Starting a Coffee Business

If you are considering opening a coffee shop, coffee store, espresso bar, or starting a coffee business (I use all these terms interchangeably), then there are multiple factors to consider, and details to attend to, in order to maximize your chances for success. In this article I’ll be concentrating on how to develop your idea into an operating business. How to position your business for success before you ever open your doors. I will address how to run that business and achieve profitability in an upcoming article.

Most people begin planning their new coffee business based upon their “dream,” what they would ideally like to own. While this is a normal tendency, it may not be the most prudent way to start. Much time and energy can be wasted working on “your plan,” when in reality, you may not be able to afford what you desire.

As a consultant, I’ve seen this happen many times over the past 19 years. Often, new entrepreneurs get swept away by their dream, and end up over-extending themselves financially, only to run out of money before they can open their doors for business. Those who do manage to get open are typically left with little or no operating capital. Because few businesses open on Monday and are profitable on Tuesday, having sufficient operating capital will be necessary to pay your bills, employees, and yourself, until the business can generate some profit.

How much capital can you raise?

Unless you have substantial personal capital to invest, you would be wise to begin your planning process by taking a trip to see your banker. Discuss the possibility of borrowing money to help fund your future business. Understand that lending institutions typically don’t like to loan on food service businesses due to their high failure rate (95%). They are even less enthusiastic if it is your first business.

You will usually have to be willing (and able) to invest a good portion of the required money personally; typically 50% or more of the project cost, before the bank will even consider lending anything to you. Be aware that many times bankers may make it sound as if financing will be no problem during this initial inquiry, but when you come back to actually get the loan, their demeanor may change as if the first meeting had never occurred.

For this reason, when you first meet with them, let them know you want honest answers, and that you will be basing your business concept, planning, and assumptions upon what they are realistically willing to lend you.

What will it cost?

Because I have done financial projections for hundreds of coffee businesses, I can confidently provide you with a realistic range of costs for different coffee concepts. When determining the potential cost, many factors must be taken into consideration beyond the expenses for equipment, fixtures, furnishings, and contractor labor.

There will be expenses for professional services (lawyer, accountant, consultant, space designer, etc.), permits and inspections, small wares, beginning inventory, marketing, pre-opening labor, etc. You’ll also need to set aside operating capital to pay bills, your employees, and yourself, until the business can become profitable. A good rule of thumb is to set aside 1/3 of the funds you have to work with as operating capital, and the remaining 2/3rds will be what you actually have to plan and open the business with. So, taking all of these factors into consideration, here are some typical costs (U.S. Dollars):

Espresso Bar/Coffee Shop: $300,000 to $450,000+

Espresso Drive-Thru: $150,000 to $250,000+

Espresso Kiosk: $75,000 to $150,000+

Espresso Cart: $30,000 to $50,000+

Understand that there is not a direct relationship between the cost of a concept, and the income it might potentially produce. One of the most lucrative operations I had ever seen was an espresso-cart that was located in the lobby of a large hospital in a metropolitan area. This business was generating over 1,000 transactions per day, and I estimated that annual sales must have been over 1.2 million dollars, with a bottom line profit probably falling between $250,000 and $400,000.

Creating a Business Plan

When you determine which concept you can afford and would like to develop, the next step will be to create a well thought out, detailed business plan. It is during this business planning process that you will begin to determine the menu items you’ll serve, and the other business features you desire to include. Your business plan should consist of 2-parts, a presentation portion, and a financial portion.

A presentation plan should be 10 to 15 pages in length, and describe such things as the type of business you intend to create (caf, drive-thru, cart, etc.), what you will be serving (sample menu), who your customers will be, the state of the industry, why consumers will choose you over your competitors, how you’ll market your business, and any experience you possess that might contribute to your success.

This plan should include high quality graphics, and must look professional! If your business plan doesn’t look professional, then why would anyone who is looking at it assume that anything else you do, will be done in a professional manner?

The second part of the business plan is the financial projections. This should include detailed information about start-up costs, professional services, and 3 years of projected business performance.

To estimate possible future business performance, you will need to project an average purchase per customer, and the number of expected customers that will visit your business each day, showing growth month by month and then eventually topping-out. You will need to estimate a realistic cost of goods for your menu, and all your other operational expenses. From this info, monthly financial projections can be created to determine the possible loss or profit that should be expected from the business. It will be critical to set aside a capital reserve to cover any projected monthly losses, so that your business can keep operating as you strive for profitability. Being under-capitalized is the number-one reason I’ve seen people fail in this business!

It will be during this financial planning process, that you will determine whether all the items and features that you plan on including will be possible with the capital you have available. If you decide to eliminate menu items or features due to budgetary constraints, be sure to analyze the financial impact of eliminating those items before doing so.

Your financial plan should be combined with the presentation plan for distribution to potential lenders and investors. Property managers or leasing agents should only be given the presentation plan. There is no need to show property managers your financial projections, and doing so would probably not be advantageous to you when negotiating a lease.

Securing your financing

After your business plan has been completed, it will be time to revisit your banker to secure your financing. You don’t want to actually execute the loan at this point in time, but you do want to get a written commitment for funding. Try to structure the loan as a line of credit if you can, in this way you can draw the money as it is needed, as opposed to taking out the entire loan up front, and having to make payments on the full amount.

Your banker may be hesitant to approve the loan at this time, because you won’t be able to tell them where your business will be located yet, and “location” will be an important factor contributing to your potential success. If this is the case, see if they will be willing to give you conditional pre-approval, with final approval being dependent upon their acceptance of the location(s) you are considering. You will want to make sure that you have secured the funds necessary to develop your project, before you sign a lease on a location!

