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?
The business analysis is mostly done in 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 of performance assessment for a restaurant or other food & beverage outlet that we will be looking at. For example the distribution of expenses is pretty straight forward in hospitality industry:
All your money coming in is your revenue/sales.
Then you have expenditures. There are three major categories of expenses before you can take a profit:
- Cost of Goods (all products that you buy, like food & beverages)
- Labour (staff that you pay)
- Overheads (things that you need to run the business)
In rough terms this distribution should be 100% Sales – 30% COGs – 30% Labour – 30% Overheads. This will leave you with 10% for tax, interest and profit. It can be maybe better explained with the cake metaphor: all your sales make up a cake and the expenses are pieces out of the cake. You can’t take more out than you have so you have to distribute it right.
This is what we will be looking at. Are you spending too much in one or more categories? In the end you don’t have more than 100% of the “cake” – if you take a big piece here and another big piece there, there is not much leftover for the last piece – and the last piece is the very reason why you are running the business, your profit.
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 we can 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 & Profit
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