Over the years, we have helped our clients thrive in their business. Apart from providing practical advice, we also share our experiences liberally to help them avoid potential pitfalls. One of the key areas that govern the rise and fall of businesses is the management of finances. In this article, we are channelling our focus in helping new business owners as having some good knowledge in this area will put them in a better stead to steer their business.
We will not be going to the extent of providing estimates for each item or area since every setup will differ depending on the concept, location, size and target audience. Nevertheless, we will be pointing certain key areas to manage and also tips that can better help you stretch your dollar.
1) Watch the budget/cash-flow
Most business owners tend to only focus on the big-ticket items, such as renovation, construction, purchasing kitchen equipment, machinery etc. They may neglect setting aside sufficient cash flow to sustain the business. Apart from keeping an eye on the main operational expenditure (i.e. manpower, raw materials), our advice for business owners is to keep tabs on revenue and expenses on a weekly basis. Most businesses tend to look at the numbers at the end of the month or quarter and that might be too late to make vital changes.
2) Have some cash buffer
The bulk of your budget will go to capital investments. This is where you will fork out a rather substantial amount for renovations and kitchen equipment (usually these items will account for about at least 60-80% of your total budget).
When it comes to renovations, do give yourself more buffer as there could be increases in raw materials and manpower costs in the course of setting up a restaurant, which could span between 3-6 months, or at times even longer, depending on the scale of the setup.
Having taken the big-ticket items into consideration, the next key area to look out for is to set aside sufficient cash flow for daily operations. The bulk of your operational cash flow will go into two areas: Purchasing raw materials and staff costs.
Build in sufficient buffer to account for market fluctuations, especially when your restaurant is using up raw materials which tend to reflect seasonal prices or demand. For example, seafood items, like fish, crab, lobster etc. tend to follow market demand, weather patterns, size of harvest etc.
3) Invest in quality
For kitchen equipment, you may wish to allocate your resources more generously in this area if you can afford it. These are investments that can go a further mile, assuming that you are willing to go for better quality equipment. While it may seem that a lot of money is being poured into this aspect in the short run, but you will be able to reap longer term rewards when your equipment produce better food quality and last longer with minimal need for repairs or replacements.
4) Managing your manpower budget
In the current competitive and tight market for labour, this is one aspect that requires much attention. Most business owner may only consider allocating resources based on paying their staff a certain amount of salary. However, they tend to neglect the fact that costs will be incurred when staff turnover rate is high. The amount of resources required to recruit, train and retain manpower goes beyond money as it involves time and emotional energy as well. With these considerations in mind, a business owner may wish to consider raising the salary budget. The reasons are as follows:
a) You will be able to attract better talent.
b) The chances of your staff staying with you is higher. When your staff is aware that you are paying above market rates, they will less likely look out for other opportunities or make a switch when a better deal comes along.
c) You can reduce training costs and time through hiring a more experienced staff (they will also be able to coach other staff that have lesser experience) – this is one huge benefit to reap in a highly competitive landscape.
5) Hire great customer service staff
Intuitively, hiring good kitchen staff and chefs will be the top on your priority list and importance when it comes to allocating manpower budget. But equally important in the hiring hierarchy is customer service staff. The brand of your restaurant is represented and expressed by this group of people. Here are some tips when looking out for hires in this area:
a) Willing to go the extra mile – It is not just a job or a paycheck for them, this is a role that they have passion for.
b) Patience – Some customers can be unreasonable and demanding, patience is definitely a key trait required for service staff.
c) Sharp and observant – This is especially important when you require them to be constantly alert and on the look out for the needs of your customers.
Was these tips useful for your restaurant setup? Comment below and let us know!