This article appeared in the May 2018 issue of Entrepreneurial Chef Magazine

You have a great concept idea for a restaurant. You have the drive, the passion, and the kitchen expertise, but last you looked, the bank account was missing a few zeroes you need to pull this off. So, you decide to go after investors.

There are different kinds of investors in business: friends and family, early-stage investors, venture capitalists, silent partners and majority partners to name a few. And of course, the ever-popular “max out the credit cards.”

For the purposes of this article, I am going to discuss how to prepare for an outside investor. This is a person that came to you by some means other than your Aunt Doris, who thinks you are an amazing cook (you are, but let’s get past that).

You have Mr. or Ms. Investor who wants to finance your dreams and bring your new concept to reality. Here are seven tips to ensure that you have the business chops to go with those kitchen chops while putting a deal together.

Know Your Sh*t!

You need to know your business concept inside and out. When someone asks you how many turns you estimate a night, you need to have that number – and by each day of the week. You need to know food costs across the board. You need to know your proposed labor costs. This is all in addition to knowing how to put a great meal on the table. Saying “I’ll get back to you with that information” doesn’t usually fly when investors are asking questions.

Bleed Your Business

This is your life, at least for the time being. Telling an investor that you are going to hire an executive chef isn’t usually an answer unless your last name is Puck or Flay, but we are assuming that it isn’t. You will be expected to be the CEO and head chef while leading a team of professionals to cover all aspects of running the business.

The Numbers Speak

You have to know the numbers forwards, backward, sideways and every way. You must be able to communicate the return on investment. Can you give an IRR (Internal rate of return is the measurement of the investment cash flow)? Are you able to show key performance indicators that an investor wants to see? If not, find a graduate student at the closest business school to help you with your pro formas. You should never utter the words “trust me, this is going to be epic” to an investor. When they review the numbers, they will tell you how successful it will be.

Create an Executive Summary

Your executive summary should be no more than two pages. It should feature these sections: Introduction of your concept, a brief SWOT analysis, a basic pro forma financials table, a brief introduction with your qualifications, brief marketing, and “the Ask.”

The Ask is what you are proposing from the investor. What you want and what they get. You must be specific.

Create a Pitch Deck

A “pitch deck” is still the preferred communications tool for investors. It’s a brief PowerPoint presentation that is either presented electronically or as a PDF document. It expands upon the executive summary, which often accompanies the deck. It’s a corporate level presentation that outlines all aspects of the deal, the potential return, the investment and what makes you unique. It should also feature an expanded SWOT analysis, this is the “drill down” from other information presented in the executive summary.

Do not get carried away and post your menu on five slides, or bios of your team across several slides. You should present the concept, a picture or two, highlights from your team and a timeline with milestones.

Getting help is a great idea if this is out of your comfort zone. Presenting a poorly constructed presentation is just as bad as not presenting one at all.

Create Your Tribe

Pick your team to take advantage of the strengths. You need to schedule time for being the CEO – you can’t successfully run a restaurant only in the kitchen.

Creating an advisory board is one way to build a team. One dinner a month for a handful of advisors is cheap for a group that can help you move your dream forward.

In business, 1+1=3 when you utilize experts in fields other than your own.

Communications Leads to Success

Your work with your investors doesn’t end when you cash the check and open the restaurant. It’s just the starting point. Create a small newsletter with your investor group to inform them of your progress and milestone achievement. This can be something you email every month. Present quarterly reports from your bookkeeper or accountant as quickly as you can.  They will want to see your progress, and if you are able to get this to them before it is asked for, even better.

Encourage your investors to eat at the restaurant and solicit their feedback. Ask for referrals. This is not the time to be shy about asking for business.

Marketing needs to be done all week long, not just when it’s slow. I recommend hiring a front of the house person who can run the reservations, greet customers and is qualified to do your marketing. Of course, you can always hire an agency to handle your marketing! One more note on marketing: create campaigns with multiple tactics that integrate the messaging, not scattered focus buying ads all over town.

Whatever you do, harness your strengths, build a team to support your weaknesses and turn your passions, dreams and work ethic into a successful business!

 


About the Author

Ira Gostin is the president and founder of 120 West Strategic Communications. He is accredited in public relations, has an MBA with an emphasis in marketing and has graduated from the advanced leadership program at Columbia University and the financial analysis program at NYU. In 2017 he was named Top Chief Marketing Officer in the Western U.S. by Corporate Vision Magazine.


 

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