The Bowden Group Blog

Wow  -  this weather is amazing.

Just when we thought we were going to have to put away all the patio furniture  -  here we are dusting it off again.

The pool has already be drained for the Winter  -  JUST when we need it most!

Traditionally this can be a quieter time, after the main holiday period.

For those lucky enough to benefit from a ”shoulder season”  -  it should be even wider this year.

So …

Enjoy the extra business, but do remember to keep monitoring those proft margins, and the labour cost.

Talking of labour cost …  have you started planning your labour costs for January?

Have you made sure that your staff have holiday time booked in January and February  -  we may not be so lucky with the weather then!

If you have any questions  -  just call me on 07831 407984.

Enjoy!

Several magazines have been running features from me over the last couple of months. One in particular appeared in Pizza and Pasta as well as their Cafe sister publication. In case you mised it we thought you might find the following interesting: In any business it is control that counts, control of the figures, control of the staffing levels and control of the stock…  Unfortunately, restaurants and take-aways are not always easy to control, so I would strongly recommend using a good book-keeper to keep control on your figures.  My suggestion has to be that you do monthly profit & loss accounts as a minimum.

Even with monthly or quarterly P&L accounts, the very best way to make sure that your business is profitable and under control is to monitor key figures on a weekly basis.  I advocate tracking sales, gross margins and wages every week.  Comparing with last year’s figures is a very useful thing to do as well, because of the benchmarks such data can provide.

One of the businesses that we are very proud to support is a restaurant in the South East.  This financial year they will make a profit of over £50,000.  Last year it lost over £30,000.  This is the same place, run by the same team.  The one major difference is that this year there has been ongoing monitoring from both them and us on a weekly basis, enabling the operator to react and respond very quickly to any changes.

So you think you want to buy or run a Pizza business?  It will be a challenge, but you can succeed if you follow four simple rules: •    Do a business plan before you start and make sure it is viable •    Do regular monthly management accounts •    Employ a good book-keeper •    Monitor your business’s performance weekly

Carrying out these basic steps will give your business the very best chance of being profitable, and staying that way.

Several magazines have been running features from me over the last couple of months. One in particular appeared in Pizza and Pasta as well as their Cafe sister publication. In case you mised it we thought you might find the following interesting:

Once you’ve bought the business and moved in, or found and converted the premises, you’ll be very busy working on all the day-to-day jobs but the danger here is that you might lose focus on the figures, so ensure that you get regular profit & loss accounts… and make sure that the figures generated are those that you need.

For example – yes, we need to track sales, but we also need to track carefully the gross profits that we make, as these can mean the difference between the business working or failing.  I have seen countless businesses that had good sales, but poor gross profits.  As a result, no matter how high the sales, the businesses just were not going to make a profit.  Ultimately, if you reduce your prices to increase sales, you need to be careful, it won’t matter how high the extra sales are if you have eroded all your profit.  Also bear in mind that, the higher the sales, the higher your wage costs are likely to be.

We all tend to think, for example, that pizza businesses make a lot of profit.  And indeed, they can do – in the right hands.  The companies that run these businesses as chains have highly developed costing programmes, and their portion control is almost perfect.  But be warned – as a small independent operator, you certainly can’t compete with them on price – you will be paying a lot more for your food ingredients than they are, and it is also likely they will be a lot more controlled about their wage costs.

Several magazines have been running features from me over the last couple of months. One in particular appeared in Pizza and Pasta as well as their Cafe sister publication. In case you mised it we thought you might find the following interesting:

You should start with a Business Plan, where you ask and answer, fundamental questions about the business.  This includes such things as being very specific about the product that you plan to sell and the competition that already exists, or might develop in the area.  You’ll need to consider the location as a whole is it likely to grow or be bypassed.  Sometimes, a planned ‘’town by-pass’’ might cut off a certain amount of existing business or a planned ‘’one way system’’ might lead people away from the business.  These are just some of the more unusual things that you need to consider.

When the outline Business plan is done, you’ll need to move on to do some figures and financial forecasting.

Whilst everyone talks about cashflow  -  and it is very important to do a cashflow forecast, I like to start with a Forecast P&L  -  or a Budget.  This shows us how we expect the figures of the business to look, over the first twelve months.  It should be done in a monthly format, with the twelve individual months making the year.  A simple spreadsheet will achieve this and will pull together all the figures.

