Here is my situation. I would appreciate a completely unbiased opinion about whether or not you think I'm (ahem) crazy...thanks :) Warning: VERY long!

I am 30 years old and just had my first (and probably only) child about 5 months ago. My husband is working full time and making about $1500 shy of what we need to really be comfortable each month in covering all of our expenses. The time has come that I need to be bringing in this extra $1500 a month. We agreed before having our son that I would likely need to go back to work. In addition my husband is planning to go back to school full time in September for one year to finish a masters. He will still work during that time but will lose another $1000 or so a month. When he completes his degree, his new position will provide a lot of stability in terms of health care, pension and long term job security, but I will still need to add to our income to make ends meet comfortably.

The problem is that I LOVE staying home with my son, more than I ever thought I would. Before I had him I was very career oriented and have always wanted to open a successful business of my own. I have TONS of experience in food service and have managed complete start ups in the past. And so now, I am seriously considering opening a gelato cafe. I am choosing gelato because it is somewhat easy to make, allows for a ton of creativity with flavors, is a unique treat (there are currently only 8 other places in my city of 550,000 people), and because I can pretty much run it on my own until it is doing well enough to hire employees. Most importantly it will give me a LOT more flexibility to spend time with my son.

I will be attending a seminar this month to learn the details of opening a gelato cafe specifically since most of my experience is in full scale restuarants. I am aware of the late night and weekend hours but I feel good about doing that as long as its on my terms.

I have figured out that my start up expenses are about $50,000 and I would want another $40,000 cash in the bank to put $2500 a month as my income contribution to the family (the absolutel minimum I would need while DH is in school) and $2500 a month towards the commercial lease and the loan payment (which I will explain in a moment) for 8 months in case the business doesnt make a dime in that length of time. I know 12 months is ideal, but I simply dont have the money for that. My break even analysis showed that I need about 100 customers a day at an average sale of $4 to make the approx $6000 net profit a month I need to run it (including my salary of $2500 a month).

I plan to situate the cafe in a high-foot traffic area and will advertise at a rate of $5000 for start up and $1000 a month thereafter. Also included in my start up costs is a budget of $1500 to have a "free gelato" grand opening where I will give away a free scoop to anyone who comes by. I will advertise this beginning a month before our opening in some local papers and on flyers. I have investigated other gelato businesses in the area and even in the winter months they seem active and lively, especially since this city's winters average around 45 degrees and very minimal snow.

The cafe will have a cozy atmosphere and will be decorated to encourage people to sit and stay a while. In addition to gelato, we will serve locally made baked goods, coffee/tea, and selective beer and wine -- specials monthly. Ideally, we would like to have enough space to build a small, 10" high stage to allow for acoustic musical acts and other small group functions (birthday parties, etc.)

In order to finance this venture (as I mentioned earlier), I will need a loan. After some research (although I am always open to hearing new ideas), I am looking at a home equity loan as my best option. It would be at around 11% interest because (I am told) that we have stated income only (hubby works on indep. contractor) and we both only have about 630 credit.

So I dont end up upside-down on our mortgage, I would never take more than 92% of our entire equity out as a loan, combined with our current savings to make up the capital needed. Ideally, if I can put an extra $625 towards the principal of the loan per month, I can have it paid off in less than 10 years. 80% of all profits above the break even point will go to pay off this loan as quickly as possible. The remaining 20% will go towards continuing to grow the business.

I have seriously researched this idea and feel confident that I have the experience and know-how to make this work. What I am still uneasy about are the following things:

How can I know that 100 people a day is realistic? I know I can make enough gelato to handle that amount using the equipment I will purchase with the start up money, but is 100 people a day realistic for a gelato cafe?

Am I crazy for funding this on my home equity? Especially at 11%? What other options do I have?

Am I crazy for doing this at a time that is so financially rocky for us? In 2 years my husband will have a much more stable job but in the meantime, what do I do to make $2500 a month plus the $1000 I will need to pay for day care. While I am qualified to do a job of this pay scale, it would mean at least 40-50 hours a week away from my son. I really hate this idea although I know tons of women who do it and I know it is a reality of life sometimes. But, if I can come up with an alternative, shouldnt I go for it? I know it is risky, but isnt everything in life? I feel I have calculated this out and know what my risks are. In all reality, if it totally bombs, then I sell everything, pay off half my loan with it, and find a job with a stable salary with one added bill a month (of about $500) to pay the rest of the loan. If I have to put my son in day care at that point, at least he will be a bit older and I would feel better about that... so at the very least this risk buys me some more time with him.


So what do you think? What other questions should I be trying to answer? Do I need a good slap upside the head? Any imput is greatly appreciated. Thanks!

Hey,
If you want to stay home, why open a cafe? Look into something you can do from home -- maybe using your food service experience to consult to others, especially since you "have managed complete start ups in the past".

I think you'll get ideas (in general) and inspiration by looking through the profiles of other small business owners here at Idea Cafe. Check out our People in Biz Profiles section from the link from the left bar.

Food for thought!

Cyberhost at Idea CafeThe Fun Place for Serious Business(sm)

Well you've certainly given this serious thought and consideration. You've just about got a business plan in your post. But to be perfectly blunt, I think your excitement has gotten the best of you. The Cyberhost made an excellent observation...if you want to stay home with the baby, why are you talking about a business start up of this magnitude. Sure, it's not a full scale restaurant, but you would still be away from home at least 60 hours a week.

And you would be at very high risk of losing your home. Yes, you took all that into consideration, but realistically, once you have a business and you find that your projections and assumptions were off, and you are not meeting your expenses, much less making a profit, you very quickly can lose everything. And I mean very quickly. You may not be able to sell the business if it comes down to that.

100 customers a day is likely not a realistic assumption. Half that might still be an optimistic number. You cannot assume a full customer base right from the get go. It can take years to build up to that.

With all due respect (and I truly do respect all the research and hard work you've put into your plan thus far), consider this that slap upside the head you asked for.

Go back to the drawing board and find something else that won't risk everything you have. (Take a peek at my site. I offer lots of suggestions there.)

And good luck to you and your family. I sense good things in your future if you are careful and patient.

Sylvia
http://businessplanmentor.com
Business plan and start up resources