Finding a location

When you have your financing arranged, then and only then will you be ready to look for a location for your business. Keep in mind that coffee is typically an impulse buy. This means you need to find a location where a large number of people work, reside, or pass by on a daily basis. Locations adjacent to or in large office buildings, hospitals, college campuses, industrial or business parks, airports, commuter train stations, performing arts centers, sports stadiums, large resorts, shopping malls, and condominium complexes, can all be prime!

Your location should also be highly visible, and easy to access. If your business isn’t highly visible, if its hard to find or tucked away in the back of a shopping center, then consumers might not see it. If they don’t know you exist, then they won’t come into your store to purchase your products. Equally important is ease of access. If consumers can see your business, but it is difficult to get to, or has no parking, then once again, limited sales will result.

Negotiating an advantageous lease

A great location with a bad lease is not a great location! You may find a truly great location, but if the lease rate and terms are not conducive to your financial model, then agreeing to that lease may predestine your business to fail.

The challenge becomes disconnecting your feelings from the process, so that you will make decisions based upon good business sense, and not emotions. Understanding how the lease rate and terms might affect your chances for success is critical. In many cases, break-even monthly business volume will occur around 10 to 15 times the monthly lease rate. Therefore, paying $3,000 a month for a space may require $30,000 to $45,000 a month in sales to debt service the business. $6,000 a month may require $60,000 to $90,000 in sales.

Divide the projected monthly sales that might be needed by 30, and you will see what will be required in sales each day. Divide that daily sales amount by your projected average customer transactions, and you’ll now understand how many customers you must attract daily. This is a critical number for you to understand and consider as you select a potential location. If the rent factor on a location you are considering will require 500 customer transactions per day to generate the necessary income to debt service your business, you won’t want to accept a location that only has the potential to generate 300 transactions!

A location’s potential to attract customers needs to be considered in order to understand if the location and lease amount will make sense. In other words, a location that cost $10,000 a month to lease, might make sense if it will generate 1,000 transactions per day. Conversely, a location that only costs $1,000 a month to lease may not make sense if it only has the potential to attract 50 customers a day!

The terms of the lease can be as important as the rate. Most commercial leases are structured as a 5-year commitment, with an option to renew for 5 more. If your lender will allow, you may want to try to structure the first term of the lease into smaller time increments, with YOUR option to renew.

You’ll always want to secure the option to renew your lease for a second 5-year term. I advise my clients to not even consider a 5-year lease without an option to renew for 5 more. If you do not have a renewal option, two unpleasant things might happen when your lease expires. First, if you have developed a successful business, and do not have the rate pre negotiated beyond the first lease period, I can almost guarantee that your lease rate will go up after that first term has expired; perhaps significantly. Second, and worse yet, the property manager may decide to not grant you another term. In this case, you may have to close or move your business.

One final thought on lease negotiations: never sign a lease without having your professional team (attorney, accountant, consultant, etc.) review it first.

Design, Layout, and Equipment Selection

As soon as you have a signed lease on a space for your coffee business, developing construction plans for bureaucratic approval will come next. Warning: do not spend any money on a space designer until you do have a signed lease!

The design stage will be where the physical means and procedures required to prepare your menu items will be determined and developed. It is also when the other business features you desire to include need to be taken into consideration, and worked into the design.

You’ll need to start making decisions about the equipment you will purchase at this time as well. As plans are created for your future coffee shop, equipment and fixtures will have to be included on those plans, and specified by manufacturer and model number. Knowing which equipment you will be using will be essential to the design process, because equipment dimensions, and electrical and plumbing requirements will all need to be known, before a space design can be completed.

When your plans have been approved by the bureaucracy, you should then put out your list of needed equipment out for bid with several coffee and food service equipment companies. When you find the companies you want to purchase from, inquire as to the lead time required for delivery, and place your order coordinating the arrival of your equipment to coincide with the completion of construction. Some equipment may take as long as six weeks to receive, so be sure to place your order early enough to insure for timely delivery and installation, before you begin employee training.

While I do not have the space within this article to go into all the factors associated with good design and its’ importance, check out my Ezine article, “How to Design and Layout a Coffee Shop or Espresso Bar” for detailed information.

Obtaining Bureaucratic Approval and Selecting Your Contractor

Once you, your coffee shop space designer and architect have come to a consensus on a design and layout, you will need to submit your proposed remodeling drawings to the appropriate local bureaucracies for approval. Upon receiving approval, also secure and purchase your building permit.

At this same time, you should be distributing sets of your plans to a number of reputable, local construction companies, or general contractors, to obtain some bids for your project’s needed construction. You’ll want to select contractors who are large enough to have dependable network of subcontractors for such things as electrical, plumbing, flooring, HVAC, and custom cabinetry. An established firm will have associations with these other construction professionals, saving you the hassle of trying to find and qualify them on your own.

Finding a contractor with previous experience in building or remodeling commercial food service businesses can also be a real advantage. There are many special requirements and construction techniques that need to be understood when working on a commercial food service business. Someone with experience in these matters will have a greater idea of what’s involved, and will be less likely to make costly and timely mistakes.

The final decision about the contractor you will use should be based upon a combination of factors, including: price, past experience, availability, references, a physical inspection of other work they’ve done, their network of subcontractors, etc. Be sure that the general contractor you select is licensed, insured &/or bonded, and will handle all needed permits and inspections.

