o pursue t"at opportunity, Fancy:s Foods "as contracted
production of t"e pressuri%ed 1(ounce cans wit" Farm Fres", an ,$la"oma dairy
processing firm. A non(competition>non(disclosure agreement is in place, and a copy of
t"is document is included in t"e appendices.
Financial Pro;ections
8"e following pages include multi year pro;ections for income, cas" flow, balance
statement, as well as estimated financial ratios. 8"ese pro;ections are for t"e 3"ipped
Dream di&ision of Fancy:s Foods ''! only. Historical financial information on Fancy:s
Foods restaurants is a&ailable upon reFuest.
Fancy's Foods LLC
Pro Forma Income Statement
January 1999 - December 1999
Net Sales $24!4"#
Less$ Cost o% &oods Sold $1'2!#
&ross Income $"'!4"#
()erat*n+ ,-)enses
Labor $12!#
.t*l*t*es $/!#
Insurance $2!4#
Sales Promot*on $12!#
Del*0ery and 1rans)ortat*on $2!#
3*scellaneous $1!"#
1otal ,-)enses $/2!9#
Net Income 4e%ore 1a-es $21!""#
Less$ Income 1a-es $2!42"#
Net Income 5%ter 1a-es $1"!'"#
5ssum)t*ons$
1 Net sales based on )r*ce o% $2#29 )er
un*t!
24! un*ts sold *n 5ntlers 2! un*ts )er mont6
/2! un*ts sold *n 7u+o /! un*ts )er mont6
4"! un*ts sold *n (8la6oma C*ty 9! un*ts )er mont6 %or "
mont6s
Sales est*mates based on "9 mar8et s6are %or )re)ared :6*))ed to))*n+ *n eac6
mar8et#
2 Cost o% +oods sold *ncludes *n+red*ents! )ac8a+*n+ mater*als! labels! and co-
)ac8*n+ e-)enses %or canned )roduct#
/ No salary :*ll be dra:n by t6e o:ners;mana+ers *n t6e %*rst year# 5ll )ro%*ts :*ll be
re-*n0ested %or ne: mar8et entry and *ncreased )roduct*on#
Fancy's Foods LLC
Pro Forma Income Statement
January 2 - December 2
Net Sales $42"!94#
Less$ Cost o% &oods Sold $/1'!2#
&ross Income $1<!''#
()erat*n+ ,-)enses
Labor $1'!#
.t*l*t*es $"!#
Insurance $2!4#
Sales Promot*on $1'!#
Del*0ery and 1rans)ortat*on $12!#
3*scellaneous $1!"#
1otal ,-)enses $"2!9#
Net Income 4e%ore 1a-es $"!9'#
Less$ Income 1a-es $1"!294#
Net Income 5%ter 1a-es $/"!2'2#
5ssum)t*ons$
1 Net sales based on )r*ce o% $2#29 )er
un*t!
22!4 un*ts sold *n 5ntlers 2!2 un*ts )er mont6
/9!2 un*ts sold *n 7u+o /!/ un*ts )er mont6
12! un*ts sold *n (8la6oma C*ty 1! un*ts )er mont6
Sales est*mates based on 19sales *ncrease %rom )re0*ous year#
2 Cost o% +oods sold *ncludes *n+red*ents! )ac8a+*n+ mater*als! labels! and co-
)ac8*n+ e-)enses %or canned )roduct#
/ No salary :*ll be dra:n by t6e o:ners;mana+ers *n t6e second year# 5ll )ro%*ts :*ll
be re-*n0ested %or ne: mar8et entry and *ncreased )roduct*on#
Fancy's Foods LLC
Pro Forma Income Statement
January 21 - December 21
Net Sales $"92!194#
Less$ Cost o% &oods Sold $442!22#
&ross Income $149!9''#
()erat*n+ ,-)enses
Salary $2!#
Labor $/!#
.t*l*t*es $2!"#
Insurance $/!2#
Sales Promot*on $2"!#
Del*0ery and 1rans)ortat*on $12!"#
3*scellaneous $1!"#
1otal ,-)enses $'/!1#
Net Income 4e%ore 1a-es $22!'''#
Less$ Income 1a-es $2!22#4
Net Income 5%ter 1a-es $42!'21#2
5ssum)t*ons$
1 Net sales based on )r*ce o% $2#29 )er
un*t!