If you are going to a bank for financing or borrowings, they will react much more positively to the fact that you have done a business plan and a Forecast P&L – because that’s what they can ultimately use to understand what you’re trying to achieve – don’t forget thought that they will challenge you on your assumptions.  This challenging is however healthy, as it will make sure that you are confident of where your figures are coming from: what your sales may be, what your gross profits will be, your labour cost, premises costs etc.

If you do the forecast and the business doesn’t look viable, then don’t just kid yourself that everything will work out fine – go back to the drawing board and start again.  If you don’t do a Business Plan, and the Forecast Profit & Loss Account, then you are taking an enormous risk.

Surprisingly I am just as happy about business plans that show the business is not viable as those that turn out to be a huge success.  In these instances I may have saved someone’s savings and their house, by simply helping them to realise that the business probably wouldn’t work.

Several magazines have been running features from me over the last couple of months.  One in particular appeared in Pizza and Pasta as well as their Cafe sister publication.  In case you mised it we thought you might find the following interesting: Everyone thinks that they can run a food business – be it an Italian restaurant, Pizza house or take-away – and so many try and fail.  Which is why it is worth exploring what you should do to avoid failing, if you are determined to go ahead.

What are your options?  Well, you could be buying a business that is already well established, with existing sales and a good track record.  In this instance you’ll be paying a premium for the business, known as ‘’goodwill’’.  That’s fine in itself, as long as you are not paying too much for that business in the first place.  If you are, then there is a danger that the business may not produce sufficient profit to give you enough ‘’payback’’ on your initial investment.

Worse still if you have borrowed capital to buy and run that business, and you are paying interest on that money.  So – you need to think this through carefully.  But there is a big difference between buying an existing business and the alternative – starting one up from scratch.

Before you commit to anything such as premises, you need to do some planning…

The Bowden Group has launched an iPhone VAT application for the hospitability industry. The application has been launched to help hotel, pub and restaurant owners to cope with VAT changes which will come into effect from January 2011.

The application known as The Bowden VAT Rise Calculator comes after the success of the online version that was introduced in the company’s blog pages (http://www.hunterbowden.co.uk/blog/)   by Hospitality Business Mentor, David Hunter in October this year

Speaking at the launch, David Hunter said: “The iPhone application and the ones that are  planned to follow, will provide digital and convenient solutions to the daily business of hotels, pubs and restaurants. It is a revolutionary step that will enable hotel and pub owners to manage their finances better using their mobile phones.”

The idea of the Bowden VAT Calculator was originally suggested by David Hunter after he observed that pub, restaurant and hotel proprietors were increasingly failing to come up with the right strategies to maintain their profit margin with the increase in VAT prices.

David Hunter feels that it may be challenging for some to cope with the figures and percentages involved in tax, especially the increase in the VAT prices, but smart planning can help maintain consistent profits.

David adds: “The iPhone application is designed to provide strategic solutions about what needs to be done to the selling price to maintain current margins. It will also add another trendy digital element to the UK’s hospitality industry.  Work is also already underway on a professional version, including additional enhancements to improve profitability, which will include a Menu and Bar individual item costing and pricing tool as well as the ability to save the relevant information.”

David Hunter has 25 years experience in the hospitality industry. David has rescued hundreds of failing businesses, many of which the owners themselves had given up on. The new iPhone application is his latest contribution to the industry and probably an apt one in the current economic climate.

David Hunter, the hospitality business mentor, says that 45-55% of the failing businesses within the hospitality sector, working with him, are owned by individuals who have no prior experience and knowledge about the industry.

David Hunter says: “The hospitality industry may look very appealing and easy to manage, but it is one of the most challenging areas to run a business. Most people who invest are highly enthusiastic, but they don’t have any knowledge about hospitality management. These owners, who come from different business backgrounds don’t implement controls and systems that are necessary to ensure smooth operations and profits. They tend to rely on appointed managers and staff that are not well managed.”David maintains:  “The hospitality industry is a vast and a tricky area. It is not just about having a great looking pub, but among other things, it involves having a sound knowledge about the market, customer preferences, trained staff with the right attitude and a good marketing strategy.”