Finalizing Your Menu, Product and Vendor Selections, and Creating your Office

If you are remodeling an existing space for your future coffee business, the process will typically take about 6 to 8 weeks once construction has begun. During this period you will have a lot of things to decide, create, and complete prior to your business opening, so don’t waste this time!

While menu planning actually began way back with the first thoughts of your business, and developed through the business planning and design phase, now is when you must solidify all of your menu offerings on paper, with descriptions and prices, so that a sign company can be contracted to create your menu boards. It may take a sign company a month or more to fabricate your menu boards, so start early, you must have menu boards to open for business!

As you create your menu offerings, you will also need to create recipes for each item, and from those recipes calculate your exact cost for each, (once you have products prices from all your future purveyors). This will be essential information for menu pricing, and for monitoring actual monthly food production performance against an “ideal.”

The prices you ask for your menu items must be a calculation between what competitors in your market are charging, and what the actual cost of the item will be, based upon your recipes and the cost of the ingredients you will use. If you under-price your menu items, your cost of goods will be high, and profitability will be difficult to achieve. If you set your prices too high, you’ll leave consumers with options and justification to look for places with lower-priced products.

Next, you will need to determine the vendors you will be purchasing your products from, and open an account with each of them. Create order sheets for each one of your future suppliers, listing all the products you will be purchasing from them, along with other important info like the case/pack size, and current price. This paper tool will be essential for analyzing the amount of each item you are using weekly, and will allow you to order to meet anticipated needs.

Beyond paper controls for ordering, you’ll need to develop tools for receiving product, recording vendor purchases and payments, recording sales, taking month-end inventories, budgeting and recording labor, creating month-end financial statements, just to name a few. You will want to have all your office forms and systems developed before you open for business. It will be difficult to find the time to develop these things if you wait until after you open.

Interviewing, Hiring, and Training Employees

When you get to about 3-weeks prior to your projected opening date, you will need to place “help wanted” ads, interview, hire, and train your employees.

Determine your tentative staffing needs by defining how many employees will be required to staff your store at various levels of business volume. For example, on a busy morning you may require 2-cashiers, 2-baristas, a person to bus tables, and perhaps a cook if you are serving made-to-order food. But, during a slow afternoon period, you may only require a cashier and barista, or perhaps someone who can take on both functions.

While there will be no way to know exactly how many people might be needed until you actually open for business, the key is to hire enough people to cover any potential staffing needs. You (the owner) want to avoid having to take on an hourly-employee job function, because you are under-staffed. Always remember, you need to be the “captain of your ship,” and not the “deckhand!”

As you hire individuals, write down when they are available to work on a piece of schedule paper, along with info such as how many hours a week they are willing to work. When you finish a day of interviewing and hiring, you can see how close you are to being fully staffed by trying to piece together an employee schedule with the people you have hired thus far. If you can’t fill all the shifts shown on your schedule, you’ll need to keep hiring people until you can. When you have hired enough employees to cover all the shifts on your weekly schedule, hire about 25% more employees.

It is not uncommon to have one of your new-hires not show up for the very first day of training! And undoubtedly, it will become all too apparent that some of the other people you hired may not work out as well. Take it from me, you are much better off to have a few more people than you actually need, than to find yourself a few short. If you don’t have extra employees, and one leaves, or you have to let one go, guess who gets to work their shift? You do! And, there will be no relief from that responsibility until your interview, hire, and train a replacement. So my advise, over hire by 25%!

About 3 or 4 days before you open, you will need to bring in (and pay) all your employees for several days of education and training. You would be wise to break down your training into different components, and to create a training checklist for each. This will allow you to systematically teach your current and future employees the same knowledge and skills each time, and will ensure that you are covering everything they need to know. Training checklists might cover the following areas:

• General company philosophy and policies/job descriptions

• Safety, sanitation, and security

• Customer service principals and procedures

• Suggestive selling, up-selling, and promoting

• Cash register operations/policies

• Espresso extraction and milk steaming fundamentals

• Hot drink preparation (including brewed coffee, tea, etc.)

• Iced and blended drink preparation

• Food preparation and service

• “Front of the House” Maintenance

• Understanding the retail merchandise we have for sale

• Dish washing, equipment maintenance, and end of day cleaning

Once your employees have had a chance to get some practice at their craft, split your employees into a couple of groups, and conduct a mock service by having one group work behind the counter, and the other group act as customers. They should take turns playing “customers” and “workers,” and practice taking orders, ringing them up on the cash register (in a practice mode), and making the beverages.

Last Minute Tasks

You will need to place all opening orders for consumable products, and coordinate the delivery of most items, to occur within 3 to 5 days before your opening (but after your final health inspection prior to opening).

You will probably find yourself with a few days between when you finish hiring your new employees, and when their training will begin. Ask your new employees if they would be willing to come in and work (you will pay them) to help clean and ready the place for opening. When construction has been completed, a thorough cleaning of the entire store will be necessary. Counter tops, inside cabinets, floors, light fixtures and windows will all have to be cleaned to remove construction dust and residues. Also, storage racks may need to be set up, furniture assembled, refrigerators wiped out, and equipment turned-on, tested, and calibrated. Arriving food and paper products will need to be opened and stored in their proper places. New food storage containers, coffee bar tools, and other small wares will need to be washed before they can be used. Use your new employees to help with all of these tasks, and you will save yourself from significant anxiety and dirty work!

Make sure you and your contractor review a list of all needed final inspections, permits, and licenses, and schedule the completion of all of those to determine when you might be ready to open to the public.