29!4 un*ts sold *n 5ntlers 2!42 un*ts )er mont6
4/!"2 un*ts sold *n 7u+o /!2/ un*ts )er mont6
1/2! un*ts sold *n (8la6oma C*ty 11! un*ts )er mont6
"4! un*ts sold *n 1ulsa 9! un*ts )er mont6 %or 2
mont6s
Sales est*mates based on 19sales *ncrease %rom )re0*ous year#
2 Cost o% +oods sold *ncludes *n+red*ents! )ac8a+*n+ mater*als! labels! and co-
)ac8*n+ e-)enses %or canned )roduct#
/ Salary :*ll be dra:n by t6e o:ners;mana+ers *n t6e t6*rd year#
Fancy's Foods LLC
Pro Forma Cas6 Flo: Statement
January 1999 - December 1999
January February 3arc6 5)r*l 3ay June July 5u+ust Se)tember (ctober No0ember December 1(15L
=e0enues $11!4" $11!4" $11!4" $11!4" $11!4" $11!4" $11!4" $/2!2 $/2!2 $/2!2 $/2!2 $/2!2 $24!4"
,-)enses
Cost o% &oods Sold $'!"" $'!"" $'!"" $'!"" $'!"" $'!"" $'!"" $2/!94 $2/!94 $2/!94 $2/!94 $2/!94 $1'2!
Labor $ $ $ $ $ $ $ $2!4 $2!4 $2!4 $2!4 $2!4 $12!
.t*l*t*es $1 $1 $1 $1 $1 $1 $1 $42 $42 $42 $42 $42 $/!
Insurance $2 $2 $2 $2 $2 $2 $2 $2 $2 $2 $2 $2 $2!4
Sales Promot*on $" $" $" $" $" $" $" $1!< $1!< $1!< $1!< $1!< $12!
Del*0ery and 1rans)ortat*on $2 $2 $2 $2 $2 $2 $2 $92 $92 $92 $92 $92 $2!
3*scellaneous $" $" $" $" $" $" $" $22" $22" $22" $22" $22" $1!"
1otal Cas6 Flo: $1!'" $1!'" $1!'" $1!'" $1!'" $1!'" $1!'" $2!21" $2!21" $2!21" $2!21" $2!21" $21!""
Fancy's Foods LLC
Pro Forma 4alance S6eet
December /1! 1999
Current 5ssets
Cas6 $<!"4#
5ccounts =ece*0able $2!4'4#
In0entory $'!42#
Pre-Pa*d ,-)enses $1!42#
1otal Current 5ssets $14'!222#
F*-ed 5ssets
4u*ld*n+ $1!"#
,>u*)ment $4!9"#
&ross F*-ed 5ssets $141!4"#
Less 5ccumulated De)rec*at*on $12!9#
Net F*-ed 5ssets $124!""#
Total Assets $273,176.00
LI54ILI1I,S 5ND (?N,=S ,@.I1A
L*ab*l*t*es
Current L*ab*l**t*es
5ccounts Payable $"1!/4/#
5ccrued Payables $/!2#
1otal Current L*ab*l*t*es $"4!4'#
Lon+ 1erm L*ab*l*t*es
3ort+a+e Payable $2!<'#
Total Liabilities $75,116.00
Owner's Equity $1!,060.00
Total Liabilities an" Owner's Equity $273,176.00
JIote6 A typical business plan would "a&e C(B years of pro forma balance s"eets, not ;ust
one year as s"own "ere. 8"e pro forma balance s"eets for following years will be
impacted by "ow profits are "andled )retained in t"e business or paid out to t"e
owner)s**, "ow assets are depreciated o&er time, t"e rein&estment of cas", t"e pay(down
of debts, etc. 8"e first year pro forma balance s"eet s"own "ere is used to calculate
financial ratios.K
Fancy's Foods LLC
F*nanc*al =at*os
December /1! 1999
=eturn on ,>u*ty # Net Pro%*t be%ore 1a-es # $21!""# # 1#''9
Net ,>u*ty $19'!2#
Current =at*o # Current 5ssets # $14'!222# # 2#</
Current L*ab*l*t*es $"4!4'#
@u*c8 =at*o # Curr# 5ssets - In0entory # $2'!"'4# # 1#22
Current L*ab*l*t*es $"4!4'#
Debt to ,>u*ty # 1otal L*ab*l*t*es # $<"!112# # #/'
Net ,>u*ty $19'!2#
!ontingency Plans
3"ile careful planning was in&ol&ed in setting t"e strategic goals for 3"ipped
