Planning permission - structuring a business plan

Tenanted and leased pub companies these days like applicants to come with a business plan. Nathan Lowry talked Phil Mellows through his.

The art of running a successful pub starts well before you pull that first pint. Planning is vital - especially if you are a lessee or tenant. It's no use going into a business and floundering around for the first few weeks.

You have to be clear in your mind how you are going to pay the first quarter's rent and what you are going to do to build trade in the months ahead. That's why tenanted and leased pub companies these days like anyone applying for a pub to produce a business plan.

A business plan is a document that sets out, in a structured way, where the money is going to come from. If you are an experienced entrepreneur it will be second nature. If you are new to the world of finance you will probably need the help of experts - perhaps a bank or an accountant.

You might also take some advice from someone who is obviously good at it. Nathan Lowry took on the tenancy at the Angel in Sutton, Surrey, from pubco InnSpired last October. Since then, everything has gone to plan - the plan.

"Basically you have to know how you are going to pay the rent," he said. "Things move more quickly than you think and you have to be careful that the cashflow is going to be there, that the busy times will carry you through when it is quieter. If you don't do that you soon get into difficulties.

"We have worked close to the business plan and in fact we did so well over Christmas and New Year that we have exceeded our expectations."

For Nathan, there were no short cuts. He had already got plenty of experience behind him when he decided he wanted a pub of his own, having helped to set up a couple of pub businesses before working as a manager.

"I looked at the websites of all the major tenanted pub companies and came up with several pubs that fitted what I wanted," he said.

He visited the pubs, met with the area managers and produced a "critical path analysis" for each pub, a kind of basic business plan that demonstrated how he intended to get his new venture off the ground.

His focus quickly narrowed to the Angel, however. InnSpired promised to do the deal and get him into the pub at a pace that suited his own plans. The pub itself showed great potential too.

"It wasn't a bad pub by any means," said Nathan. "It had been a Scottish & Newcastle training house, though, and there was no solidity there. I think the locals were getting fed up with all the changes of management and it needed someone to go in there and do something a bit special."

As well as bringing the promise of a licensee who was in the pub for the long term, Nathan's business plan detailed key changes to its operation, including the introduction of freshly made food and the organisation of events.

He had already visited the pub on a number of occasions, choosing different times and different days, and had developed a clear idea how each of the various parts of the pub, which has a large garden, a restaurant and other well-defined zones, could work.

All of this went into the business plan. But Nathan's initiatives have gone well beyond the document that originally impressed InnSpired.

"Once you are in the pub you start getting feedback from customers and that generates more ideas," he said. "We are always building on the plan. You have to keep doing things to keep up the interest. We are having a beer festival this weekend, for instance, to try to get more people to try the pub, and I want to expand the function room so we can do more weddings."

As a tenant, Nathan is not entirely on his own. InnSpired invested £20,000 towards an external refurbishment and although this particular licensee is one of the more entrepreneurial ones, the company's business development manager, Paul Linton, is always on hand to offer advice.

Even so, Nathan is acutely conscious that it is his business - and his responsibility. "This is my place and I'm in charge - and that means it's down to me to pay the bills, no one is going to do it for me. That's why it's important to plan the business in detail."

Enterprise offers its Blueprint for success​

Enterprise Inns has introduced a Business Blueprint to help prospective tenants structure their business plan.

The 12-page document takes applicants through the thought process involved in a systematic way and links to the company's key skills audit, a test that helps to identify what training is needed.

The Business Blueprint has sections on:

• personal details, including training needs
• information on the pub, its trading area, customers, features, retail standards and product range
• SWOT analysis
• competitor analysis
• the applicant's short, medium and long term plans for the business
• separate action plans for marketing, retail standards, facilities, food opportunities, staff training, controls and development, with a timescale and a budget for each
• profit and loss forecast for the first 12 months with a detailed breakdown of outgoings and sales income
• cashflow, with a monthly chart projecting the balance between cash intake and expenses for each aspect of the business
• investment, detailing the costs of start-up.

The aim is not merely to assess an individual's chances of success but to provide a constant reference if and when they take over the pub. A section at the back is reserved for the licensee to record meetings with the Enterprise regional manager and any actions and changes to the plan that result.

"A business plan is vital for people who are new to the industry," said Enterprise's Peter Grieve. "Apart from anything else it helps us to manage a prospective licensee's expectations. Some of them are aiming for the stars and they come up with some outlandish ideas.

"But we can't influence them too much. They have to understand the business plan is theirs and whether it succeeds or fails is up to them."

Research the key for InnSpired​

InnSpired does not insist that prospective tenants produce a business plan but it is certainly encouraged.

"It is a positive tool for selection but only a part of the process," said Peter Grove, operations director for the company's southern region. "Factors such as personality, whether the character of the individual complements the style of the pub and its customer base, are also important.

"However, if the candidate has done their homework and produced some sort of business plan it will stand them in good stead in the selection process.

"More importantly, it will help them get their business off to a good start. A business plan is a significant indicator for demonstrating an individual's level of commitment."

A business plan for a tenancy is usually based on a three-year rolling forecast and should include research, cashflow forecasts and budgets.

Research - both micro and macro - is the core of the document. Micro research involves investigating and evaluating information on competitors, including all leisure facilities in the vicinity of the pub. It should also include visits to the pub itself, on different days and at different trading times, to evaluate the existing customer base and style of operation.

Macro research involves gathering information on legal factors and regulations, for example the impact of changes to licensing law.

InnSpired also recommends a SWOT analysis - which sets out a business's strengths and weaknesses, opportunities and threats.

"Good research will lead to an understanding of existing and target custome