How is your business’s health?
An independent business analysis is one of the most important steps in the process of improving your business.
Where are you now?
Where do you want to go?
How do you get there?
andThe business analysis is mostly done during the initial visit– we talk about your business, we look at your business figures, we assess your financial position. You need to face what you have– honestly and direct – that is the first step.
There are basic rules for performance assessment in a small business, especially cafes, restaurants or other food and beverage outlets.
- You need to make enough money to pay all your present and future expenses so we will have a look if your sales prices are right.
- Next we will assess all your expenses in relation to money inflow- is this sustainable or do you have to cut back somewhere?
- As an example there are three major categories of expenses in the hospitality industry:
- Cost of Goods Sold- COGS (all products that you buy to sell, like food and beverages)
- Labour (all your staff plus associated costs)
- Overheads (things that you need to run the business)
- As a rough stencil the distribution should be 30% COGS, 30% Labour and 30% Overheads. This will leave you with 10% for tax, interest and profit. Using this stencil we will now adjust to your specific figures- lets say you need more money for labour but less for COGS or your rent percentage is high but you have low administration cost.
- You can’t take more out than you have so we have to find a distribution that works for you. This will be our specific stencil that we will find strategies to work towards.
The next step is to find out where you want to go, what you want to improve. Do you want to focus on your sales or on your expenses or a combination of both? Or do you want to focus on a specific category of your expenses?
And then, whatever our focus should be, it is important to have a specific goal set that is achievable in the time frame you choose. Only with that in mind can we continue to the last step of developing an individual plan to get you where you want to be.
A ROUGH GUIDE TO REVENUE DISTRIBUTION
Cost of Goods
Tax, Interest and Profit
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