Dream, it may be t"at t"ese goals are not met. 8"e Beans "a&e decided to set a %one of
acceptability for meeting sales and financial ob;ecti&es. For bot" sales and financial
ob;ecti&es, a E0G negati&e de&iation from e<pected sales and pro;ected returns on assets
will be accepted. Howe&er, if sales ob;ecti&es and returns on in&estment are less t"an
@0G of pro;ections, certain actions will be ta$en. 8"ese actions include6
E. Fo% una""epta,le sales levels !u%in& the -i%st yea%# Fancy:s Foods will combat t"is
problem by doubling in(store promotions of 3"ipped Dream in Antlers and Hugo.
8"e Beans will personally arrange and carry out t"ese promotions on wee$ends at
pea$ s"opping times. 2f sales do not increase wit"in one mont" of t"e in(store
promotions, Fancy:s Foods will ad&ertise in t"e wee$ly s"opping circulars of t"e
stores for one mont".
/. Fo% una""epta,le sales levels in Oklaho/a .ity an! +ulsa# After 1 mont"s of
mar$eting products in t"ese two metropolitan areas, sales will be e&aluated. 2f not
meeting acceptable sales le&els, Fancy:s Foods will consider contracting wit" local
mar$eting specialists in ,$la"oma !ity and 8ulsa to carry out t"e in(store promotions
and pus" t"e products to t"e stores. 8"is contractual relations"ip will be based upon
sales commissions )to be determined by t"e specialists and Fancy:s Foods*, t"ereby
pro&iding incenti&e for t"e specialists to generate sales of 3"ipped Dream.
C. Fo% una""epta,le ,usiness li1ui!ity# 2n t"e e&ent t"at t"e business lac$s liFuidity,
Fancy:s Foods will e<amine t"eir accounts recei&able procedures to ensure t"at
payment periods are ;ust and t"at payments are being recei&ed in a timely manner.
Also, cas" flow pro;ections will be re&iewed to determine if unforeseen cas"
layouts>e<penses are undermining t"e financial "ealt" of t"e enterprise.
?. Fo% una""epta,le %etu%ns on e1uity# 2f returns on assets and owners: eFuity fall
below acceptable le&els, Fancy:s Foods will first e<amine and compare t"e per(unit
costs of production and mar$eting wit" sales prices. 2f t"e margins are too t"in, a
price increase for products sold in specialty>gourmet s"ops will be considered.
Howe&er, because establis"ed non(fla&ored substitutes already e<ist at lower prices,
t"e lost sales resulting from a price increase may ma$e t"is option unsuitable for
products sold in general food stores. Fancy:s Foods will t"erefore assess
opportunities for minimi%ing production costs and e<amine different
mar$eting>distribution alternati&es.
APPENDI2
J8"is is w"ere t"e appendi< would start if t"ere was one. Appropriate material for
appendi<es include owner)s* resume, a processing flowc"art, a management "ierarc"y
diagram )if t"e business "as multiple employees, sales staff, etc.*, letters of intent to
purc"ase from buyers, ad&ertisement materials, copies of training completion certificates,
etc.K