Work Smarter Not Harder


Selling a business, Business for sale, Running a cafe, Running a restaurant
Work Smarter Not Harder

January and February are unpredictable months in the food hospitality industry, many business owners are under the false perception that you need to either increase trading hours or discount more to increase the volume of sales, in order to make more money.

However, the answer is often to adopt quite the opposite strategy. There is another way to make more money, which is to increase your profit margins!


Focus on profit, not turnover:

Investigate your gross profit margins across your menu and promote the products with the highest profit margins – these are your specials!

When your volume of sales decreases in the slower months of trade you need to adapt, by offering less choice so that you do not need to stock more, whilst refining your product so that it is less labour intensive to produce at the same scale as your normal menu. Then spend more time rotating these specials so that your lower quantity of menu items are being refreshed more frequently.

If your turnover decreases by 15%, manage your variable costs so that your wage bill decreases by the same percentage; this way you only need to nominally improve your gross profit margin by approximately 5% to maintain the same profitability. When turnover falls - stop selling low margin products and focus on making your lower volume of trade count for you and your business.


Stop discounting, just don’t do it:

Discounts can send your business into a downward spiral, particularly in the case of vouchers where you cash in today for a promise to deliver something tomorrow. Discounts often have a reverse effect on the health of your business and can wind up being the grim reaper for businesses which do not realise just how much they destroy your margins.

Take that espresso bar without a kitchen which offers a menu from wholesale channels for a gross profit margin of 50%, discounting your prices by only 10% means that you will now have to increase your sales by a whopping 25% just to break even!


Increase your prices!

Are you mad? Not at all, in fact most business owners are more concerned about how they think that price sensitivity is an issue for the customer, than the customer themselves. Of course there will be a loss of some customers, but ask yourself whether these are the customers which you really need to centre your efforts around?

Take the example above, your gross profit margin is 50%, now increase your prices by 10% instead; welcome to a position of power - now you can afford to lose 17% of your customers and still break even!


Forget thy neighbour, concentrate on you:

The numbers are down so you take a walk down the street to check on how your competitors are going… what a complete waste of time that was… and how do you feel now - pumped?

Invest time in differentiating your business from the competition, talk to your staff and focus on the superior service that you can offer, get on social media and network with your customers, create your own atmosphere and get noticed… and if you need to go for that walk then knock on doors and introduce yourself, make it worthwhile.


Still feeling frugal, ok check your bills:

Lowering overheads is a much better use of your time than lowering prices! Check all of your bills and invoices... now you have something to talk to your competitor about too!

You will soon get a good understanding about whether you are being charged more for a service, or billed for a service which you no longer use, or have never received. Also you now have more of a history, what better time to negotiate?

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