Ice cream shops are a mainstay industry within the United States. These businesses have enjoyed continued growth and they are universally enjoyed. One of the best aspects of operating an ice cream shop is at these businesses are able to produce substantially high contribution margins from the sale of ice cream as well as other sweet goods that are sold through their retail locations. Although they do have a certain degree of seasonality based on the geographic location, these businesses are able to produce substantial revenues during late spring, summer, and early fall months. In order to address the issue regarding seasonality, many ice cream shop entrepreneurs will offer coffees, teas, and baked goods on a year-round basis to further drive sales.
When we are engaged to develop a business plan specific for an ice cream shop, we initially focus on conducting the market research portion of the work first. This is important for a few reasons. First, it allows us to understand the market, not only from a demographic perspective but also in regards to addressing competitive issues. The scope of the analysis includes understanding the population size, population density, number of tourists to the area, median household income, median home value, as well as regional specific statistics regarding unemployment. We also analyze the number of businesses in a target market, as well as the annual revenue produced on a county/regional basis.
We also examine how the target market area reacts to different economic scenarios as inflation, consumer spending, GDP, and other economic trends fluctuate. This allows us to apply a risk score to the development of the business, which is compared to the national level of risk associated with starting a similar enterprise.
Once we have all of the market research in hand, we are able to effectively develop a revenue profile for the ice cream shop.
Using the revenue profile that we created, we then put together a full-scale ice cream shop financial model. This financial model includes a profit and loss statement, cash flow analysis, common size income statement, breakeven analysis, DSCR analysis, and related metrics that showcase the development of the ice cream store. We also thoroughly discussed the use of funds in regards to what assets will be acquired as well as the need for operational funds.
The market research in the financial plan are the foundational chapters of the document. Once these are completed, we then move into developing the ice cream shop marketing plan. In my opinion, this is the third most important aspect of the business plan as it provides the methods that will be used in order to drive traffic to location. Initially, we discussed the facility that is being sourced and the use of extensive exterior signage. Most of these businesses are typically located on highly traffic roads and streets. Although obtaining a highly visible retail location may occur a slightly higher rental cost, the return on this investment is substantial.
In regards to online marketing strategies, we thoroughly discuss the implementation of a pre-launch strategy that will create familiarity with the business even before its grand opening. This includes the distribution of online advertisements for a free ice cream or related product among first-time customers. This is an outstanding way to create goodwill while also substantially boosting brand name visibility. We also discuss the use of mailed advertisements in order to further drive traffic to the location among people that typically live within a 5 mile radius of the store. Additional considerations regarding the marketing plan include local search engine authorization techniques, the extensive use of social media, development of televised advertisements, and word-of-mouth referrals.
Once we complete the marketing plan, we then focus our efforts un developing the ice cream shop operations plan. Here we continue to address the issues related to seasonality, the types of ice cream products offered, human resource resources considerations, as well as general procedures and protocols for the smooth operation of the business on a day-to-day basis.
Within the section, we also discussed the pricing that will be applied to all products that are offered through the ice cream shop.
Once these four primary chapters are completed, we then move into the secondary aspect of the work. This includes developing a risk analysis profile as well as a SWOT analysis. As it relates to strengths, ice cream shops are able to produce substantial contribution margins not only from the sales of ice cream but also from beverages as well. The issues related to seasonality can be ameliorated by offering hot beverages during the colder months. For weaknesses, these businesses do have low barriers to entry, and there are always going to be competition within any given market. For opportunities, one of the ways that many ice cream shop entrepreneurs will expand their operations is by developing a mobile ice cream truck, which only produces income but also increases brand visibility. As it relates to threats, issues with inflation can cause the underlying cost of the inventory inputs to increase.
Finally, we move into developing the ice cream shop executive summary. Here, we provide an extensive overview of the business, as well as having this part of the document serve as a road map for the rest of the content. A snapshot regarding the anticipated financial results of the businesses is provided as well as an overview of the market. As many people skip around when reading a business plan, we find the executive summary to be one of the more important chapters as it provides a summation of everything else in document.