Finally, think about holding an invitational grand opening, an evening or two before you will open to the public. You’ll want to send out invitations about 10 to 7 days before the event. Invite your friends and family, the contractors who did the work, the owners of surrounding businesses, the chamber of commerce, the local newspaper and television station, the police chief, the mayor, etc.

A Friday or Saturday tend to be good days to hold this event. Make it an open house, say: “drop by anytime between 4PM & 8PM for free menu sampling.” You won’t want everyone to arrive at the same time since your employees will still be fairly inexperienced in making drinks and servicing customers. Cut up cookies, dessert bars, desserts, and panini, into bite-size pieces, and place them on serving trays around the dining room. Welcome guests when they arrive, and instruct them to order any beverage off the menu that they would like, and to help themselves to your food samples.

As the owner, this is a valuable chance for you to network with potential future customers, and prominent individuals from your community that might be able to help spread the word about your new business. This is also a great chance for your employees to get some hands on experience, with some brisk intervals of business, which will better prepare them for when you open to the public. Your guests will be forgiving if it takes a little longer than expected for their beverages to be made, because it’s all free! Make sure each guest is given a take home menu and a coupon for a free drink before they leave. You should be able to turn some of these first night guests into your first regular customers.

Your Opening Day

With your opening to the public just around the corner, be sure that all the final details have been attended to. Do you have change for your cash register drawers, and a back up change bank? Do your employees all know when they are working, and do they have a copy of their schedule? Have you placed a bakery order to be delivered on the morning of your opening?

If you will be working with a computerized cash register system, and its’ operation is new to you, it might be wise to pay for on-site assistance for the first day you’re open. If employees have questions, or get bogged down during a transaction, having someone there to tell them what to do can be invaluable.

When you finally open, realize the first two weeks will be the most difficult, and the most important. You’ll need to spend almost every hour you are open for business, for the first 7 to 10 days, standing between you cashier and barista, listening to everything they say, and watching everything they do.

You job is to provide them with intense, relentless, detailed instruction, and to help them when necessary. You will want to make sure your cashier is following your customer service and suggestive selling protocols, and that they are handling cash and making change correctly. And, you’ll need to supervise your barista to make sure they are following all the procedures necessary to produce excellent beverages, and that they develop a sense of urgency to do that in an efficient and time-effective manner.

New employees are malleable, so it is important to refine and correct everything they do over the first week(s). If they learn good habits to begin with, then with minimal management, they will continue to employ those habits, because it’s the only way they were taught. But, if they are left alone, with minimal or no supervision for the first week or two, then they will undoubtedly develop their own habits, and those might be less than desirable, and prove difficult to change.

Your first week of business will be a time of excitement, and apprehension. You will look forward, dreaming about your businesses’ potential, yet face challenges as you refine your operation, deal with employee issues, and settle in to the day to day routines and disciplines required to run a successful store.

Project Management Project Life Cycle

Project Life Cycle has four phases:

  • Initiation
  • Planning
  • Execution; and
  • Closure

Project Initiation

The Project Initiation is the 1st phase in the Project Management Life Cycle.

The most common tools or methodologies used in the initiation stage are Project Review, Plan, Overview and Schedule Reviews.

You can start a new by defining its objectives, scope, purpose and list of deliverable to be produced. Professionals and skilled project team also being selected in this stage by the appointed Manager.

Project Planning

The Project Planning is the 2nd part in the Project Management Life Cycle. The 2nd phase should include a detailed identification and assignment of each task until the end of the assignment. It should also include a Risk Analysis and a definition of criteria for the successful completion of each deliverable according to the Schedule prepared by the Planning Engineer.

It involves creating of a set of plans to help guide your team through the execution and closure of the business assignment.

The plans created during this section will help you to manage time, cost, quality, change orders/variation, risk factors and other issues. They will also help you to manage key personal and external vendors/suppliers, to ensure that you deliver the project on time and within schedule.

Project Execution

The Project Execution is the 3rd phase in the Project Management Life Cycle. The Project Execution is usually the longest phase in the project life cycle and it typically consumes the most energy and the most resources. You will build the physical deliverable and present them to your client for approval.

The most important issue in this part is to ensure activities are properly executed and controlled. You will need to implement a range of management processes during this section. These processes help you to manage time, cost, quality, change orders/variation, risks factors and issues. They also help you to manage procurement, client approvals and communications.

The most common tools or methodologies used in the execution phase are an update of Risk Analysis Review, in addition to Project/Business Plan. The planned solution is implemented/incorporated to solve the problem specified in the business requirements.

Project Closure

The Project Closure is the 4th and last phase in the Project Management Life Cycle. In this last stage, the Project Manager must ensure that the Business Assignment is brought to its proper completion (according to contract).

The closure section is characterized by a written formal project review report contains of overall level of success to your sponsor in the phase. Project Closure involves handing over the deliverable to your client/customer, passing the documentation to the client/business development, demobilizing/releasing staff and equipment, and informing stakeholders of the closure of the business assignment.

Between one and three months after the project has been closed and the business has begun to experience the benefits provided by the project, you also need to complete a Post Implementation Review.

This review allows the business to identify the level of success of the project and list any lessons learned for future projects.

“Nobody plan to fail, but they fail to plan”…

Top Four Key Categories of Project Failure

Every year, big companies invest millions of dollars in many of their strategic projects with several key objectives in mind: Business Expansion, Portfolio Diversification, Improvement in Product Marketing and many more…

Not all of these projects ultimately get launched successfully, some were on hold because of some specific reason, while some just didn’t get to deploy successfully, while many of them were staggered into sub-projects which will be deployed by phases with different deployment dates.

