Slicing Your Pie

Every business slices their pie in slightly different ways, some by choice, some by necessity.

So, after GST is removed from your total revenue, you might roughly have;

• 30% Cost of Sales (COS) / Cost of Goods Sold (COGS)

• 35% Wages & Salaries (including PAYG, Superannuation and Workers Comp. insurance)

• 10% Rent & Outgoings

• 10% Profit (fingers crossed!!)

Which leaves 15% as this grey area usually grouped as ‘Overheads‘.

These expenses can be vaguely split these into two columns, Fixed or Uncontrollable Costs and Variable or Controllable costs.

Your Bookkeeper or Accountant may split these down further sub-categories, ie Licences & Permits or Postage & Stationery.

If you are a restaurant, your annual liquor licence fee is practically an uncontrollable cost. You don’t set the figure, and you must bear the cost if you want to sell liquor.

Stationary would generally be a variable cost. There might be a minimum annual cost, i.e. printer roll or basic menu printing. But ultimately you can shop around and decide to change where you spend this money.

The best reason to split expenses this way is to focus on where the most savings might be.

Approach both of these columns with creativity, and there may be more than you can do about traditional ‘Uncontrollable Costs‘ than you thought!

It would be great to hear anybody else’s experiences, tips & tricks in the comments below!

But first, a couple of ideas or mantras to bear in mind

“The poor man pays twice“ - Saving money in the wrong areas leads to having to pay more for it in the future.

“Chase down the 1%-ers“ - Probably an update on your Grandparents saying “Look after the pennies and the pounds will look after themselves“. Sweat the details, and they soon add up to a bigger difference

“First, pick the low hanging fruit!“ Challenging yourself to save 5% on your overheads is a big task, but the first couple of % might be easier than you think, and you can build up some momentum.

17 Practical Ideas To Save On Overheads

1) Laundry

There are plenty of commercial laundry companies to launder napkins, table cloths, or even chef whites. If you have space, why not buy or even hire (Radio Rentals) a washing machine? Using timers to delay washes to off-peak electricity use could save costs further.

2. Printing

Printing menus by season could be a good option depending on your setup. Printing menus in-house can certainly be cheaper, especially if you can commit to larger orders from good paper merchants, check out Papermarc. For best value printing use monochrome laser printing over inkjet and look for bulk toner drums. Also, regularly printing menus in-house allows you to adapt to market availability and specials from your suppliers.

3. Flowers

Fresh flowers can be a great addition to your venue; they break up hard surfaces and corners and add life and freshness. The price can certainly add up over a month. Explore building a relationship with a local florist over a commercial supplier, perhaps negotiating a discount for allowing them to leave business cards by a floral display? Alternatively, dried Australian natives can have a great look and last many times longer than fresh flowers.

4. Candles

If your venue is open into the evening, candles on tables can help create an atmosphere and a subtle movement in the room. Tealights generally come in 4 hours or 9-hour sizes, and the larger ones provide better value. Don’t let staff replace them all every shift; some will burn quicker than others if positioned in a draft.

5. Waste

If you are in a central area, you may have multiple options for waste disposal companies. Services tend to be comparable, but prices can vary considerably, depending on what other clients they have in the area. Carefully plan when you will need your pickups as most companies charge per ‘drop’ for each bin size, no matter how full they are. If you have space to store larger bins, why not see if any neighbours want to split costs with you? Additionally, the more recyclables you can separate the better, paper and cardboard are bulky, but collection fees are a fraction of that of general waste. Insist that suppliers take back and polystyrene (cold packaging), the drive might grumble but they usually will!

6. Pest Control

Better to have regular maintenance than an urgent call when there is a visible problem. Find a company which will do you an upfront annual price for savings.

7. Bulk Chemicals

If you have space, try to buy chemicals in bulk. You can generally find 20L drums of dishwashing liquid, sanitisers and rinse-aid among others. Make sure you get the right taps or pumps to dispense small amounts easily. Also, check any dilution instructions, bulk chemicals can be crazy concentrated, I’ve seen 1:250 surface sanitizer, yep 2ml for a 500ml trigger bottle!

