Business Plan Basics: How to Wow! Your Banker

by Greg Ubert – Crimson Cup Coffee

A lot goes into a great cup of cof­fee, and the same is true for a great cof­fee shop. To suc­ceed, you need to stand out. This requires doing your home­work and chan­nel­ing every­thing you learn into a solid busi­ness plan.

Over the next few months, I’ll cover aspects of suc­cess­ful busi­ness plans. Because most cof­fee house own­ers require financ­ing of some kind, let’s start with what you’ll need to impress your banker to obtain a loan. You’ll need the same kind of infor­ma­tion for approach­ing other investors, even fam­ily and friends.

In some ways, bankers are much like entre­pre­neurs. They’re always seek­ing new clients and would not stay in busi­ness if they did not lend money. Your job is to make it easy for them to lend money to you. Here’s how:

Build a Relationship. Get to know your banker before you need to ask for a loan. Set up accounts for per­sonal sav­ings, check­ing, busi­ness credit cards, mer­chant pro­cess­ing, etc., as long as the rates are com­pet­i­tive. It’s often best to choose a bank that tar­gets entre­pre­neurs. Even if a busi­ness bank can’t issue a loan, its lend­ing offi­cers might be able to con­nect you with investors, grant oppor­tu­ni­ties and fund­ing pro­grams spon­sored by uni­ver­si­ties, pri­vate foun­da­tions and government.

Toot Your Horn. Your banker wants to see that you have the grav­i­tas to run a suc­cess­ful busi­ness. Now is not the time to be mod­est. Collect infor­ma­tion about your career suc­cesses, edu­ca­tional attain­ments, and cof­fee indus­try expe­ri­ence (if you have any). Be pre­pared to explain that you have the skills, deter­mi­na­tion and self-confidence needed to suc­ceed. Work this infor­ma­tion into your busi­ness plan and have few anec­dotes to share in conversation.

Illustrate How You’ll Succeed. Make sure you know how your cof­fee house will stand out from the com­pe­ti­tion and how you’ll cater to your local audi­ence. Don’t approach the banker until you can demon­strate that you’ve thought of every­thing and that you have a con­tin­gency plan. This means you’ve nailed down every­thing from your loca­tion and how much it will cost to pur­chase equip­ment to your sup­pli­ers and how you’ll reach poten­tial cus­tomers. Be pre­pared to prove or qual­ify every assump­tion in your plan.

Explain the Industry. Coffee houses occupy a unique niche in the restau­rant indus­try, and in most cases you’ll need to edu­cate your banker. When one of my clients applied for financ­ing, her banker pro­ceeded to tell her that she could not run a suc­cess­ful busi­ness just by sell­ing cof­fee. Because she under­stood indus­try fun­da­men­tals, she was able to explain why a cof­fee house would sur­vive – and thrive – with­out also becom­ing a restau­rant serv­ing sand­wiches, soups, sal­ads, etc. In the end, she received the financ­ing she requested.

Demonstrate Financial Strength. Bankers will want to know your per­sonal and busi­ness net worth to judge your abil­ity to meet your finan­cial oblig­a­tions. They will also look at your past credit his­tory – and use it as an indi­ca­tor for the future. Make sure you have expla­na­tions for any blem­ishes. They also will ask for some invest­ment on your part as proof of com­mit­ment. This con­sists of an injec­tion of cap­i­tal and/or col­lat­eral as secu­rity for the loan.

Show Them the Money. Banks are averse to risk; they loan money only when they’re fairly cer­tain it will be repaid. As a result, it is very impor­tant for you to demon­strate how your cof­fee house will make a profit. Submitting detailed finan­cial pro­jec­tions also helps the bank under­stand your busi­ness and how you’ll use the funds.

How impor­tant are finan­cials? Extremely! Most bankers tell me they skim through the busi­ness plan, and then flip directly to the finan­cials if they’re inter­ested. The finan­cial sec­tion of your busi­ness plan requires three doc­u­ments: a cash flow state­ment, an income state­ment (also known as a profit & loss state­ment or P&L), and a bal­ance sheet. Make sure these paint an accu­rate and com­pre­hen­sive pic­ture of pro­jected invest­ment, income, expenses and cash flow.

Get Backup. If you don’t have cof­fee indus­try expe­ri­ence, you can sig­nif­i­cantly increase your odds of suc­cess by work­ing with estab­lished cof­fee roast­ers and busi­ness con­sul­tants. Adding their exper­tise to your own helps reas­sure the banker that you know what you’re doing.

Now that we’ve explored how to impress your banker, we can take a more in-depth look at other busi­ness plan fun­da­men­tals. Next month, we’ll be look­ing at how to deter­mine your break-even point.

Greg Ubert, founder and pres­i­dent of Crimson Cup Coffee & Tea, has been roast­ing cof­fee in small batches since 1991 and has taught hun­dreds of busi­ness own­ers how to run suc­cess­ful inde­pen­dent cof­fee houses. The author of Seven Steps to Success in the Specialty Coffee Industry can be reached at

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