At high level, Projects failures can be categorized into 4 great category,
a. ) Poor planning:
-The key to any project success ( regardless of its size, its budget and for which regions ) is good planning. Good planning helps minimize potential risks, reduce last minute changes, and avoid any miss dependency. One of the key item in project planning is Risk management. With a well out-lined plan, issues and risks get mitigated significantly with alternative work-arounds ready to take care of the issues while the long term solution is on its way.

Here are some sign of poor planned projects,
1. Major gaps remained to be unresolved
2. Key stakeholders have no active participation in the project
3. Too frequent changes in the scope, Business requirements can’t be finalized.
4. Multiple revises in project Time lines
5. Lack of Test and Development Resources

b.) Lack of Management support:
-A project will only be successful if there are strong support from Management in terms of financial support and Resource support. If without, Projects will suffer from one or more of the following areas:
-Inadequate skills and inappropriate Staffing – Lack of team members with the necessary skills to run the projects in the Organization ; however, Management do not see the need for additional staffing.
– Lack of financial support – Management will invest their money in projects where they believe higher return will be reaped. Lack of budget resources will somehow forced the project to stop sooner or later.

c) Poor project management:

A lot of key projects were found to fail due to Poor and Bad project management. These may be caused by :
– The scope and objectives of these projects have not being defined properly and the process are not comprehensive enough to take care of all the details.
– The required testing resources from other functional teams have not being engaged earlier ; same goes to the testing environment
– Miss out a few key requirements during the development phase. This last minute miss caused the project to slip its key milestones.
– No dedicated Business owners to sign off for the user acceptance testing

d) Lack of Key Business engagement for the project:

Business Leads and end users are not keen to get engaged and participate in the projects
– due to this limitation, not all Business process has being validated and reviewed by the appropriate Business leads/Subject Matter Expert ( SME) as per requested. This might lead to potential over-look of gaps in any of the Business process with the new changes implemented for the Project.
– It is imperative to have all the necessary players to be fully committed and engaged in the project throughout , namely the Business, IT team as well as the project stake-holders.

Using a Project Management Software Application to Manage Your Projects

Businesses today are looking to achieve their organizational goals without unnecessary expenditures. The increase in the number of project time tracking solutions is on the rise since they help businesses to deal with the complexities of large projects.

Businesses have started implementing time management solutions so as to get a complete organizational view of projects. This helps them to decide which projects are important, making the entire process efficient.

  • Helps in more efficient planning of the projects –

The move from the ideas stage to planning is more structured with the right project management tools. Project managers have better visibility and consequently they are better informed during decision making. During the planning stage when resources are being allocated a quality project time tracking software can help decision-makers sift easily through business metrics. The overall efficiency of the project and people performance improve significantly as a result.

  • Better execution of projects –

Project time management solutions ensure better project execution overall, by balancing resource management, staffing, budgets, and setting milestones. There is clarity on the activities of employees/resources down to a granular depth and as a result thereby tracking employee time off, attendance and work hours becomes far more accurate.

All these efficiencies come through seamlessly once the software solution is integrated into the business processes.

From determining strategic business goals to deciding which projects will help meet those goals and then efficiently managing the execution of the projects… the right project management tool offers a business tremendous value.

  • A quick snapshot of the benefits gained from such time management software solutions is as follows -Defines metrics to help measure what projects should be undertaken
  • Seamlessly integrates the business so that executives can view projects across the organization.
  • Standardizes methods to execute business goals
  • Provides a better understanding of employee talent management (resources)

The evolution of technology has ensured that a project manager today is better equipped to make more qualified decisions, since the overall goal of a good project management software solution is to make the whole process more efficient both in terms of human resource allocation and time. Not being efficient in either of these can be detrimental to an organization’s health and overall well being. Companies can ill-afford the hazards of such a scenario.

Therefore, I believe that a project time tracking and management software definitely helps your businesses to run effectively and meet your organizational goals anytime needed.

Business Process Vs Project Management Process

All attendees of “Project Management… by the Numbers” know that every project is a project within another project(!). In other words, every project we manage is a part of another bigger project. So, what is the difference between a business process and a project management process?

Let’s begin the answer with an example…

The CEO of the organization believes the project is to bring a new product to market. Let us call the product the Wireless Internet Waffle Iron (WiWi).

The CEO knows he/she has a process to get the WiWi though his company. This includes identifying the best possible WiWi and all the way to sustaining the WiWi when it is sold to the consumer.

The company has a published plan based on stages for this process (for example; Stage 1 – Ideation, Stage 2 – Assessment, Stage 3 – Feasibility, Stage 4 – Development, Stage 5 – Commercialization, Stage 6 – Sustainment), in order to get the WiWi from one stage to another.

Most often, the process progresses by passing the responsibility of the project from one group to the next along the way of each stage. It does make sense that Engineering manages the conceptual work and Marketing manages the marketing.

Because of this process, the CEO passes the project to his direct reports with confidence that the project can now be managed on time, on budget and that the Wireless Internet Waffle Iron will be exactly as envisioned.

Working with my clients, I have identified this scenario hundreds times over the years and it is easy to recognize this as a “business process” as this is how the business (company) views the work as a project.

Now, back to our scenario…

The WiWi project is running behind schedule because the assessment stage took longer than planned and the project is running over budget because the feasibility stage was not properly analyzed up front. Now you (the next project manager in line) have been assigned the development stage and are expected to bring the project back on time and schedule as well as manage all the work the development stage requires.

All this time the CEO continues to have confidence in his people and processes that the WiWi project will be on time, cost and objectives. You are backed in the corner with this (can’t let the CEO down) and have to cut corners as they did during the feasibility stage.

