Putting together a business plan for a pub can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.
We will explore why writing one is so important in both starting up and growing an existing pub, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.
Without further ado, let us begin!
Why write a business plan for a pub?
Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having a pub business plan is so crucial.
To have a clear roadmap to grow the business
Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.
In this dynamic context, it's essential to have a clear roadmap for your pub. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.
That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.
To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your pub to be in the next three to five years.
Once you have a clear destination for your pub, you'll focus on three key areas:
- Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
- Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
- Risks: you'll identify and address potential risks you might encounter along the way.
By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.
To get visibility on future cash flows
If your small pub runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your pub's future cash flows.
So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.
The good news is that your pub business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.
To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.
By diligently monitoring your pub's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.
To secure financing
A detailed business plan becomes a crucial tool when seeking financing from banks or investors for your pub.
Investing and lending to small businesses are very risky activities given how fragile they are. Therefore, financiers have to take extra precautions before putting their capital at risk.
At a minimum, financiers will want to ensure that you have a clear roadmap and a solid understanding of your future cash flows (like we just explained above). But they will also want to ensure that your business plan fits the risk/reward profile they seek.
This will off-course vary from bank to bank and investor to investor, but as a rule of thumb. Banks will want to see a conservative financial management style (low risk), and they will use the information in your business plan to assess your borrowing capacity — the level of debt they think your business can comfortably handle — and your ability to repay the loan. This evaluation will determine whether they'll provide credit to your pub and the terms of the agreement.
Whereas investors will carefully analyze your business plan to gauge the potential return on their investment. Their focus lies on evidence indicating your pub's potential for high growth, profitability, and consistent cash flow generation over time.
Now that you recognize the importance of creating a business plan for your pub, let's explore what information is required to create a compelling plan.
Information needed to create a business plan for a pub
Drafting a pub business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.
Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.
Carrying out market research for a pub
Before you begin writing your business plan for a pub, conducting market research is a critical step in ensuring precise and realistic financial projections.
Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.
In the course of this research, you may stumble upon trends that could impact your pub.
You may find that people in your area prefer craft beer over traditional lager. Additionally, research could suggest that customers are looking for more non-alcoholic options in pubs.
Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.
By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your pub.
Developing the sales and marketing plan for a pub
As you embark on creating your pub business plan, it is crucial to budget sales and marketing expenses beforehand.
A well-defined sales and marketing plan should include precise projections of the actions required to acquire and retain customers. It will also outline the necessary workforce to execute these initiatives and the budget required for promotions, advertising, and other marketing efforts.
This approach ensures that the appropriate amount of resources is allocated to these activities, aligning with the sales and growth objectives outlined in your business plan.
The staffing and capital expenditure requirements of a pub
Whether you are starting or expanding a pub, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.
Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.
A pub might incur costs such as wages for bartenders and wait staff, costs for cleaning supplies, costs for kitchen equipment, and costs for serving supplies. Additionally, a pub might incur costs for utilities, such as water, gas, and electricity, as well as costs for repairs and maintenance of the building and equipment.
In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day-basis (insurance, bookkeeping, etc.).
Once you have all the necessary information to create a business plan for your pub, it is time to start creating your financial forecast.
What goes into your pub's financial forecast?
The objective of the financial forecast of your pub's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for a pub are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
The projected P&L statement for a pub shows how much revenue and profit your business is expected to make in the future.
A healthy pub's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for a startup will look different than for an established pub.
The projected balance sheet of your pub
The balance sheet for a pub is a financial document that provides a snapshot of your business’s financial health at a given point in time.
It shows three main components: assets, liabilities and equity:
- Assets: are resources owned by the business, such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors and other entities, such as accounts payable (money owed to suppliers) and loans.
- Equity: includes the sums invested by the shareholders or business owners and the cumulative profits and losses of the business to date (called retained earnings). It is a proxy for the value of the owner's stake in the business.
Examining the balance sheet is important for lenders, investors, or other stakeholders who are interested in assessing your pub's liquidity and solvency:
- Liquidity: assesses whether or not your business has sufficient cash and short terms assets to honour its liabilities due over the next 12 months. It is a short-term focus.
- Solvency: assesses whether or not your business has the capacity to repay its debt over the medium term.
Looking at the balance sheet can also provide insights into your pub's investment and financing policies.
In particular, stakeholders can compare the value of equity to the value of the outstanding financial debt to assess how the business is funded and what level of financial risk has been taken by the owners (financial debt is riskier because it has to be repaid, while equity doesn't need to be repaid).
The projected cash flow statement
A cash flow forecast for a pub shows how much cash the business is projected to generate or consume.
The cash flow statement is divided into 3 main areas:
- The operating cash flow shows how much cash is generated or consumed by the operations (running the business)
- The investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.)
- The financing cash flow shows how much cash is raised or distributed to investors and lenders
Looking at the cash flow forecast helps you to make sure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
It is also a best practice to include a monthly cash flow statement in the appendices of your pub business plan so that the readers can view the impact of seasonality on your business cash position and generation.
The initial financing plan
The initial financing plan, also known as a sources and uses table, is a valuable resource to have in your business plan when starting your pub as it reveals the origins of the money needed to establish the business (sources) and how it will be allocated (uses).
Having this table helps show what costs are involved in setting up your pub, how risks are shared between founders, investors and lenders, and what the starting cash position will be. This cash position needs to be sufficient to sustain operations until the business reaches a break-even point.
Now that you have a clear understanding of what goes in the financial forecast of your pub business plan, let's shift our focus to the written part of the plan.
The written part of a pub business plan
The written part of a pub business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.
The written part of a pub business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Let's go through the content of each section in more detail!