8. Daily Cleaning

Do you need contract cleaners every day? On quieter days of the week, could opening or closing staff to the minimum with deeper cleaning by the pros on busier days? Keep your cleaners on their toes; the level of detail can often fall off after a few months. Negotiate price based on time in the venue rather than the jobs completed, and if you notice they are finishing quickly, you can find extra tasks.

9. Utilities

Know your quantities and shop about, they profit due to the inertia of their clients switching providers! Power prices keep rising, but smart meters may provide an opportunity to analyse your usage. Smart switches and monitors might allow you to control usage when you are not open. Maintaining and replacing fridge doors seals saves heaps of energy and the life of your fridge compressors.

Chefs have an awful habit of leaving their range burners running all day and night, get on their case about costs and the saving of fossil fuels!

10. Breakages

Cheap glassware and crockery is a false economy! Unless you must have to have bespoke pieces from a local artist, look to the mid-range. Cheap serving-ware chips and cracks in a heartbeat, Ikea might look cool at a reasonable price but is unlikely to survive many trips through a commercial dishwasher.

Did you know that many of the European brands offer 5yr chip-warranties on their products?

Similarly with glassware, especially stemware. The cheaper stuff is made in two pieces and creates a weakness. Without spending a great deal more, you often get incredible durability and elegant styles. Invest in a stemware rack for your glasswasher to save them toppling over.

11. Freight

Money down the drain! Lean on your suppliers, minimum delivery orders and try to top-up accordingly. Most suppliers will be flexible if you can be on your delivery days and times.

12. Subscriptions / Contracts

More and more, subscriptions are growing ongoing expense in the internet age. Software subscriptions and digital services can be at the mercy of USD exchange rates. A good opportunity could be the option of paying for a year upfront, with savings of up to 20-30% A good option at EOFY to minimise income tax on profits.

13. Buy New or Second Hand Equipment?

It’s a trap to think that when you are birthing your venue, you need the best and shiniest equipment to make it work. Like new cars, kitchen equipment loses a huge chunk of value as soon as it’s installed and switched on. Second-hand equipment can be found very cheaply and honestly, after six months, most people wouldn’t be able to tell the difference.

Sophisticated equipment like combi-ovens or induction hot-plates might benefit from warranties, but the more traditional kit comes with the same annual maintenance from the second year to the tenth. Gas regulators & ignitions and fridge compressors & door seals are just as expensive!

14. Home kitchen equipment

Chefs love their toys. In these days of home Masterchefs, much of the specialist equipment available to the home cook is pretty good and very affordable.

You can find all sorts of equipment from leading brands in department stores at fractions of the price of commercial brands.

Some examples of equipment with great home brands:

• immersion circulators

• dehydrators

• cold-press juicers

• induction plates

• food processors & mixers

As a bonus, Myer or David Jones are a lot better about warranties (with almost no questions asked) than wholesale suppliers. Your kitchen team can break 10 Anova circulators for the price of 1 x Polyscience!

15. Disposable Consumables

There are a ton of savings here, and you can be revel in your new, environmentally conscious status!

Plastic straws & stirrers? No need! Or if they really really must have a straw, check out these wheat straws. Drink coasters? Can be up to 6c apiece, look into reusable cork options?

Takeaway containers for storage back-of-house can be expensive and wasteful. Could you use stackable mason jars or reusable plastic storage like you would at home?

16. First Aid Kits

A cook cuts his hand deeply; unfortunately, your first aid box consists of 3 small blue plasters and some Panadol. Your worker's comp insurance may not pay out if first-aid is not given on the premises. Full catering first-aid boxes are costly and a hassle to keep organised, stock-take and replenished. Sanokil and others install and maintain comprehensive kits with quarterly visits for no upfront cost and a very reasonable annual fee.

17. Telephone

If you have a decent internet connection, you might want to look at a virtual phone line. Take a look at cradle.io, at $50pm inclusive of all calls AU/NZ calls. You can access your line form an app on your phone from anywhere, receive voicemail by email and set up phone trees (IVR’s - press 1 for reservations, etc.) custom messages & opening hours. A better product and a saving. Pair with fixed wireless broadband to give Telstra the flick.

Have you found this useful?

Share with friends or let us know your top tips in the comments. Let's shave a few bucks on expenses and get a few more into profits!

(reading time: 8mins)