Financing your Small Business

You think you have a great idea for a start-up, but one major inhibiting factor is the lack of capital.
Do not ever give up on your idea because of this reason! 

There are many ways to go about financing your start-up, but I'm only going to talk about "angel investors" in this post. Angel investors can be divided into two distinct groups, which are the institutional groups (governmental and non-governmental ones) and the independent ones, or so to speak, rich people who are willing to invest.

What I feel personally is that institutional groups, more than often, are looking at really specialized industries with high value-added business ideas. They will do very specific and thorough research before throwing their money into your project. Definitely not the restaurant kind of idea.

While you may find more interested investors in the second category comprising of independent investors for your restaurant ideas, these people are hard to look for/ speak to if you do not have the relevant connections.

However, no matter which group you choose to approach, one thing that you will definitely need is your business proposal.


For my project proposal to potential investors (I chose to approach the second group of angel investors), I focused a lot on the finances involved in my cafe business.

1. Executive Summary
You will find a lot of advice online telling you to be very, very concise in your executive summary. Listen to them. A potential investor expects to know important details about your business in this one or two page summary. Some things that I think that are good to include are Long Term Opportunities and Financial Positions/ Requirements. Pretty standard stuff from standard templates but to me, these are the most important.

2. Financial Requirements
Say you want to sell 10% of your company shares. What do you have to do?

Step 1: Ensure that your company is registered properly. Get a lawyer to draft your shareholder's agreement so that the investor knows his position in your company. (I think it is essential to have a company for your cafe even if its a small one.)

Step 2: You have invested say, $9000 into your business. Does that mean that 10% of your company shares is equivalent to $1000 then? Not necessarily. Potential investors buy into your company by looking into the Price-Earning (P/E) Ratio. They use this to determine if your company can give them sustainable returns in the long run. So, Step 2 is basically to find out the P/E of your company. If your company is a new one like mine, the easiest way to go about doing this is to go to finance websites, like Yahoo! Finance and look for companies that are similar to yours. More famous companies in the F&B industry include Food Empire Holdings. A typical F&B company has a P/E of 2-3. You can determine your company's P/E by comparing your company with another listed company that is about the same size as yours, or what you'd expect your company to be in 2-3 years time. So, to sum it up in the layman's language, you have do to up your restaurant's Projected Net Profit and multiply it by the P/E and voila there's your company's net worth!

Projected Net Profit x P/E ratio = Company's Net Worth (so if you want the investor to buy 10% of your company, you take 10% of the company's net worth!)

Do note that this method of determining your P/E is merely a rouge gauge for your executive summary. For more theoretically-sound information, do go to websites like investopedia.com to find out more or read a textbook!

3. Your Restaurant's Projected Revenue/ Net Profit
It is important to include this into your business proposal as investors being investors, they want to know how much your restaurant is expecting to make monthly.

Here's what it should look like, roughly:

You should do a pessimistic, average and optimistic projection of your revenue and make sure you show your investor that even your pessimistic projection allows you to make money! This can be easily done up with Microsoft Excel.

The projection in the picture is a daily projection. You should have a monthly projection and a yearly projection as well, so that you can calculate if your overheads are covered or not.

I will definitely elaborate more on these next time.

Have a great weekend!

Working with Small Spaces

So let's face it. It is really unlikely that your new cafe/ restaurant will have a full-fledged kitchen like you see on reality TV series like Hell's Kitchen.

It would be an absolute luxury to have such a huge space where a dozen people could stand around and work at the same time.

Unfortunately, space constraint is one thing that you will face as a restaurant owner and what you want to do is to maximize the size of your sitting/ dining-in area and minimize the size of your working space (i.e. your kitchen) because it just makes simple business sense to do that. You will want to increase the number of tables and seats in the dining-in area to increase revenue, and you have to do that at the expense of your working area.

1. Planning for your Kitchen Equipment

Even if you have huge area for your kitchen, it is very important for you to know the exact dimensions of the equipment you will be getting.

Planning is absolutely important and it should be finalized at least a month before the renovation of your restaurant starts. This is especially so if your equipment has to be imported. Imagine the hassle if we would have to send back the equipment just because it does not fit. It is your job as the restaurant owner to work with your kitchen consultant to ensure that such hiccups do not happen.

From my personal experience, you have to be really sharp when dealing with the kitchen. It is the heart of your restaurant so you do not want the heart to have any problems, do you? Common things to look out for:

- does the equipment in the CAD (Computer Aided Design) file tally with the equipment list? i.e. Did the kitchen consultant miss out anything in his drawing that you have ordered? For your reference, this is how a CAD file looks like:

- is there a flow in the working area inside the kitchen? for example, do you want the dishwashing area to be in the middle of the kitchen or the side? The side would be better most of the time, because you do not want the dishwasher to block the other kitchen helpers serving the food by being in the middle of nowhere.

What to expect from your Kitchen Consultant:
- any decent kitchen consultant would do up a CAD file for your allocated kitchen space with their proposed plan of where to place your equipment that you are going to order from them
- if they offer you the service, get a 3D design from them
- they have to work very closely with your Interior Designer and submit their finalized plan of the kitchen layout so that your ID can integrate the kitchen layout to his entire restaurant layout


2. Prepping your Staff

The most important man in the restaurant, i.e. the Chef spends most of his time in the kitchen. Imagine you have just poached this really talented chef from a rival restaurant. You offer him a higher pay, better privileges, better working hours and he's sold. The first day he reports for work, he gets the shock of his life because the working space he has is miniscule. How'd you expect him to work?

Well, for me, i would probably face that problem when I hire my second chef (I have already hired my first). How do I avoid such morale issues? I would start by being entirely honest about the small working space he's gonna be working in, and offer him some compensation such as better pay, better prospects (promotions etc. etc.)

As a general guideline, if you are working with a really tight space, I would suggest you have at least 70cm for your walking area around the kitchen. That would give you enough space for two over-sized people to brush against each other. Hahaha.


That's all I have for now. I will definitely go into more detail on how I would plan the kitchen and what kinds of equipment you need for different kinds of food that you can sell.


Feel free to contact me via email if you're looking for a good kitchen consultant. Have a great weekend ahead!