Small business? Look at your numbers!
Small business? Look at your numbers!
It’s a question which I have often asked myself and the answer has also often eluded me.
Small businesses are the backbone of our economy, particularly in regional and rural areas and have often been started by well-meaning entrepreneurs who want a lifestyle change. Often, they have had very little to no business experience. They may have been employees, but running your own business is another new level of learning.
I have mentored and coached retailers as well as Business 2 Business providers and while many are making a cracking job of doing business others are failing and don’t even realise it.
I had lunch in a regional café recently and predict that, unless it is privately funded, the business, in its current form, won’t last the year out.
If you don't do your numbers you won't last
I had trouble imagining they were making a profit, let alone paying themselves, as the owner, a fair wage, because on a Saturday morning they had three people working in the small café, with its seating capacity of about 15-20 patrons. Two employees and the owner. And 12 customers. The two employees spent more time chatting to each other than anything else, so there wasn’t a lot of output.
We were there on a Saturday morning and they planned to close at 2pm. The café wouldn’t open again until Monday. Meanwhile they had a lot, and I really mean a lot, of pre-prepared food in their display case – quiches, pies, salads, pastas, individual cottage pies, pasties and so on as well as four or five cakes. By the time they closed, and we left, there was still an enormous amount of food left on display – which I assume the staff would share amongst themselves, or it may have ended up in the freezer. I was desperately hoping it wouldn’t still be on the shelf by Monday.
The wastage in a small business like this would be phenomenal, and quite unnecessary. They had a huge menu selection, which included all day breakfast offerings. So much so I nearly didn’t order any food as I had too many choices.
Humans are odd creatures, when faced with too much choice we often opt for nothing as it’s too hard to make up our minds. It’s a simple lesson, cafes especially, should bear in mind.
When faced with too many choices humans often choose 'nothing'
Reducing the overly large range of choices, which weren’t just embedded in the menu but were also added to on the ‘specials’ board, would have controlled wastage and customers would have been happy not to have to think too hard.
They also offered wine and spirits, bearing in mind they were a daytime only café, not opening in the evening and liquor licenses start at $600+ and go up to $8,600 or so depending on the type of activity. This can be an expensive undertaking if you don’t sell much, particularly if you offer a wide range of wine selections (they did) and wine by the glass (they did). Another area of expensive wastage, especially when it came to ‘bubbles’.
I didn’t have a clue what their turnover would be, but I did figure their wastage may have exceeded it.
The sad part is that they probably haven’t even realised they could make more money and remain viable with a few adjustments to how they do business.
There’s a lot of help around for people at any stage of their enterprise. If it’s been a dream to run a small boutique café, then go for it, but do your research and work out your numbers first. There’s some good help here - restaurant-catering-guide.pdf (innovationandskills.sa.gov.au)
But cafes aren't the only businesses which could benefit from support - if you think you could do better then it could pay dividends to get a good mentor or coach! Happy to chat any time – my details are on my website: www.wordsolutions.com.au
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