This blog is by Smartpay Research & Insights Manager Robert Caruana, based on a panel discussion from the 2023 Fine Food Festival at ICC Sydney. The topic was: “How to take control of your restaurant’s numbers.”
It seems like everywhere you look these days, there are headlines talking about rising inflation costs, and the squeeze that small and medium-sized businesses are feeling on their profits. According to the Australian Payments Diary, RFI Global June 2023, 60 percent of consumers intend to spend less in the next 12 months – this is up from 47 percent 12 months ago. So what does your food business need to do to survive – and maybe even thrive – during these trying times?
I recently joined a panel at Fine Food Australia, the largest food expo in Australia, titled, “How to take control of your restaurant’s numbers.” Alongside my fellow panellists, we discussed what it’s like to run an Australian food business in 2023 and maximise your profits. Here are my top 3 takeaways from the session.
Know your numbers: Set goals for what success looks like
It’s never been more important to be clear on your numbers. As inflation shaves away profit margins, you need to know what your sales and business costs look like to help understand the cash flow of your business. Keep track of what turnover is on a daily, weekly and monthly basis. What trends are you seeing? What days are most profitable for you? This can help you keep on top of what’s normal for your business, and spot changes in trends as they happen. You don’t want to be caught out by a decline in turnover; you want to catch it as soon as it starts to occur so you can adjust your business operations accordingly and stay cash-flow positive.
Equally important is tracking your business costs. Make a list of what falls into this bucket, including not only labour and goods costs, but variable costs like utilities and merchant fees. Historically, there’s an inverse relationship between variable costs and your business’ performance – when turnover is high, this could mean that your costs increase as well. Things like your EFTPOS fees could be percentage based, equalling a higher bill following a particularly strong month. We regularly have merchants who come to Smartpay looking to reduce or eliminate that bill altogether – like the owner of Cafe Zoo, Marc, who is enjoying saving $30,000 a year with Smartpay Zero Cost™ EFTPOS. Knowing these numbers can help you evaluate the value to your business. If you see costs trending upward from one of your suppliers, you can use the historical data to try to renegotiate rates with your current supplier, or shop around to see if there’s a better offer out there for you.
…and be clear on how to track them
It’s one thing to know your numbers – it’s another to stay on top of them. Find a system that works for you and stick to it, whether it’s a classic option like Excel spreadsheets, or an accounting software like Xero, Myob or FreshBooks. The best way to find the right tool for you will be asking your industry friends which ones they prefer. Once you pick one, see if that provider offers free training courses so you can learn the ins and outs for how it can help you stay on top of your numbers.
Once you have your system in place, choose your key metrics, make note of them over the last 12 months, and keep an eye on them – daily, if possible. By tracking a full calendar year, this helps you make note of any seasonal trends, and it means you can set those benchmarks to keep on top of any anomalies in your daily numbers. Some metrics that are good to track include…
- Sales. Knowing your sales can also help you set your break-even point and know what your gross profit is (i.e. how much money your restaurant is making after the cost of goods).
- Break-even point. This is the tipping point for your business – this represents the revenue your restaurant needs to make to cover your costs. This is extremely important to understand how your business is performing and ensure you don’t dip into debt.
- Historical Sales. This is all about knowing how your restaurant does over time, tracking by day, week, month and year. Use these numbers to set your goals for what you should be making at those milestones, so you can gauge future performance against them.
- Cost of Goods Sold (CoGS). What are the costs for your business? This includes food, drink and anything else that goes into making each of your menu items. Especially in the current economic climate, this is one to watch and see how inflation is impacting your numbers. If you aren’t happy with certain prices rising, it might be time to shop around for a new supplier, or re-negotiate your deal.
- Labour Cost. This includes wages, as well as other variable costs like taxes and employee benefits. It helps to know this figure, to see what percentage of your overall revenue is going to your labour costs.
- Turnover Rate. Complementing your labour cost is knowing your turnover rate. What’s the average length a staff member stays with you, and what’s the cost to your business to recruit someone new? This can help you evaluate how to improve retention for your business (a key goal that I talk about later on in this post!).
Keep it cost-effective: Maintain loyalty
Maintaining loyalty across your business is imperative. During tough economic times, people typically revert to what’s comfortable and known to them. This can include sticking to their local, regular spots. How can you foster relationships with your customers to earn loyalty? Foster a community feel in your business. Create a best-in-class experience for your customers, and ask that they leave you a Google review to share their positive experience (we have a blog on how to ask your customers!). Think about introducing an incentive for repeat business. For example, if you own a cafe, can your customer earn a free coffee after a set number of visits? This can be cheaper for your business in the long run, versus continually trying to win new business.
This goes the same for your staff. Find and retain quality staff. Create a great working environment and culture around the workplace – investing in them in turn means they will invest in you through good work and loyalty. Constantly recruiting staff can equal big costs for your business, and burn you out as well.
What are your best tips for how to stay on top of your restaurant’s numbers? We want to hear them! Email firstname.lastname@example.org and we’ll add them to this blog.