David Hunter says that from his 35 years of experience in the hospitality industry, he has observed that a huge number of people who want to try their hands in this sector are highly successful entrepreneurs with lots of capital made from running very successful businesses in other sectors, but they then fail because they don’t understand the specific issues of the hospitality trade.

In addition, when these investors appoint managers, as most of them do, they do not necessarily check that those managers have the skills needed to run a business, and they fail to manage the activities of the managers.  As David comments: “Managers have to be managed, and motivated – and that is the owner’s role!”

David says: “Across the UK, we are seeing lots of pubs and restaurants closing down due to the recession. However, things could be set right and a large number of businesses can be saved if the owners have a better understanding of the commercial and management aspects, and get the basics right.”

The Bowden Group’s David Hunter believes that the hospitality industry as a whole, and independent companies in particular will suffer due to poor management of the VAT rise in January.  In an effort to help a simple VAT calculator has been added to his blog – www.hunterbowden.co.uk

Hospitality Business Mentor, David Hunter: “Pubs, restaurants and hotels regularly fail to increase prices in line with imposed changes.  This includes the annual rises following each budget as well as higher supplier costs and, as we will see in January, VAT.  Instead they maintain prices, cutting into their own profits.”

Hunter believes businesses owners don’t want to pass on the costs:  “As I go about my business I regularly meet people who feel that increasing their prices by a penny or two appears mean in the eyes of customers so they simply do not do it.  That might work one year, but if they adopt the same attitude year on year it will chip away at the profits and make their business unsustainable.”

Coupled with this lack of desire, Hunter believes there is also a lack of understanding:  “This is going to sound harsh but I regularly meet proprietors who have difficulties with figures.  It goes without saying therefore that the figures and percentages involved in tax, particularly VAT increases may be challenging for them.  To ease matters we have added a simple calculator to our blog that does the maths for them.”

Hunter added ‘’ There is obviously more to maintaining your margin than increasing prices.  This calculator just shows you what needs to be done to the selling price to maintain your current margins.  You could equally source the same product elsewhere for less, or change to another product that has a different cost base – maintaining your existing selling prices.’’

Hunter defends his comments:  “I know some people will say that this calculator is patronising and they are all capable of dividing by one figure and multiplying by another.  But that doesn’t take into account every individual – such as those people who maintain their success by being great hosts rather than financial managers.  For them, such a simple formula is ideal.”

That VAT increase …

We all know about it.

We all hate it.

We all know it’s going to happen anyway.

So – how many of you have actually done anything about it?

It’s probably time that you DID do some planning for the VAT rise – or were you just going to ignore it, and hope that it goes away?

The cold fact is, that if you do nothing when the VAT rate changes, you will make less money – yes, even less!

You could call me on 07831 407984 to have a discussion about it, or you could act like an ostrich and bury your head in the sand.  But it won’t get any better that way.

Over the next few blogs we’ll be looking at some options – and it’s not just about increasing your selling prices – that might scare away some of your valuable customers.

Watch this space.

David

-          on eMail at    davidhunter@bowdengroup.co.uk -    or on 07831 407984

David Hunter, the Hospitality Business Mentor from The Bowden Group (www.bowdengroup.co.uk) has launched a focused offer, bringing his services to the tied pub market.

David Hunter says:  “The nature of tied pub leases and contracts means the people running these establishments require more than just a passion for the job.  They need to be business savvy, understand the figures and have all their processes in place.  They also need to love the job, and be prepared for the hours entailed.”

For £395 per month ‘’tied brewery lease’’ pubs across the UK can receive:

• A day of face to face, onsite time with David*
• Access to and instruction on David’s tried and tested methods, systems and processes
• Weekly monitoring  of key figures, with feedback
• Arbitration and negotiation with landlords as appropriate

Hunter continues:  “Unfortunately, due to a lack of business skills, lack of capital or lack of previous experience, many tied pubs are failing.  As the tenants face difficulties they find it hard to meet the needs of the landlord and in time the pub fails.  Through better systems and communications from all parties I firmly believe tied pubs can flourish and become a benefit to landlord, tenant and community.”

*Depending on location and timings this could be one of David’s equally experienced and qualified partners.