1. The executive summary
The executive summary, the first section of your pub business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.
To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.
Subsequently, provide an overview of your pub's addressable market, highlighting current trends and potential growth opportunities.
Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Lastly, address any funding needs in the "ask" section of your executive summary.
2. The presentation of the company
As you build your pub business plan, the second section deserves attention as it delves into the structure and ownership, location, and management team of your company.
In the structure and ownership part, you'll provide valuable insights into the legal structure of the business, the identities of the owners, and their respective investments and ownership stakes. This level of transparency is vital, particularly if you're seeking financing, as it clarifies which legal entity will receive the funds and who holds the reins of the business.
Moving to the location part, you'll offer a comprehensive view of the company's premises and articulate why this specific location is strategic for the business, emphasizing factors like catchment area, accessibility, and nearby amenities.
When describing the location of your pub to a third-party financier, you could emphasize the potential for high foot traffic, the convenience of its location to local businesses, and the potential for increased visibility.
You could also note the potential for the pub to be part of a vibrant social scene in the area, as well as the potential for increased profits due to a higher demand for your services.
You could also mention the potential for the pub to become a destination for travellers, as well as the potential for increased sales due to its proximity to popular tourist attractions.
Lastly, you should introduce your esteemed management team. Provide a thorough explanation of each member's role, background, and extensive experience.
It's equally important to highlight any past successes the management team has achieved and underscore the duration they've been working together. This information will instil trust in potential lenders or investors, showcasing the strength and expertise of your leadership team and their ability to deliver the business plan.
3. The products and services section
The products and services section of your pub business plan should include a detailed description of what your company sells to its customers.
For example, your pub may offer a wide selection of beers, wines, and spirits and a full menu of pub food. It may also offer entertainment such as live music and karaoke nights, and activities such as pool, darts, and trivia nights to attract customers.
Additionally, your pub could offer an outdoor patio to create a more relaxed and comfortable atmosphere. Offering these products and services will give customers a variety of options to choose from and help create a unique and enjoyable experience.
The reader will want to understand what makes your pub unique from other businesses in this competitive market.
When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channel/s that you are targeting them through.
4. The market analysis
When outlining your market analysis in the pub business plan, it's essential to include comprehensive details about customers' demographics and segmentation, target market, competition, barriers to entry, and relevant regulations.
The primary aim of this section is to give the reader an understanding of your market's size and appeal while demonstrating your expertise in the industry.
To begin, delve into the demographics and segmentation subsection, providing an overview of the addressable market for your pub, key marketplace trends, and introducing various customer segments and their preferences in terms of purchasing habits and budgets.
Next, shift your focus to the target market subsection, where you can zoom in on the specific customer segments your pub targets. Explain how your products and services are tailored to meet the unique needs of these customers.
For example, your target market might include young professionals. This demographic is likely to be interested in trying new craft beers or cocktails or attending special events such as live music nights or trivia. They also may be looking for an atmosphere to socialize with friends or colleagues.
In the competition subsection, introduce your main competitors and explain what sets your pub apart from them.
Finally, round off your market analysis by providing an overview of the main regulations that apply to your pub.
5. The strategy section
When crafting the strategy section of your business plan for your pub, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.
The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.
For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.
In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.
Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.
Your pub could face the risk of theft or vandalism. If your pub is not well-secured, it could be exposed to burglars who may try to steal your assets, or even vandalize your property.
Additionally, your pub could face the risk of a liability lawsuit. If your patrons become injured while on your premises, they could file a lawsuit against your pub for negligence, which could result in costly legal fees and damages.
6. The operations section
The operations of your pub must be presented in detail in your business plan.
The first thing you should cover in this section is your staffing team, the main roles, and the overall recruitment plan to support the growth expected in your business plan. You should also outline the qualifications and experience necessary to fulfil each role, and how you intend to recruit (using job boards, referrals, or headhunters).
You should then state the operating hours of your pub - so that the reader can check the adequacy of your staffing levels - and any plans for varying opening times during peak season. Additionally, the plan should include details on how you will handle customer queries outside of normal operating hours.
The next part of this section should focus on the key assets and IP required to operate your business. If you depend on any licenses or trademarks, physical structures (equipment or property) or lease agreements, these should all go in there.
You could have a range of key assets, such as the pub itself and any associated real estate, as well as intellectual property. This could include a unique brand name, logo or even a slogan. You might also have the rights to any recipes or menu items that you offer in your pub which could be considered intellectual property.
Finally, you should include a list of suppliers that you plan to work with and a breakdown of their services and main commercial terms (price, payment terms, contract duration, etc.). Investors are always keen to know if there is a particular reason why you have chosen to work with a specific supplier (higher-quality products or past relationships for example).
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of a pub business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my pub's business plan?
In this section, we will be reviewing the two main solutions for creating a pub business plan:
- Using specialized online business plan software,
- Outsourcing the plan to the business plan writer.
Using an online business plan software for your pub's business plan
Using an online business planning software is the most efficient and modern way to write a pub's business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your pub's business plan
Outsourcing your pub business plan to a business plan writer can also be a viable option.
Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.
However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.
From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).
You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.
The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.
For these reasons, outsourcing the pub business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.
Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their own business plan using online software.
Why not create your pub's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a pub business plan is a terrible idea.
Why?
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my pub business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
- ...
Overall, while Word or Excel may be viable options for creating a pub business plan for some entrepreneurs, it is by far not the best or most efficient solution.
Takeaways
- A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
- Having an up-to-date business plan is the only way to keep visibility on your pub's future cash flows.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this practical guide gave you insights on how to write the business plan for your pub. Do not hesitate to get in touch with our team if you still have questions.
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