Seven Ways to Ensure Your Hospo Business Turns a 10% Profit
We’ve seen it all too many times – young guns opening venues with fire in their bellies and passion in their eyes. They feel they’re great employers, teachers and community leaders, but at the end of the day, the return on all their hard work isn’t up to scratch.
The biggest mistake we see is what we call “death by 1000 cuts”. They’re individual concessions, not strictly mistakes, which ultimately leave business owners with too small a piece of the pie.
Interest piqued? Here are our top seven tips for improving your profit margin.
Fixed Costs
> Are you charging what you need to cover your costs, and ultimately, what the market will bear? Value can be added simply by how goods are handled, plated or described. For example, host an hour of training to ensure staff are fully across menu items and dietaries. Ensure plating is consistent and all employees encompass company values, too.
> Your rent, insurance, licences and permits and electricity – should, absolutely be negotiated. Shop around for the best deal for your business because they’re going to cost the same whether you’re open or closed, quiet or busy.
> Your ideal rent ratio (rent and outgoings/sales after GST) should be around 10%. Are you above this? Boost it with creative fill-ins during times you’re closed – perhaps a stand at your local farmers market could use your kitchen for prep one day a week.
Variable Costs
> Test your recipes! Well-tested recipes, consistent suppliers and chefs who carefully manage inventory and wastage can help greatly with keeping a reliable figure.
> Conduct regular stock takes and menu costings to catch issues quickly enough to stop them affecting your bottom line. Your profit and loss statement won’t lie. There’s no right or wrong on what your business will or should spend but knowing how this fits in with your fixed costs and your labour costs is vital to knowing how and when you turn a profit.
> Budget ALL your labour costs – the PAYG element as well as your upcoming super payments. If you have a large payroll, you may like to add in your workers comp insurance and any annual leave liabilities to get a complete picture.
Paying award rates and carefully accounting for all penalty rates, loading and overtime is baseline, however, working out rostered days and hours is a negotiation – if you lay out the boundaries and budgets, your team should respect your business and your consistency.
For example, it might be more convenient for a staff member to work 30 hours per week over four shifts, but if the business demands are to cover slightly shorter periods over more days, then those are the shifts available. If an afternoon is unexpectedly quiet, offer the early finish to the casual workers and you may find that they jump at the chance.
> Write your roster using placeholders or just roles or titles such as “barista” or “host”, instead of names and availabilities. This will help paint the picture of staff you actually need.
If all is going to plan and no unexpected maintenance, repairs or other expenses fall due, your business should aim for a 10% profit. Yes you should chip away at your fixed costs, haggle and penny-pinch, but assertively jumping at opportunities to shave your variable costs is vital to nabbing that well deserved bigger piece of pie.