When it comes to opening a business, having a solid understanding of your financials is crucial. You need to know your numbers so that you can make sure you have enough money to start up your business. In addition, you’ll need to know how to track your numbers so you can understand how your business is doing and what sort of adjustments you need to make.
For restaurants and cafés, the numbers go well beyond just the prices of your menu items. Whilst these are, of course, necessary for getting customers in the door and adding revenue, they are far from the only numbers you need to worry about or know ahead of time.
Questions to Ask Before You Open
Before you can open your doors, you need to have the answers to several numbers-based questions. The questions below will help you determine how prepared you are. If you don’t have the answers to them, take time now to figure them out. You will only be able to have control over your numbers after you can answer these questions.
1. How many items do you need to sell, and at what price to go from break-even to profit?
This question gets to the root of your business’s success. To answer it, you’ll first need to know what your break-even number is. You can calculate this by following this formula:
Break-Even Point = Total Fixed Costs ÷ (Total Sales – Total Variable Costs ÷ Total Sales)
Use this formula as a starting point to figure out your break-even point and then how much you will need to sell to move past it into profit.
2. How much cash will you have in the bank in a month?
Hopefully, the answer here is positive. You need to have money in the bank so you can cover monthly expenses as well as unexpected costs.
A surprising number of new business owners never answer this question and end up with an unpleasant surprise at the end of their first month in business. Do yourself a favor and answer it honestly so you can make a strategic decision about when it’s the right time to open.
3. What’s the ROI for buying software to help with order processing and tracking?
Investing in PoS software can help you operate efficiently and end up saving you a lot of money, not to mention headaches, down the road. Do some research to figure out which PoS software solution could work best for you. ERP software could also be useful, and many ERP systems integrate with PoS for a streamlined experience.
Identify Critical Numbers for Your Business
There are a lot of numbers that go into setting up and maintaining a successful business. Instead of trying to manage all of them, we recommend focusing on identifying and tracking five key numbers that will enable you to always know where your business stands.
By focusing on five specific numbers, you’ll be able to be flexible and adaptable. Following numbers will make it easy for you to identify problems before they become significant challenges, and you’ll also know which aspects of your business are the most successful.
We’re listing suggestions below, but you may want to swap out some of these numbers for other metrics that are more important for your specific business.
Profit
Of course, the main point of all businesses is to be profitable. Use the break-even above formula to determine your break-even point, then identify how much you need to sell to turn a profit. Track this metric so that you can identify whether you are profitable or not. You can easily track this by the day, week, month, quarter, or year using ERP software to determine where you can improve over time.
Sales & Guest Check Average
With today’s software, you can track sales in really interesting, granular ways. One way that can be extremely helpful is the “guest check average.” You can track this amount to determine which sections of the restaurant or what types of sales tend to have the highest guest check.
In addition to tallying the guest check average in general, you can also break this down by server, so you can quickly identify who your high performers are. Knowing this can be critical when you face a downturn, such as a recession, and need to make cuts to your staff. You’ll be able to keep your high performing and high earning servers and let go of those who are not doing as well.
Product Waste
Food waste is a big issue in today’s restaurants. One study estimates that food waste costs the UK restaurant sector £682 million each year. That’s a lot of food that could be put to better use, not to mention a lot of money that restaurants are tossing in the bin.
Knowing what items are going to waste and why can help you trim down your budget and maximise your offerings. You can easily track food waste using a food log. Train your employees to use it and be consistent.
Consumer’s Perception
Consumer perception is everything in the hospitality industry. You could be doing everything right as far as running your business, but if customers aren’t happy, then your business will have a hard time succeeding.
Keeping an eye on customer reviews is crucial for understanding how the public feels about your business and what you can do to improve their experience. Tracking your star rating across platforms could help you figure out when your service is less than stellar. It can also help you identify improvements that work, which you can identify as your star rating raises.
Employee Turnover
Every industry has turnover, and the hospitality industry is no exception. Track your turnover rate to determine if there is a problem with your operations that is causing employees to leave at a higher than average rate. You can easily calculate employee turnover with the following formula:
Employee Turnover Rate = (Employees Departed / Number of Employees) X 100
Figure Out Your Numbers
Identifying and calculating numbers for your business takes a lot of work, but it’s well worth it to give you a solid understanding of what you need to do to open and maintain your business. If you’d like some support determining your numbers, contact us! We can help you answer critical questions before you open and figure out which key metrics your business should be tracking.
