I can’t tell you how important it is to have a budget if you want to run a successful restaurant—or any other business for that matter. Now, having said that, you would be amazed at the number of restaurants that don’t. I have had clients ask me to help them with their restaurant, and the first thing I always ask is to see their numbers. When they tell me they don’t have records of them, I know immediately what their problem is.
It’s just one big math problem
Knowing how much you spend on food and beverage, how much you spend on labor, what your rent is, all in relation to your sales is the best and only way to have an idea of which way is up. So, start there.
Take the time to accurately record all costs and all sales. I know it’s a pain in the you-know-what but it will give you the starting point you need to operate properly. Once you have these numbers to reference, you can tell where your problems lie. It does take some time, especially up front, but it gets easier and then you will have historical numbers to look at to compare current operating data to.
How are you going to know if you are spending too much money on food? How are you going to know if you are spending too much money on labor? How are you going to know if your employees are stealing from you? If you don’t know, I promise you they are…
Take the time to do it right
Now that you are in the habit of recording this information, you can project future costs and sales. Now you’re talking. What a powerful tool to be able to create a fairly accurate budget that will be a guiding hand moving you forward. The beauty of this is that you can tell in real time if you are on track to have profit, or on a path to disaster. Better finding out in real time where you stand versus waiting six weeks to hear back from an accountant that you will probably be closing your doors soon…If you find out NOW, you can actually do something about it. Imagine the possibilities of seeing and understanding this information before it actually happens. That is how successful businesses operate. Like so many other things in this business, it is all about anticipation.
I know some of these posts are not the most interesting, and don’t always include the best stories, but this information is gold and not taking the time to practice sound financial guidelines will find you in the poorhouse before you know it.
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This is great advice! I can vouch for it as a guy who’s owned several small businesses…. some successful, some not so much 😉