Don’t Blow Your Budget in One Go!
Whether you’ve already opened your dream restaurant or you’re thinking of buying one, you’re going to spend a fair amount of time thinking about and planning your first successful year. One of the cornerstones of running a profitable restaurant is controlling your cash flow in such a way so as to ensure both short and medium-term stability. A well-planned and executed budget should provide a higher cash inflow versus outflow. If your outflow is higher than your inflow, you need to take an objective look at your expenses and start putting cost saving measures in place to shift that balance.
- Hire the Right People
At the end of the day, you are running a business and you need to remember this. At the start, you need to assert the kind of work ethic that results in an increased profitability and elimination of waste. Employ staff who are reliable, team players and share in your vision. Firing and then replacing staff is a nightmare and a costly exercise, it also hampers consistency in your business as customers see new faces every time they visit.
- Keep a Capital Cushion
Expenses add up quickly and planning for the unplanned is crucial for your survival. Make sure you have enough capital available to cover your operational expenses for the first six months. Keeping aside enough capital will give you time to get the business off the ground and start to turn a profit. After the first few weeks or months, you may notice a decrease in sales as the buzz around your establishment dies down. It is at this point that your capital “cushion” will fill certain gaps in your cash flow. Plan ahead and don’t let extra cash during good times go to waste to help keep your head above water during quieter periods.
- Keep the Menu Simple
Many new owners will create overly complicated menus which put customers off instead drawing them in. A complicated menu means you have to carry a larger stock holding therefore increasing your expenditure. In the case of unpopular menu items, the stock will age and lead to revenue loss. Start out with a simple menu, you can always tweak it later when you have gauged what your customers want. Talk to your customers and use their feedback to perfect your menu. Tweaking your menu according to trends and seasons will help keep foot traffic steady and the cash flowing in. A fresh and exciting menu that isn’t over complicated is a great marketing tool!
- Don’t Rely on Credit
You will need to rely on building a good relationship with your suppliers and other third parties for reliable products and services. Most of your suppliers will most likely offer you payment terms which will come in handy when you’re a low on cash. While these payment terms are a nice convenience, do not let them become a crutch for your business and you will land up in a rut. Order what you need for the shorter term and make payment as soon as possible. Most suppliers will offer a cash discount for prompt payments, ask about these as you can save yourself some money over time.
- Start Taking Stock
It is only human nature to want to be prepared for every scenario. The last thing you want to do is be in the middle of a lunch rush and run out of a key ingredient. Start doing daily/weekly stock takes as soon as possible to not only keep an eye stock (theft is one of the biggest financial drains in the restaurant industry) but also help you understand the ebb & flow of your kitchen. Many point of sale systems offer well-equipped stock modules and reports that will you manage your stock, minimize wastage and replenish your stock in a timely fashion.
Controlling your budget effectively will help you reach your break-even point early which means you should start seeing a profit sooner. Over time, you should instinctively know when you reach your break-even point and budget within that range.