After some major frustration, a few all-nighters and some creative reporting, you breathe a sigh of relief and can pass the project with all of its problems to the next group in the process line. Unfortunately, the WiWi is still over budget and running even later.

What we have described above is a classic business process that is mistaken for a project management process. The difference is that the business process sees the product as the project, not the stages or even the tasks as individual projects.

Business processes are absolutely necessary for management to plan and work from, but if we view each stage and task as a project, and the leader of each stage and the doer of each task as a project manager, then we will have an accountability chain within the project. Back to our scenario… but this time as a Project Management Process.

The Four Phases of a Project Management Process…

Phase One – Concept/Feasibility

The WiWi has been dropped into the business process by the CEO. The person that is leading the Ideation Stage must consider this stage a project within itself, and themselves as the Project Manager.

Ideation is a part of the WiWi project, but has its own separate time, cost and objectives. These must be defined and agreed to by the Ideation Phase Project Manager and a Project Customer (maybe the Project Customer has to be the CEO!).

Before agreement can happen, the Ideation Stage Project Manager has to be convinced his/her part of the WiWi Project can be accomplished within the time, cost and objective constraints given. In order to determine the true TCO vs. the goal TCO, each member of the Ideation Project Team must view their tasks as projects with themselves as the Task Project Manager and the Ideation Stage Project Manager as their Project Customer. Each person then follows the same project management process to gain agreement that their tasks can be accomplished to the individual time cost and objective constraints given.

When the entire team agrees all tasks can be done based on individual concept/feasibility studies, agreement can be reached or negotiated between the Ideation Stage Project Manager and the WiWi Project Manager.

Wahoo – Phase 1 done!

Phase Two – Organization/Schedule

The Ideation Stage Project Manager now has agreement at a high level to TCO of the Ideation Stage, so it is time now to do detailed planning and scheduling of the Ideation Stage Project of the WiWi Project.

After reconfirming tasks and team members schedules, a critical path analysis is completed by the Ideation Phase Project Manager (including detailed costs) and run by the Ideation Phase Project Customer for another agreement and:

Phase Three – Execution

Double Wahoo – It’s time to actually do all the Ideation Stage tasks.

The Ideation Stage Project Manager manages the critical path tasks, people and budget, and in turn delivers the Ideation Stage Project to the Project Customer.

The Ideation Stage is almost complete (not quite, but almost) because:

Phase Four – Review/Audit

Now it is time to review the project management during the Ideation Stage Project. Did we do enough concept/feasibility? Did the team members follow-through on their promises? How can we improve the project management process? Etc.

Your part of the WiWi Project, the Ideation Stage Project, has been successfully managed by using a project management process. I think a party is now in order, don’t you?

So, back to our original question: What is the Difference between a Business Process and a Project Management Process?

The answer: The difference is that the business process sees the product as the project, not the stages or even the tasks as individual projects.

We as everyday project managers are responsible for the successful completion of the time, cost and objectives of our piece of the Wireless Internet Waffle Iron Project, not the whole thing.

If you are the CEO (or the CEO’s designated authority) and want the WiWi on time, on cost and on objectives, then consider each stage within the business process a project and allow the project management process to work.

But for now, back to us, the Project Managers. When you get your assignment, whether it is a stage or a task, ask who your Project Customer is and stick to the four project management phases of your specific work.

Understanding the Concept of Business

Many think of loads of money when hearing or saying the word business, but one has to be aware that are profitable and nonprofitable businesses. Therefore, understanding what this concept involves is important because it helps you decide whether you are made for this or not.

Once you get acquainted with the notions related to running a business you can be more confident. It doesn’t have to be a “C-Cola” type of business, small businesses can be financially satisfactory as well. If the specific lingo scares you with terms like cash flow, profit/loss statements,debt-to-equity ratio or accounts receivable don’t be fooled. Small/business ownership is not that complicated as it seems. You will be surprised to find out that you are already familiar with some of the meanings. Have you ever been paid for a musical performance, performed services like baby-sitting, lawn-mowing? Then you have been involved in small businesses.

Being a small-business owner gives you the liberty to choose the work program as you think it is best for your business. Some successful small-business owners work 40 hours a week, whereas others work part-time.

A small business can be born out of the blue, when you are sitting under a tree on a hot summer day and thinking about a glass of cold lemonade. The you realize that this could use for some other too and you come up with the idea of selling lemonade. There is no lemonade stand in sight, therefore no competition. An untapped market is an important aspect to start from.

Next, you start asking the neighbors if they’re willing to buy lemonade from you. This way you discover whether the quality, service and location of your projected business are appealing to many or few customers.

Let’s say that the “market research” you have conducted has been positive. A step further is to choose the location of your business. Maybe the street where you live isn’t as crowded as you might want to. To maximize sales you look for a street with enough traffic. You decide to move the stand on the corner down the road, in front of Mrs. X’s house. You convince her to grant you the permission to set up there by offering a free glass of lemonade every day. This “move” represents your first lease and the first experience of bartering.

After all these steps have been completed, you name your business, build your stand, prepare the lemonade and obtain the necessary elements of the “store” (the cash box; a table-the furniture; a pitcher-the fixture. You may want to talk with a friend or your parents to help you with the capital.

These challenges you are about to face when starting a small business are the same that a large company copes with every day. The basics of running the business are the same.

Using Business Angels to Build Your Business

If you’ve already approached your family, friends, and your bank for funds to help your business, and are still a bit short, then your next step is to approach business angels. These are people who have built one or more successful businesses themselves, and would like to diversify their interests elsewhere.

A given business angel might be willing to invest up to $250K, but will usually feel more comfortable sharing that risk with other angels.. So, for example, if you decided that you needed a quarter of a million dollars, an angel would probably be happier putting in half of it if another angel did the same. That doesn’t mean that he or she wouldn’t put in that amount; it only means that it probably would have to be matched by another angel who invested the same amount. And, of course, if you’ve secured some investment from your family and/or friends already, that would make them feel better because their risk would be diluted that much more.

Not all angels will limit themselves to sums as low as this, The mature oil-rich Middle Eastern countries have many very wealthy people who will invest several million dollars on their own if the project meets their standards. And that’s really the most difficult part.

Business angels often work through brokers, people who have a “stable” of angels who look to them for good investment opportunities. A friend of mine is one such broker, and he tells me that the problem is not a lack of money, but rather it’s a lack of good projects.

Business angels will want a concise summary of your business. It may not need to be a formally written business plan. That will depend entirely on what the investor wants. A well written document could be as short as one page. You’ll need to check with the broker to find out what is preferred.

Here are some items that you’ll want to include in your summary: what you’re selling, a good estimate of how much of the market you could get over what period of time, and your anticipated profit and loss for the first three years. They might want a percentage of your company and/or a seat on your board, if you have one. This is not because they want to control your company, but instead because they want to protect their investment. But, what ever else you do, hold onto at least 51% of your business.

Objectives for a Business Plan

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Any business plan requires a set of objectives. These objectives will serve as a guide in order to draft an effective plan. Also, the objectives can determine the simplicity or complexity of a plan.

On creating objectives for a business plan, you need to keep in mind the reasons why the business will be created. What will the business be a few months from now? What will be your projection regarding the business after 5 years? This will also include identification of the growth rate of the business. If you are going to start at a certain business niche, you should be able to project a reasonable growth after a certain period of time. This will serve as the objective that you would want to achieve.

Your objectives can be aimed towards the growth of a business. Or, it may also be for the rehabilitation of certain products or services. Having a crystal clear business plan will allow you to have a clearer direction or path that you need to take in order to achieve success.

Also, these objectives need to be specified towards a certain product or service, if needed. There can be general objectives. But there should also be specific ones detailing all the actions that your company needs to take.

For your projected business, the things that you will be implementing should be easily determined or measurable so that you will have a basis for either failure or success when you evaluate in the future. Also, this feature can allow you to be content with your efforts or increase your efforts to improve poor developments as assessed with the objectives.

You do not enumerate objectives that are exciting, interesting, and sensational if they are unrealistic. You need to be able to stick to business plans that will make it very possible for you to achieve and get to where you need to go. There can be a little struggle, but basing on the experience of the general public or of other business owners, that target should be reachable.

There should be a timeframe for you to follow. You do not only set your plans and work on them whenever you want to. In order for each phase to be followed and in order for the plan to actually work, you need to develop a timeframe that will be reasonable enough for you to complete a certain task.

Detailing your goals and making them easy to understand is also important. If you are going to need the help of other people, you need to send your message regarding your business goals as clearly as you can. This can be done with the help of statements that back up or further explain the objectives of what you have listed.

Also, clear objectives can give your business plan a greater chance of being considered as credible and effective. This is important if you are going to apply for loans or if you are to work with investors.

How to Write a Project Business Proposal

So, you have a great idea for a project. As we all know, a “project” could be almost anything. You might be thinking of a neighborhood project, like creating a club where kids can safely hang out after school; an in-house corporate project like teaching employees how to use a new document management system; or a project for a client, such as creating a new commercial website. No matter what sort of project you’re planning, the odds are that you need to convince others to approve your ideas and give you the job. That means that you need to write a project proposal.

Don’t worry-writing a project proposal is not nearly as difficult as it may sound. You probably already know most of the information you need to put in a proposal. And you don’t need to start off by staring at a blank computer screen, either. There are great ready-made kits available that give you templates, instructions, and samples to work with-that’s a huge head start.

There’s also a basic structure you should follow when writing any project proposal. No matter the type of project, you need to: introduce yourself and your project, describe the need and how the project will meet that need, provide the details of what you propose to do and explain the costs, and persuade your proposal readers that you are the perfect choice to successfully complete the project. Finally, you should end with a “call to action,” requesting readers to take the next step-setting up a meeting, signing a contract, voting for your ideas; whatever makes sense for your project.

The most important goal of your proposal is to convince the people reading it to approve your ideas and support and fund your project. This means that you have to prove you understand the issues and plan to meet the needs of others. So a good project proposal should never be all about you. Start off by imagining yourself as the proposal reader. What do you already know about the project and the proposal writer? What would you want to know?

First of all, any proposal reader will want to know why you are proposing the project to them. So gather all the information you have about your readers, and do research if you need to fill in some gaps. You need to convince the readers that it’s in their best interest to support your project. You need to persuade them that your project will benefit them.

In other words, you need to write not a one-size-fits-all proposal, but a customized proposal. Depending on how many people need to approve your project, you may need to include information tailored to each type of person involved in the approval process. Easy to digest summaries for executives, staffing and resources information for managers and technical or logistics details for project leads.

But this doesn’t mean that you need to start from scratch each time. You’ll find that most of the basic information stays the same, even though you are addressing a particular reader and or group of readers in each tailored proposal section. You may simply restructure the same information in a couple different ways (bullet points for one person, expanded details for another).

Let’s work through the proposal structure in order. Start your proposal with a Cover Letter, which should be a brief personal introduction of yourself and your project, along with a mention of the action you want them to take after reading your proposal. Be sure to include your contact information, so readers can easily find you if they have questions. Next, create a Title Page with the title of your specific proposal (for example, “Streamlining Our Order Process,” “Rehabilitating the Parkview Playground,” or “Converting XYZ’s Corporate Fleet to Hybrid Vehicles.”

If your project is long and detailed, you’ll add a Table of Contents next. This is where a proposal kit can really help, because the library of topics they include are extensive enough to cover all types of specialized proposals. Each template will become a topic page, which will then be listed in your Table of Contents. You can’t compile a Table of Contents until you have written the proposal, but remember that your TOC should be placed right after the title page.

Now you have completed the introduction section. Next comes the section where you describe the project needs, goals, and objectives, always keeping the readers’ point of view in mind. For an internal company proposal or a complex corporate proposal, you will probably need to start off this section with an Executive Summary, which is basically a list of your most important points. Keep in mind that an upper-level decision maker may read only this Executive Summary.

Next, outline all the need for the project. You might include pages like Needs Analysis, Project Background, Goals and Objectives, and other details that explain the current need or opportunity.

Next, explain what you propose to do and the benefits your project will provide. Of course, given the variety of the thousands of potential projects, each project proposal will differ dramatically from the next one. The complexity of the project will determine the length of the proposal: your proposal might be only 5 pages long, or more than 50. This is where the topics included in a ready-made kit’s extensive library will be incredibly useful. Odds are that you will find a pre-written template for every project detail. There are hundreds of topic templates, so there’s no way to list them here. The names shown below are only a few of the most commonly used topics.

For general project information, you can use topics such as Opportunities, Benefits, Project Plan, Project Methods, and so on.

Depending on the type of project, you might need pages like Project Management, Volunteering, Personnel, Supervision, Outsourcing, Facilities, Production Plan, and Schedule topic pages.

You might need evaluation topics such as Expected Results, Evaluation, Acceptance Criteria, Measures of Success, or summary topics such as Project Summary and Recommendations.

If your project is very complex or technical, you may need detail pages such as Documentation, Diagrams, Definitions, Schematics, and Studies.

Any project has costs, so you will probably add financial pages like Budget, Project Cost Summary, Cost/Benefit Analysis, and so on.

To show that you have considered all aspects, think about adding topics such as Assumptions, Risk Analysis, Contingency Planning, Coordination, Project Oversight, and Accountability.

After you’ve provided all the details for your project, it’s time to persuade your readers that you’re right for the job. Add topics to describe your Qualifications, Credentials, Company History, and Experience, and be sure to include any Referrals, Testimonials, or Awards you’ve received. Finally, conclude with a Call to Action, specifically asking readers to take the next step in approving your project.

Those are all the basic steps for writing your proposal. Now you should take some time to make the proposal look good by adding your company logo, choosing special fonts or bullets, or using colored borders on your pages. Be sure to match the style of your proposal to the style of your organization and the type of project, and keep in mind your relationship with your readers.

Spell-check and proof every page before you send the proposal out. It’s never a good idea to proofread your own work, so try to find someone else to do the final proofreading pass.

Finally, print the proposal or save it as a PDF file-whatever seems appropriate for your project and your readers. Then deliver it using the method that’s customary for your organization. It’s common to email PDF files, but these days many people receive so much email that a PDF attachment might be easy to overlook. If you decide to print a complex proposal, make sure the pages are easy to flip through, and add tabs if needed. For an internal company project, you might be sharing editable Word versions using collaboration software.

You can see now how the content of each project proposal will vary widely because of the variety of organizations and types of projects. But you can also see that all project proposals should follow the same basic structure.

Want to speed up the process of creating a proposal? Then use a pre-designed proposal kit and get a head start. Pre-designed templates found in kits contain easy-to-understand instructions and examples that will guide you to add appropriate content to each proposal page. A good kit will include a variety of sample project proposals, too; studying these can give you great ideas on what to include and how to format your own proposal.

Project Business Software

A good business project management software program is there to help ensure that you remain on track with whatever task has been set in order to reach your goals. Before the introduction of computers and software the only way a person could devise and then manage their projects was by using pen and paper.

However, because of the introduction of the likes of such programs as Microsoft Office Project or Microsoft Office Visio many of the tasks previously done by you can now be done on your PC quickly and efficiently. Using such programs, you will not only help you to organize but also manage your business more effectively. In addition, when it comes to planning and then tracking projects everything is easily available to hand and the information can then be provided quickly to those that need it.

Now let us take a look at some of the other benefits that a business can gain from using such software programs when they have a project underway, no matter the size.

Benefit 1 – These types of software programs provide those involved with the project a quick but clear picture of exactly what is happening and where the project is at and where it is going. So even those people who do not get involved with the project from the beginning are quickly able to be brought up to speed on what is happening, what has happened and what will be happening in the future.

Benefit 2 – All the programs can be fully customized by those using them so that they can work in relation with the project that is taking place. Moreover, they allow you to track every step of the project as and when it occurs.

Benefit 3 – There are some project business management software programs around which can not only be used within the confines of your company but can also be relayed to others no matter where they are in the world.

Benefit 4 – The reporting systems on these programs are easy to understand and can provide the information that is required at the click of a button in order to that you can then make a much more informed decision.

Benefit 5 – Because the information can be made readily available to many different people at any one time this means that those involved in the project can collaborate together more effectively.

As you can see from above there are many reasons why if you have any projects to be carried out in the future that need to be constantly monitored and tracked. Then getting a good quality business project management software program is essential.

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